Can’t believe I am making a positive post about the conservative government. However, I have been SCREAMING about this for years! It makes no sense to me that a family where husband makes 40,000 and his wife who makes for 60,000 pay LESS taxes then some one with one parent at home and working spouse makes 100,000. It drives me crazy.
Don;t get me wrong- I consider myself a feminist buy I do believe strongly that one parent stay at home for the first few years – would love if we were more like Switzerland and maternity leave is for 3 years. I used to say vehemently that it is a choice for both parents to be working but we are quickly becoming an economy where it has become a necessary to have two incomes. More and more I am noticing homeschool families really struggling to make ends meet. You will rarely meet parents who make more “sacrifices” time-wise and financially than a homeschool mom or dad.
Anyway- I digress- the Harper government is looking to make it more “fair” and even out the taxes for families with a stay-at-home parent.
This from the Niagara Falls Review:
Couples could win under tax plan :Conservatives eye changes to save families money
Local News – Thursday, November 23, 2006 Updated @ 8:12:15 AM
If Ottawa allows married couples to average their incomes for tax purposes, it would be a “radical” change to Canada’s tax system – one that could save families thousands of dollars a year, says Brock University professor Allister Young.
It would be like adding a “June Cleaver proposal” that would encourage married women to stay at home, Young said. But its supporters say it would allow families – not the tax system – to determine how their children are raised.
“It’s going to be a radical change, for sure. The Canadian system has always viewed the person as the taxpaying unit. They have not viewed the family as the economic unit,” said Young, an associate professor in taxation in Brock’s accounting department.
“Income splitting” is a concept Finance Minister Jim Flaherty hinted might be outlined in the economic update he gives today in Ottawa.
Income splitting is common in other countries, including the United States, Germany and France, where couples can choose to file joint or separate tax statements.
Niagara Falls MP Rob Nicholson, the Conservative House Leader, confirmed it’s a tax-cutting measure the Conservative government is considering as they prepare next spring’s federal budget.
“We will review options for improving support for families, potentially including income splitting in a fiscally responsible manner and within our spending priorities,” Nicholson told The Review this week.
The Tories have already approved the idea of pension-splitting, which will allow senior-citizen couples to average their pension incomes for tax purposes.
Nicholson called that recent move “a big step forward.”
They made it last month following the controversial move to begin taxing income trust funds, a popular investment vehicle for seniors. Pension-splitting could cost Ottawa $1 billion in lost revenue in the next fiscal year. Extending income splitting to all couples could cost $5 billion a year, according to published reports.
Income splitting would benefit families where one spouse works outside the home, but the other doesn’t.
Young used an example of one spouse earning $100,000 a year while the other has no income.
The bread-winner would be in one of the highest tax brackets – paying 26 per cent to Ottawa. If the couple split the income and each paid tax on $50,000, they would each be taxed at 17 per cent, he said.
In that scenario, the couple could save about $4,000 a year, Young said.
“It’s going to play well to the Conservative base,” Young added.
“It will be a windfall for the single-income family … This proposal will do nothing for individual income earners.”
Tax cuts will likely be high on the Conservative agenda as Flaherty prepares tax-relief measures for next year’s budget. Ottawa has a $13-billion surplus.
But critics say there’s an inherent problem with income-splitting because it doesn’t benefit single people and widows.
It also doesn’t benefit a husband and wife with similar incomes.
“I don’t think it’s an equitable way to cut taxes,” said Welland MP John Maloney, Niagara’s only Liberal representative.
A couple where one spouse earns $60,000 a year and the other receives $20,000 would benefit from income splitting. But a couple where each spouse earns $40,000 a year would not notice any benefit, Maloney predicted.
“The families that can afford to have one stay home benefit most,” he said.
Tax cuts are only possible now because Ottawa is running a surplus the Liberals created, Maloney said. When the Liberals were in power before this year, they tried to spread the wealth around. They used surpluses to fund social programs, pay down the national debt and cut taxes, Maloney said.
The Conservatives seem determined to cut income taxes, though it will leave them short of cash for social programs.
“They’re cutting taxes but they’re also cutting social programs,” said Maloney.
Cash Ottawa is considering handing through income splitting could be used to fund literacy programs, health-care programs or expand medical schools, he said.
Income-splitting is not a new idea, said Mel Grunstein, previously a Reform Party candidate who promoted it in the early 1990s. It will be a popular idea among conservative Canadians because it addresses a “fundamental” issue about how children are raised, Grunstein predicted.
The taxation system now encourages both parents to work and have someone else look after their children.
“It’s allowing the taxation system, in effect, to influence people’s decisions,” Grunstein said.
Income splitting would also help families where a parent needs to stay home, said Mark-Alan Whittle, a member of a national coalition of income-splitting advocates who are becoming more vocal.
Whittle, a Hamilton man, didn’t work for nine years so he could stay at home and care for his late son Logan, who had cerebral palsy.
He and his wife decided one of them should stay home. Her job paid better, so he stayed home.
“It would have really helped us if we could have filed together,” he said.
“Anything a government can do to keep the family stronger is something we should do. It’s better for the whole country,” Whittle said.
with files from The Canadian Press