CERB tax denies thousands escape from poverty


CERB WILL DRAG CELINE H. BACK INTO POVERTY. She hasn’t got the money to pay the income tax she owes on the CERB payments she got. She is far from alone.

Celine made the same mistake most of us did: she thought her CERB payments would be tax free. They aren’t. Now she’s left to find money she hasn’t got to pay taxes she didn’t expect.

Many still living in poverty

The good news about the Canada Emergency Response Benefit (CERB) is that it more than offset lost income for the poorest 10% of Canadian families. The bad news is that 422,000 CERB recipients will still be left below the poverty line in 2020 (Market Basket Measure). The worst news is that 208,000 of those families will not escape poverty because of the taxes they owe on their CERB payments.

In several provinces, the CERB effectively replaced provincially-paid social assistance, saving provinces additional money.

Canadians who drew upon the CERB owe $14.4 billion in taxes. Those living below the poverty line will owe $232 million in income taxes.

Some poverty relief

The CERB paid a flat rate of $500 a week, which, for most Canadians, was higher than what EI’s formula would have produced.

It’s unlikely that many—or any—low income Canadians have extra money saved for the purpose of paying taxes on CERB.

Canadians with higher incomes at year’s end will pay more of their CERB income back in taxes, at a tax rate of 36%. Canadians in the three lowest income deciles will pay less than a 10% tax rate. Nonetheless, many will still owe some of their CERB income in taxes.

Those CERB recipients who are living below the poverty line will owe $232 million in taxes on the CERB by April 30, 2020.

There will still be 422,000 people who, despite having received the CERB, will still be living below the Market Basket Measure poverty line. Among that group, 208,100 people would be lifted out of poverty if they didn’t have to pay taxes on the CERB income that they received during the pandemic.

CERB taxes drag people down

Put another way, CERB-related taxes, owed well after they received the benefit, will be the reason why they’ll remain below the poverty line.

In addition to the fact that almost everyone who received the CERB will owe tax on it, there are plenty of low-income Canadians who received the CERB but were deemed ineligible after the fact.

Canadians were encouraged to apply for CERB under unclear rules in the middle of a global pandemic. Many who applied and received the CERB were low-income and after the fact, may be deemed to have not been eligible.

Given the unclear rules, and the fact that taxes weren’t withheld at source, the federal government should at the very least offer a tax deduction for low-income CERB recipients—or, better yet, declare a CERB  repayment amnesty to all Canadians living below or near the poverty line.

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