Harper’s income splitting causes controversy

by | Oct 30, 2014 | News

By Jessica Laws

Prime Minister Stephen Harper is at the Lebovic Jewish Community Centre today where he announced income splitting tax credits for parents with children under the age of 18.

“Strong families make a strong country,” said Harper. He announced different money-saving opportunities for families, including income splitting and an expansion of the Universal Child Care Benefit.

The Universal Child Care Benefit will be $160 a month for children under the age of six, up from $60, and a new monthly benefit of $60 for children from the ages of six to 17 to start Jan. 1.

These benefits will take effect long before the election in 2015.

The income splitting will allow one spouse making a higher income to transfer up to $50,000 of their taxable income to a spouse who makes less.

Even the late Finance Minister Jim Flaherty backtracked on his support for a “Family Tax Cut” because he said it could benefit some Canadians more than others.

Liberal MP Adam Vaughan said that income splitting only benefits one out of every seven people with the other six paying for the tax cut, leaving behind 86 per cent of Canadians.

“A significant number are single moms. It means that the government will be handing out tax cuts to people who don’t need help, those who need most help get nothing,” said Vaughan. “What we really need is a national day care program that would help all families equally and the cost is almost equivalent to what they are giving away to the wealthiest and most privileged families in the country and that’s problematic for us.”

Income splitting will only help stay-at-home parents married to spouses with high incomes with the purpose of reducing a family’s tax burden, wrote Toronto Star reporter Martin Regg Cohn.

“They are trying to make it fair…that’s an objective that they are probably tying to achieve, just to make it a little more even handed,” said Blair Kean, an advisor at Tax Doctors Canada.

Two experts feel there are better ways to help families.

In a report by the C.D. Howe Institute written by Alexandre Laurin, associate director of research, and Jonathan Rhys Kesselman, Canada research chair in public finance and professor at Simon Fraser University’s School of Public Policy, if the goal was to help support a family in raising their children it would be allocated to those less in need of financial help.

“We suggest changes to other parts of the tax and transfer systems that would be more effective in addressing the true needs of families and taxpayers,” they wrote.

Economist David Macdonald wrote in a report titled Income Splitting in Canada, Inequality by Design that “the evidence in this study of income splitting reveals that it creates a tax loophole big enough to drive a Rolls Royce through. In essence, it’s a tax gift to Canada’s rich.”