The Hidden Cost of Clawbacks: Taxing Federal Benefits
Why does the Canadian government tax some of the very benefits it pays out? This article explores the logic behind taxable vs. non-taxable federal benefits, comparing programs like the Universal Child Care Benefit and the (now former) Child Tax Benefit. It questions the administrative costs of taxing government-issued income, the policy goal of clawbacks, and the fairness of complexity in the system. The author suggests a more transparent and efficient structure might achieve the same budgetary goals without confusing taxpayers. Though written in 2013, this article remains relevant for anyone grappling with the oddities of how government support is taxed in Canada.
