More than 200,000 will be pushed below the poverty line due to taxes owed on CERB

April 8, 2021

More than 200,000 people will be pushed below the poverty line due to taxes owed on the Canada Emergency Response Benefit (CERB) unless urgently needed changes are made, according to a new analysis from the Canadian Centre for Policy Alternatives (CCPA).

“The federal government should move quickly to put a tax deduction for low-income CERB recipients in place,” says CCPA Senior Economist David Macdonald, who authored the new analysis. “The benefits of offsetting taxes and lifting more than 200,000 people out of poverty far outweigh the marginal costs of such a measure.”

While the CERB more than offset lost income for the poorest 10% of families, there will still be 422,000 families that received the benefit and remain below the Market Basket Measure (MBM) poverty line—208,000 of them for no other reason than because they owe taxes on the CERB.

Among the findings:

  • People living below the MBM poverty line will owe $232 million in income taxes on the CERB by April 30, and 208,000 will be pushed below the poverty line because they owe taxes on CERB;
  • The poorest 20 per cent to 39 per cent of Canadians, on average, maintained their income level while on the CERB despite job losses, even after taxes are taken into consideration;
  • The top 60% of Canadians lost more income from job losses than what the CERB offset;
  • Canadians who drew upon the CERB owe $14.4 billion in taxes overall: $8.7 billion to the federal government and $5.7 billion to provincial governments.

The analysis recommends implementing a deduction from total income targeted to low-income Canadians that would offset taxes owed on the CERB. This would be preferable to a non-refundable tax credit, which would only apply to federal, not provincial, income taxes owed.

“The government can, and should, relieve the stress for low-income Canadians who almost certainly didn’t save those critical CERB dollars for taxes when they lost their jobs. Instead, they likely spent that money on essentials like rent and groceries,” adds Macdonald. “This would reduce the taxes owed from $14.4 billion to $14 billion—a relatively small amount in the grand scheme of the program.”

The full analysis can be read online.

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For more information, please contact Alyssa O’Dell, CCPA Media and Public Relations Officer, at [email protected] or cell 343-998-7575.

The CCPA is an independent, non-profit charitable research institute founded in 1980.