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Income splitting allows the spouse in higher tax bracket to shift income to their partner with a lower level of earnings so that the overall rate of taxation is reduced. This means, for instance, a working spouse could transfer income for tax reporting purposes with a stay-at-home partner in a lower tax bracket.
Income splitting may seem helpful to thousands of families but there is a fundamental unfairness involved. It shifts the tax burden to disproportionately disadvantage single people in favour of married couples. It basically acts as a subsidy for people who are married.
A single person who makes the exact same income as a married person would be facing a significantly higher tax liability just because he/she is not married. It is even worse if the spouse does not have an income (the classic example would be a stay at home mom). This is just another example of the government trying to encourage approved of lifestyles through the tax code. It is at its core an attempt at social engineering.
Imagine for a moment that the government forces someone to pay more taxes because of a life style choice that is fundamental to their identity or circumstance. To draw upon a historic example, what if you had to pay higher taxes based on your religion? Surely you would not think that is fair. Then why would you think it is fair to pay higher taxes because you are not married?
Unfortunately the Liberal Party is not attacking the Conservatives on what is bad about income splitting. Instead the Liberals are focusing on the one positive of this particular proposal: the “once we are out of deficit” caveat.
Even though I do not like income splitting I take heart in the caveat that the Conservatives have attached. It shows that the Conservative Party is seriously viewing deficit fighting as the priority. I sincerely hope that any other proposals, that are not cost saving, from any party would share the same caveat.
25 comments:
So you say,if you don,t get the tax benefit,you don,t want families to get it.I wonder what your mother & dad would say to that.Guess you prefer the Liberal platform then.Daycare for all,and people with no kids and the elderly will pay for it.Everything cannot be across the board for christ sake,get married if your worried about not getting the married tax break.You pay taxes for schools but don,t have children.Just be fair with your articles and quit complaining about other people getting help.
You forget that the income earner with a spouse has more finacial obligations to his family than a single income earner.
The same logic could be applied to seniors. Why do they get tax breaks the under 65 crowd doesn't?
"Expert" Tom nailed it on the head. Single people have about a million less financial obligations than a married couple do. I could easily live on less than half my income if I wasn't married, and 1/4 of my income if I didn't have kids. Easily.
So the parallels you gave to the Muslim jizya tax on Christians and Jews is not the same. A better parallel would be to say that Harper is taxing people with more financial obligations less.
So you could argue that he is promoting lifestyles that cost more. But you can't accuse him of social engineering morality or religion through tax reform.
And finally, are not families one of the groups that support the Conservatives the most? So why shouldn't he reward his voting base?
Families with 2 income earners also struggle, but they will receive less help from income splitting than families with one parent staying at home.
A family with 2 earners making $50k/year have more expenses than one that has a single earner making $100k. The single income family basically has one spouse doing certain things that the two income family have to pay for (day care, etc), plus there are additional costs for each worker (transportation, more work clothes, etc).
This policy is geared towards a certain lifestyle at the expense of others. You are requiring everyone else to share a larger tax burden to cover this.
One could argue that the whole institution of marriage is discriminatory.
Death benefits, spousal benifits, dependant subsidies, income splitting etc.
Families like seniors or the disabled face challenges; different challenges of course but they are there. Society collapses without them. Without families there is no gov't. Families deserve support. They raise the youth that will become tomorrow's doctors, welders and mechanics.
Families are the keystone of our species. It is the only reason many people get out of bed in the morning.
Anon, why do only one certain type of families deserve support then? Every single person, by definition, is in a family.
bertie,
I don't believe in a binary choice between the bad policies of the Liberals and the bad policies of the Conservatives. And no I don't think that others shouldn't get tax credits just because I don't (I get a tax credit for my TTC pass). I just don't think that government should be telling me which life style is best.
Expert Tom,
Maybe, but they do that by choice. I take on more financial obligations by owning a car that doesn't mean that I should be getting a tax break for owning a car. People should take responsibility for their own decisions. You want a family? You pay for it.
Anon 1,
Not exactly. Being old is not a life style choice.
Tory,
Government policy shouldn't be about awarding voters for voting for the right party. It should be about what is best for the country. That being said, I understand the political calculation. That doesn't mean I like it.
Anon 2,
Are you saying that without subsidies no one would get married and there would be no families? I would ask you to substantiate that claim.
Lifestyle choice?
Some of you don't get it. None of us exist unless families do.
Being married is only one form of being in a family. And not everyone wants to be married and have kids.
My wife and I together earn a little North of $100k and we each pay taxes. Another family with only one income earner pays significantly less tax than our two income family. What income splitting allows is a family to family comparison and an equalization of the taxes each family pays. We can treat every person as a single but that leads to real inequities in family finances. I guess the question is what is the basic unit of our society, the single or the family? For tax purposes I would suggest it is the family.
Now, if you want to get right down to it I don;t care if it is a straight or gay family or if it two people non-sexually codependent. I would expect that each "family" have the same responsibilities to each other in case of familial breakdown but I see no reason to restrict is based on which body part fits where.
The Rat, your family would end up paying a greater share of the tax burden. The one income family will have one spouse at home so they do not have to pay for daycare, plus the costs of working are less. That one income family earning equivalent to your family will be better off.
People don't earn income as a family, they shouldn't be taxed as a family.
And for the record, it really creeps me out that everyone is talking about the family is the building block of society and the government should be funding this.
I don't want to pay for all the left wing spending programs and I don't want to pay for the right wing ones either. Can't we just have smaller government so that families (or seniors, or youth, or whoever your preferred group is) can live their life as they want?
Contrary to the claim made by W.J., the present tax system (Liberal creation) favours the two income family over the single income family. I know this from personal experience having raised four children under the current system. Of course the idea of losing that advantage is not liked. A strong society is based on strong families and not singles. Even in my many years of single life, I had no difficulty understanding that.
Alain, it doesn't favour 2 income families. You don't have to raise a family to talk about the tax code. It is perfectly readable to anyone. They even put it right on the government's website.
I like families. Every single person in the world is from a family. There is nothing special about them, unless you define everyone as special. This doesn't imply the government should be funding everyone from everyone.
Did I start this or was I only the first to start.I only want to emphasize the fact that personally any tax break for families is great and we should not be envious.We all know that it discriminates against the single wage earner.That is not the point.Do we have to continually bring in 300,000 immigrants a year to sustain the tax system or balance the older population with the young.Why not continue to give Canadian families tax breaks and monetary incentives to have larger families and have a made in Canada country.There i am pro Canadian and we can (sorry for the use of this word)copulate as good or better than any other nation on earth.We need to in our cold climate.So any help or tax break families can get is great for Canada.
Perhaps I should have specified that two income families with children are favoured over a single income family with children under the present system. That is fact and not speculation with their allowed write-offs.
Alain, you are wrong. One income earners are not taxed for their in-kind income that two income couples have to pay for. There are plenty of advantages to have one parent home doing work.
You are currently better off with one parents making $100k than 2 parents each making $50k. Yes, the take home pay from employment income is less, but the saving are huge, plus you have a parent home with the kids. Why you have to subsidize this further, I have no idea.
Um, this is good policy except Harper has no plans to implement it. Sorry.
He’s quite happy to pass the billions around to the most profitable corporations, but ordinary Canadians with families like you and me have to wait, probably forever.
And even if he does implement it, you’re not likely to qualify with all of the many strings attached.
To wit:
- the deficit must be slayed - and there is no way Harper is going to do that. He would have to radically change his free spending ways and he would actually have to implement spending cuts. Even if he did, we're talking 6 or 7 years at the earliest, long after he is gone.
- he will only implement it in his "second full term". Got that. We have to give him two back to back majorities before he'll permit us to keep our own money.
- the income gap between spouses has to be significant, so if one of you works part-time, or you aren't wealthy, forget about it.
- your kids have to be under 18 so too bad for you if you are supporting your kids at university or have a child with handicaps that needs your full attention
- since your kids have to be under 18, you can forget about this tax cut if your kids are right now 10 to 13 since it will take that long before we get the tax cut (if we ever do)
- you only get to split $50K
- Say Anything Steve has promised this before and he doesn't exactly have a good record at all for keeping promises.
Comment to William Joseph:
It is perfectly acceptable for someone with the education/abilities to earn 100k to be better off than someone who has the ability to earn 50k. That just makes sense. Greater ability equals greater ability to earn income.
The income splitting for families allows families who have one earner able to make 50k the choice of one parent staying home, working part-time, etc. It acknowledges the value in having parents raise their own children. You could even argue that this may decrease the desire for a national daycare program.
Anonymous:
Income splitting does allow that but it doesn't seem that Harper's version will. The income gap must be large so a $50K salary plus a part-time working parent won't be allowed.
Which goes to the very point of this post: Harper is telling you in very precise ways how to live your life and structure your family.
And not just with this. You can get a tax credit if you send your kid to sports camp, but not computer camp or for piano lessons or math/science, for example. There are countless other examples.
Harper: very definitely not a libertarian.
Reality is, a single person without dependents is going to be in dire straits in his/her declining years unless his/her contemporaries are producing enough offsprings to look after him/her in his/her declining years.
Reality is, the cost of parenthood (both direct and in economic opportunities lost) is and will be considerably more than any tax benefits granted.
As the 'non-working' parent in a single-income family (our children, when asked, referred to me as a 'professional volunteer), I feel such recognition of the burden placed upon families is long overdue. I have long since returned - at least part-time - to the workforce, but my abilities to fully engage in 'real' work were constrained by being the
'daugher/neice on call' to my mother and her sister. Our family was greatly enriched by being around these senior family members, but our financial health suffered, as did my physical health. By the time I was relieved of responsibilities to the senior generation, my health no longer permitted me to fully realize my own career. I do not regret those caregiver years, but my family and I are paying the price.
Frances: That is a touching story and not at all uncommon, I suspect.
It is a dilemma and it is very tough, far more so on women than on men. I admire the choice of staying at home, but we all have to recognize that, as you indicate, that means you have a tougher time supporting yourself later in life because you've sacrificed your own career path.
That is why giving families support and choice, real choices, is so important. Why demonize and penalize families that make your choices. Why demonize and penalize families that decide they are better off with two working parents. A good government will not try to make that decision for us.
Given the support you gave to your family members, I'm curious about what you think about the Liberal promise on exactly this sort of thing. Leaving the cost aside (or dealt with separately), what do you think about their plan to give you the support to help your elderly or sick family members?
Hugh nails it this is just more SoCon social engineering...which will never be implemented because it requires a balanced budget, something Harper will not do.
"You are currently better off with one parents making $100k than 2 parents each making $50k. Yes, the take home pay from employment income is less, but the saving are huge, plus you have a parent home with the kids. Why you have to subsidize this further, I have no idea."
This is wrong. A 2 parent household with one income earner making 100K will pay much higher taxes than a 2 parent household where they each make 50K. Basically the 2nd portion of the 100K is taxed at the highest rate whereas both 50K incomes are taxed at the lower tax rate. All this policy would do is to even that out somewhat. There is very little savings of not having one spouse working, although I will agree the non-monetary benefits would be nice.
I can see why single people or dual income families will say "It's wrong because only some people benefit" but thats only because they already have an advantage with our current 'progressive' tax system. Of course a flat tax would straighten this all out. :-)
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