Fact check: Would the NDP's Kids Activity Tax Credit get kids more involved in extracurricular activities?

The Kids Activity Tax Credit introduced by Alberta's New Democratic Party promises to save parents money when their children take part in extracurricular activities, such as swimming lessons, dance class, sports gear and more. 

If elected in the May 29 provincial election, the NDP says the proposed tax credit would save Alberta families $500 per child, incentivizing parents to keep their children enrolled in extracurriculars despite the rising cost of living.

"Playing an instrument or learning another language helps expand their capacity long past their younger years," NDP Leader Rachel Notley said in a press conference on May 9.

"We need to try and help level the playing field a bit so that kids can access these opportunities regardless of their family income."

But does this type of tax credit incentivize more extracurricular activities?

Short answer: No, not likely. Studies and previous experiences suggest this isn't an effective tool to level the playing field or keep kids involved in activities. 

Déjà vu

The NDP promise resembles federal tax credits put in place by Stephen Harper's Conservative government in 2006.

But the children's fitness and children's arts tax credits have since been phased out under Justin Trudeau's Liberal government. 

In a 2017 report, the Ministry of Finance found that these two tax credits didn't encourage kids to take part in extracurriculars nor did it help the most vulnerable families to pay for these activities.

The report states that both tax credits "were primarily used by high-income families who would likely enrol their children in organised activities even in the absence of the credits, meaning that the Government forgoes tax revenues with little resulting behavioural changes or social benefits."

More benefits for the richest

Data from the Canada Revenue Agency shows that high-income households used the tax credit the most. In the final year the credit was active, 37 per cent of Albertans who claimed the tax deduction had an income over $100,000. 

The report concluded that "these credits were also largely inefficient because the bulk of the costs arising from the credits were incurred in relation to activities that would have taken place even in the absence of the credits."

However, the NDP's proposed tax credit is an improvement from the pitfalls of Harper's federal one. 

The federal government's tax credit was nonrefundable, which meant households that didn't owe money on taxes couldn't benefit from it. 

Since the NDP proposal is refundable, families who don't owe taxes could receive it.

It also offers families a higher refund. Harper's 2006 tax credit only amounted to a $75 rebate per child.

But a fundamental problem remains, says Jennifer Robson, associate professor at Carleton University in Ottawa. She says tax credits like this don't make anything easier for parents struggling to make ends meet, as the money isn't reimbursed until several months after they've already paid.

"If money is one of the obstacles, these credits give money after the fact," says Robson. "They always rely on the fact that the parents have the money upfront to pay for these programs in the first place.

"It doesn't actually get the help into the hands of parents at the time that it would make a difference."

"If you don't pay, you can't play," echoed a 2014 Caledon Institute of Social Policy report on the Children's Fitness Tax Credit.

When asked about the tax credit, Notley defended the proposal, explaining that the middle class is suffering from an increased cost of living.

She hopes the tax credit will incentivize arts and sporting organisations to lower registration fees and provide more extracurricular access for low-income families.

"By incentivizing some of this activity, we'll also create more opportunities for some community groups and nonprofits that offer these programs to provide more low-cost programs for lower income families because they will have a greater demand and greater revenue," said Notley.

But the Ministry of Finance's report contradicts Notley's hypothesis. It noted that suppliers often respond to increased demand by raising prices.

Robson and other experts agree that the best policy to increase the financial accessibility of extracurricular activities is to support the organisations that provide these programs directly.

With a $100 million budget, the NDP also announced a promise to increase funding for community infrastructure.

But the estimated cost of the NDP's proposed tax credit is higher, estimated at $150 million.

A popular proposal during elections

Despite the criticism, numerous versions of this tax credit exist across Canada. Saskatchewan and Nova Scotia have both revived similar tax credits, even after eliminating them in the past.

These types of tax credits seem to become popular in election campaigns. Robson suspects people typically react positively to these types of proposals in internal surveys.

A physical activity tax credit has been proposed in Alberta before, but was never implemented. At the time, Lloyd Snelgrove, then finance minister under a Progressive Conservative government, called the tax credit problematic and said it would be impossible to measure its success.