Canada Disability Tax Credit Fails Poorest Disabled Families
Author: School of Public Policy - University of Calgary
Published: 2016/06/12 - Updated: 2026/01/20
Publication Details: Peer-Reviewed, Informative
Category Topic: Taxation - Related Publications
Page Content: Synopsis - Introduction - Main - Insights, Updates
Synopsis: This report from the University of Calgary's School of Public Policy reveals critical flaws in Canada's disability tax credit system and offers evidence-based solutions for reform. Authored by researchers Wayne Simpson and Harvey Stevens, the analysis draws authority from rigorous policy research examining how current non-refundable tax credit structures inadvertently exclude the most vulnerable Canadians with disabilities. The findings prove particularly valuable for disability advocates, policymakers, and families navigating Canadian tax benefits, as they expose a troubling paradox: the poorest disabled families receive an average of just $29 annually from a program designed to support them, while those with higher incomes capture the bulk of benefits. The report presents actionable reform options, including an enhanced refundable disability tax credit that would increase incomes for low-income families with disabled members by 27 percent, making this research essential reading for anyone seeking to understand or improve disability support systems in Canada - Disabled World (DW).
Introduction
When the government establishes a social program whose primary purpose is to help provide support to low-income people with disabilities, its success should be measured on how well it achieves that purpose.
Unfortunately, there are reasons to seriously question the usefulness of Canada's disability tax credit (DTC) since it is helping so very few of the people it is intended to support. In fact, the credit is helping only a small number of Canadians with disability who qualify for it, and least of all those in the poorest families who receive an average of only $29 annually.
Main Content
The School of Public Policy with authors Wayne Simpson and Harvey Stevens has released a report that provides evidence of the limitations of the DTC and presents potential reforms, including an enhanced refundable disability tax credit that could provide benefits to every family with a disabled person below the low income cut-off, which would raise their incomes by 27 percent.
According to the report:
"Designing the support as a tax credit means that only those Canadians with disability who earn enough income to have them owing taxes can take advantage of it. The unfortunate reality is that people with disability are often at low incomes precisely because their disability leaves them unable to work in full-time, well-paid jobs. Thus, the very people who need this support most are the ones least able to take advantage of it. The neediest disabled Canadians are receiving the least benefit. Far from being a successful policy, the results of the disability tax credit can only be described as disappointing."
Can This Be Rectified?
Yes. By making the disability tax credit refundable.
Along the same lines as a guaranteed minimum income, or negative income tax, those low-income Canadians with disabilities who qualify for the credit but lack sufficient income to benefit from the credit could simply be made eligible for a refund of the amount they cannot claim.
Simply doing that, turning this non-refundable credit into a refundable credit, would increase the average benefit for Canada's poorest families with a disabled person from $29 to $511 increasing their total income by 4.1 percent.
An even more effective option is the enhanced refundable DTC which can raise their incomes a far more consequential 27 percent.
Insights, Analysis, and Developments
Editorial Note: The gap between policy intention and real-world outcomes revealed in this research underscores a fundamental challenge facing social programs across North America. When tax credits are structured as non-refundable benefits, they systematically favor those who already have taxable income - precisely the opposite of what disability support should accomplish. What makes these findings particularly striking is not just the modest $29 average benefit reaching Canada's poorest disabled families, but the stark contrast with what's possible: the proposed enhanced refundable credit could transform that pittance into meaningful support representing more than a quarter of these families' total income. As governments continue to grapple with how best to support citizens with disabilities, this analysis from Calgary's policy researchers offers more than critique - it provides a roadmap for turning well-intentioned programs into effective tools that actually reach the people who need them most - Disabled World (DW).Attribution/Source(s): This peer reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by School of Public Policy - University of Calgary and published on 2016/06/12, this content may have been edited for style, clarity, or brevity.