OTTAWA, February 13, 2014 (LifeSiteNews.com) – Canada’s leading marriage and family think tank as well as a pro-family conservative women's group say it is about time “income splitting” was introduced for Canadian families.
The promise of income splitting was a major plank in the 2011 Conservative Party platform. Fulfilling the promise was dependent upon balancing the budget, something that Minister of Finance Jim Flaherty confirmed yesterday is on track for next year.
“It’s basically allowing you to keep more of your own money. It’s a tax cut expressly aimed at families so you can have more money when you need that money because you are raising your kids,” said Institute of Marriage and Family Canada Executive Director Andrea Mrozek to LifeSiteNews.
When he announced the plan, Prime Minister Harper said that the current tax system treats married couples like “roommates,” because spouses are taxed individually. The Family Tax Cut, as they called it, would allow families with children under 18 to share up to $50,000 of their household income for federal tax purposes. Families would save money on their tax bill by dropping the high-earning spouse to a lower tax bracket.
Gwen Landolt, national vice-president of REAL Women of Canada, called income splitting “long overdue.”
“Women are not so dense as to have failed to notice that the present tax structure treats families in similar circumstances differently, by providing a special benefit to two-income families which discriminates against single-income families with the same income,” she said in a press release.
The proposed move has its critics, however.
Analysts from the C.D. Howe Institute claim that income splitting “does more harm than good” since it would “create more inequalities in the tax system rather than less.” The economic think tank also argues that income splitting would “discourage some spouses, particularly mothers, from re-entering the workforce after leaving to care for young children,” resulting in a “decline in total work hours, with adverse effects on economic efficiency.”
The institute projects the annual loss of revenue due to income splitting would be about $2.7 billion.
Landolt criticized such concerns, saying they manifest a bias towards dual-income families.
“Apparently, they believe that legislation should shepherd women into a single career choice – namely: the paid workforce.”
“Women, however, are competent to make their own choices. It is their life, their career. It is not the role of the government by tax legislation to direct women’s career paths,” she said.
Flaherty made waves yesterday when he showed signs of wavering on the election promise to split incomes. “I’m not sure that overall it benefits our society,” he said, according to the Globe and Mail. “I think income splitting needs a long, hard analytical look.”
But other ministers defended the plan. “All I know is we keep our platform commitments,” said Employment Minister Jason Kenney. “There’s always different ways you can design a program around the details.”
“The bottom line is we’re committed to tax relief for Canadian families,” he added.
University of Calgary economist Jack Mintz argued in a research paper last year that the existing tax system penalizes single-earner families and is therefore unjust.
“Given that Canada's income system aims to treat people in similar circumstances as equally as possible, it is certainly time to let couples split their income so they do not face a penalty in higher tax rates than those faced by couples bringing home the same amount of total pay,” he wrote with Matt Krzepkowski in a paper titled No more second-class taxpayers: How income splitting can bring fairness to Canada’s single-income families.
Minz does not think an income splitting policy is a tax cut for the rich, but a “readjustment of the tax burden between families of higher incomes.”
“The current tax system is unable to provide a level tax burden for similar families with similar means, with the tax burden for single-earner families being higher than a dual-earner family with the same market income,” he wrote.