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60 Can. Tax J. 635 (2012)
Delivering Government Grants to Students through the RESP System - Distributional Implications

handle is hein.journals/cdntj60 and id is 712 raw text is: CANADIAN TAX JOURNAL / REVUE FISCALE CANADIENNE (2012) 60:3, 635-49 Policy Forum: Delivering Government Grants to Students Through the RESP System- Distributional Implications Azim Essaji and Christine Neill* ABSTRACT The Canadian learning passport (CLP) proposal put forward in 2011 by the Liberal Party of Canada has interesting distributional implications. Replacing tax-credit-based aid to students with up-front funds through a registered education savings plan (RESP) could get more money to students while they are studying, which is likely one of the lowest- income periods of their lives. As well, the switch to the CLP would spread out student financial assistance based on parental income over a longer period of time, helping to ensure that some additional assistance goes to families that struggle during the period prior to post-secondary entrance, and not only during the study period. Unfortunately, though, current rules under the Canada student loan program (CSLP) would partially undo any attempt to provide increased financial assistance to students from low-income families through the RESP system. This could be ameliorated by changing the treatment of RESP withdrawals under the CSLP-a reform that would be sound policy whether or not a proposal like the CLP is ever introduced. KEYWORDS: HIGHER EDUCATION m FINANCING m REFORMS m POLICYm RESPm LOANS CONTENTS Introduction 636 Issues in Analyzing the Distribution of Subsidies to Post-Secondary Education 637 The Distributional Effects of Replacing Tax Credits with the CLP 639 Estimates of the Distribution of Tax Credits Relative to the CLP by Current Parental Income 639 Interactions with Other Student Financial Aid Programs 641 What If Some Students Do Not Have an RESP? 647 Longer-Run Distributional Considerations 647 Conclusion 648 Of the Department of Economics, Wilfrid Laurier University (email: aessaji@wlu.ca; cneill@ wlu.ca). We thank Kevin Milligan for his guidance, and Alan Macnaughton for his comments and advice on an earlier paper on Canada's tuition and education tax credits. 635

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