Addition to the family agenda has stirred controversy
Prime Minister Stephen Harper recently announced a complete overhaul in taxation for two-parent families. On Wednesday, Oct. 29, the Conservative Party of Canada added to the “family agenda,” publicizing a plan for income splitting that would allow families with children to receive a tax break.
The plan, set to be applicable for the 2014 tax year, would allow families to transfer money from one parent to another in order to avoid high tax brackets. This is estimated to create up to $2,000 in savings for families with children under the age of 18.
It has been suggested that the income splitting proposal may be a “vote-getter,” strategically hoping to make a positive impression on Canadians that are planning on hitting the polls in the upcoming elections. However, there is still much debate on whether the change will be positive or negative.
Jim Flaherty, former Minister of Finance, was one of the first to voice his concern about the announcement before his death several months ago, suggesting that those that would benefit from the tax break would be a very small minority, making the cuts too costly for the outcome.
Flaherty was not the only one to raise questions about the proposal. David Macdonald, Senior Economist for the Canadian Centre for Policy Alternatives (CCPA), also shared major concerns, stating that “this is income inequality by design, purposefully making Canada a less equal place.”
In response to the backlash, Harper has capped the benefit at $2,000 a year.
“Concerns have been expressed that too much of the benefit of that would go at very high income levels,” the Prime Minister said. “That’s why we limited the benefit under this and also expanded other benefits to Canadian families to make sure that all Canadians across the income spectrum benefit from those measures.”
Regardless of the capping, one thing is still clear: this proposal is not for the single parent. The tax benefit would not be available to them, which makes income splitting fundamentally exclusive.
While concerns over the proposal continue to be voiced, suggestions, like lowering the age of eligibility, have been made to improve the program. Currently, the families covered will be any family with children under the age of 18. If that age were to be dropped to 12, the proposal could be framed as an affordable day care plan, rather than income splitting.
Conservative Member of Parliament Maurice Vellacott has also suggested that the income splitting should be gradually phased in, starting with families with younger children. This would allow a complete assessment of the fragility of the budget as time goes on.
It has been suggested that if the goal of the income splitting plan is to help families, then a better proposal may just be reducing personal income taxes or increasing the Child Tax Credit, both of which would be more inclusive to the diversity of the Canadian family.