THE CHILD TAX BENEFIT - SIMPLE, FAIR, RESPONSIVE

The Child Tax Benefit announced in the 1992 federal budget will radica lly alter the tax-transfer treatment of dependent children. This paper assesses official claims that the scheme will be 'simpler, fairer, an d more responsive'. Any improvements in simplicity are found to be gre ater in concept than in practice. The improvements in equity are found to be mostly associated with the revised treatment of common-law coup les and other changes that could have been achieved quite apart from t he Child Benefit. At the same time, the reforms will worsen the horizo ntal inequity in the taxation of families with children vis-A-vis chil dless house-holds at upper incomes. Families at the lowest incomes wil l gain few additional benefits. Limited gains in responsiveness will b e offset by the Child Benefit's worsened response to most variations i n family incomes. Other shortcomings of the scheme, such as its limite d indexation, are also examined. The paper formulates both partial and more extensive methods to overcome the problems of the Child Tax Bene fit. A properly refined scheme could significantly improve Canada's ta x-transfer treatment of dependent children.