The Children's Fitness Tax Credit gives parents a non-refundable tax credit to recognize the cost of registering children in sports. When the credit was first introduced, its cash value was $77.50 - the amount of the credit ($500) times the basic marginal tax rate (then 15.5%). The popularity of the credit among parents has led to it being enriched to $1000 in 2014 - a cash value of $150.
It's not that much money. Not compared to the Universal Child Care Benefit, which had a (pre-tax, admittedly) cash value of $1920 in 2015. Not compared to the Canada Child Tax Benefit, with a cash value of $1446. Not compared to the value of the Child Care Expense Deduction - worth up to $7,000 times the lower earner's marginal tax rate. But if one judged the importance of a tax provision solely by the number of academic papers written about it, it's one of the key aspects of the Canadian income tax system.
A partial bibliography of the literature on the Children's Fitness Tax Credit can be found at the end of this post. It's not a long bibliography, but it contains more academic papers than my recent disability tax policy reading list. Why all this interest?
First, there are fiscal inducements. Health research is well-funded. People conduct research on things like fitness tax credits because that's where the grant money is.
Second, analysis of the Children's Fitness Tax Credit is straightforward methodologically. The stated objectives of the program are clear: to increase physical activity among children, and to promote health. There is a widespread consensus as to what a good tax system should achieve: efficiency, equity, administrative simplicity, and so on. The Children's Fitness Tax Credit can be evaluated by its success or failure in meeting these goals.
Finally, it's fun. It's fun to have a rant. The overwhelming consensus among policy analysts - economists and non-economists alike - is that the Children's Fitness Tax Credit is bad policy. Kevin Milligan gives a concise summary of the case against fitness tax credits here. They're complicated and ineffective, plus low income people miss out on them. There's something satisfying about completely demolishing - intellectually, at least - a poorly designed program.
It's also enjoyable to think about children and sports. I once tried to write a paper on long term care insurance. I abandoned it because every time I worked on it, I became depressed and anxious, thinking about the ravages of old age. It's much more pleasant to day dream about the swish of blades on ice, the thunk of a puck hitting the boards, the camaraderie of the local shinny rink...
Much ink has been spilled on subject of the Children's Fitness Tax Credit, but at the end of the day, it seems a picture is worth a thousand words. Here's the picture:
The Children's Fitness Tax Credit enjoys widespread support, has been steadily expanded, and will soon (2015) be made refundable. Judging by their impact on policy, the efforts spent critiquing the Children's Fitness Tax Credit have been largely a waste of time.
Has the time been worse than wasted? Perhaps this is just academic catnip, giving policy analysts something to chew on and keep them happy and occupied? The equivalent of shouting "squirrel" to distract people from the serious business of income splitting, corporate taxation, the treatment of capital income, and so on? There are a number of good papers on this reading list. I wish it was equally easy to find research on aspects of the tax system of greater significance than the Children's Fitness Tax Credit.
Block, Sheila. "The children’s fitness tax credit: Less than meets the eye."Canadian Women’s Health Network 9, no. 3/4 (2007): 20-21. Ungated here.
Centre for Spatial Economics Economic Benefits of an Adult Fitness Tax Credit (2007) Ungated here.
Fisher, Koren L., Amin Mawani, Barbara Von Tigerstrom, Tamara Larre, Christine Cameron, Karen Chad, Bruce Reeder, and Mark Tremblay. "Awareness and Use of Canada's Children's Fitness Tax Credit." Canadian Tax Journal/Revue Fiscale Canadienne 61, no. 3 (2013). Ungated here.
Larre, Tamara, “The Children’s Fitness Tax Credit: Right Message, Wrong Policy Instrument” in Lisa Philipps, Neil Brooks & Jinyan Li, eds. Tax Expenditures: State of the Art (Canada: Canadian Tax Foundation, 2011) 12:1.
Leitch, K. "Reaching for the Top." A report by the Advisor on Healthy Children and Youth. Ottawa: Minister of Health Canada, Report 4552 (2007).
Leitch, K. Kellie Report of the Expert Panel for the Children's Fitness Tax Credit Ottawa: Department of Finance, October, 2006. Download here.
Nguyen, Hai V. and Paul Grodendorst, “Does Child Fitness Tax Credit Program Make Children More Active?” unpublished manuscript, available from the authors, contact vanhai.nguyen [at] duke-nus.edu.sg
Reach, D.M. (2012). "Fitness tax credits: Costs, Benefits, and Viability", Northwestern Journal of Law & Social Policy, Vol. 7. Ungated here.
Sassi, F., A. Belloni and C. Capobianco (2013), “The Role of Fiscal Policies in Health Promotion”, OECD Health Working Papers, No. 66, OECD Publishing. http://dx.doi.org/10.1787/5k3twr94kvzx-en (tangentially related)
Sauder, JoAnne, “Children’s Fitness and Activity Tax Credits: why they were created and what they are intended to do” (2014) 21 Health Law Journal 75. Ungated here.
Saunder, JoAnne "Canada's Experiment with Children's Fitness and Activity Tax Credits" LLM Dissertation, University of Saskatchewan. Ungated here.
Spence, John C., Nicholas L. Holt, Julia K. Dutove, and Valerie Carson. "Uptake and effectiveness of the Children's Fitness Tax Credit in Canada: the rich get richer." BMC Public Health 10, no. 1 (2010): 356. Ungated here.
Von Tigerstrom, Barbara, Tamara Larre, and JoAnne Sauder. "Using the tax system to promote physical activity: critical analysis of Canadian initiatives."American journal of public health 101, no. 8 (2011): e10-e16. Ungated here.