ANQI SHEN 

CUP Ontario Bureau Chief

HAMILTON (CUP) — Every year, Canadian post-secondary students are eligible for tuition, education and textbook credits that cost billions of dollars in funding. However, students from low-income households are the least likely to benefit from the credits during school despite needing the money the most.

A recent study, conducted through the C.D. Howe Institute — a not-for-profit organization that aims to raise Canadians’ living standards through economically sound public policies, found that tax credits are “disproportionately” transferred to well-off families in a given tax year. Most students from lower-income households can claim the non-refundable credits only after they finish school and start earning enough taxable income.

Christine Neill, an associate professor of economics at Wilfrid Laurier University, authored the study. She found that the tax credit savings amount to about $2,000 per year for the average Canadian undergraduate student.

“For youth from relatively high income families, a couple thousand dollars per year may not change their decision to go to university or college, but it might change those from low-income families. The problem is, they tend to get the money later,” Neill said.

In 2012, students with family incomes below $30,000 used only seven per cent of education credits transferred to parents in 2012, but made up about half of tax filers.

Households with an income above $80,000 used about 42 per cent of education credits transferred to parents but made up just 10 per cent of tax filers.

Neill recommended that simply making the credits refundable would vastly improve the program. Students not earning enough taxable income would then get a cheque in the mail for what they couldn’t claim on their taxes instead of having to carry the credits forward.

The same recommendation has been made in the past by the Canadian Alliance of Student Associations and the Ontario Undergraduate Student Alliance.

According to Neill’s study, undergraduate students in British Columbia save the least from the tax credits, followed by students in Ontario and Newfoundland and Labrador. Students in Saskatchewan save nearly the same amount as those in Alberta, where students recieve the most tuition tax credits in the country, but only by a small margin.

A 2010 study found that college students save a larger proportion of their tuition from the credits than university students. However, college students end up with a smaller dollar value from the credits because their tuition is lower on average.

Last year, the federal government spent $1.6 billion on tuition, education and textbook tax credits whereas it spent $700 million on the Canada Student Loan Program.

Tuition and education credits were first introduced in 1961, and the option to “carry forward” unclaimed amounts was introduced in 1997.

“Before the carry-forward was introduced, kids from low income families may never have been able to claim the credits. After 1997, the program became more expensive but it became better,” Neill said.

A textbook credit was added in 2006, raising questions from the academic community on the efficacy of the program.

Whether to stimulate enrolment in post-secondary education or to distribute wealth to students from lower-income families, the purpose of the tax credits hasn’t been clearly articulated.

Neill argues that the credits currently fail on both efficiency and equity principles. She also made a point that the credits aren’t well-advertised on university and college web pages that display tuition fee information.

“One major issue is that many people don’t know about [the credits], and they don’t know before going through post-secondary education,” Neill said. “If you don’t know something exists, how would it affect your behaviour?”

  • guest

    huh? What credits? Give us a link that will explain what these credits are and how i can use them?!

    • Mike

      Paws -> Academics -> Tuition and Fees -> Tax receipts. File on your tax return… If you didn’t include them on your previous years returns I’d consider getting them amended… It’s a big chunk of change.

    • angry foodie

      Really? Not to be condescending, but if you don’t understand simple things like tax credits and income tax, I am not really sure if you were ready for university in the first place.

    • Jim

      If you think income tax is a “simple thing”, congratulations. However, I’d wager there are plenty of [perfectly good students (other than accounting students) who would disagree.

  • guest

    That last paragraph is the most useful part of the article – Many people don’t know about the tax credits. If you don’t file income tax yet, you likely don’t realize they exist or that you can stockpile them (carry them forward) for the future when you start earning enough money to actually become concerned about income tax. http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/menu-eng.html for more information.

  • lel

    A useful article in the sheaf!?

    • 1234

      But still useless commentators.

    • lel

      u mad son

  • s

    Take fewer classes/semester and get a job. Then you can use your tax credits now.

  • angry foodie

    I think the term “targeting” in the headline is a bit misleading.

    I don’t think these credits “target” anyone disproportionately. Some people can just sign them off to mom and dad to get a chunk of money out of them. Hell, I am far from wealthy and I was able to do this too, albeit many years ago.

    If you are not wealthy, and you are not taking a degree program where you should be able to land a job out of school, you really have no sympathy from me. I sure wouldn’t be at university if I was not in a professional program which gave me career options upon graduating.

    If you are in a degree program which will lead you to high-paying employment upon graduation, you have a solid year or two of tax-free income ahead of you upon graduating. This can work out to as much as $10K, or around 3% of a down payment on a 2 bedroom condo with only minor mold problems…

    Point is, there are different paths a person can take. I could be making $32 an hour right now had I chose the trades, but that would be around 80% of my potential, at least as an employee.

    But following a profession gives you a much higher earning potential, though it is slower getting there. Point is, you don’t go to university to “find yourself”. You want to find yourself? Go get a dishwashing job at a busy restaurant. You’ll find yourself alright, and you might come out of it actually realizing that earning money is the whole point of going to school. Learning for learning’s sake is best done on your own time.

    If you came to university for a purpose, it is quite irrelevant how you get your tax credits at the end of the day…

  • angry foodie

    In addition…

    The reason these credits are used more quickly by wealthy students is because their parents are already paying their tuition. Therefore, the parents, not the students, deserve the tax credits.

    Doesn’t matter how rich I am, my kid is in university on my dime, those tax credits are mine, for keeps.

    That also explains some of the statistics above…there are also probably some rich kids in those stats whose parents pay their way and let the kid keep the credits for when they get out of school, which would further muddle the argument being made here.

    In any case, I think it is something of a red herring…

  • Goobs

    Of course the title is misleading, the sheaf always manipulates things
    to fit its left wing agenda. And not enough income? You have 4 months of
    summer, get a job! Classes are only part of the day, get a part-time job. This is Saskatchewan, there are jobs everywhere.
    probably some lazy arts student editing this. I hate this left-wing
    propaganda piece of crap paper that for some reason I had to pay for
    even though it never has anything objective to say. If you want tax credits you go get income to use it against. simple concept, its even flexible enough to have them carried-forward to when you actually make money, Its on students to get a degree that will actually allow them to make that income. Its completely fair. I don’t understand what this article is trying to say? Keep this bias crap in the opinions section. keep on fighting the man The Sheaf, you’re losing