Newspaper article The Canadian Press

Editorial Exchange: Tory 'Income Splitting' Is Unfair and Costly

Newspaper article The Canadian Press

Editorial Exchange: Tory 'Income Splitting' Is Unfair and Costly

Article excerpt

Editorial Exchange: Tory 'income splitting' is unfair and costly


An editorial from the Toronto Star, published Feb. 13:

Kudos to Jim Flaherty for pouring a big bucket of ice water on one of the Conservatives' worst policy ideas. The federal finance minister, fresh from his least interesting budget ever, has performed a useful service by raising serious doubts about the idea of "income splitting" for some families - something the Tories have been dangling before voters for almost three years.

Flaherty has had a long time to ponder the idea, ever since his party included it in its 2011 policy platform. And now he says he's "not sure that overall it benefits our society" and it "needs a long, hard analytical look." In plain language, it's not fair and it doesn't make sense.

As the Conservatives conceived it, income splitting (or what the party calls the "Family Tax Cut") would allow couples with children under 18 to transfer up to $50,000 of income from one partner to another for tax purposes. If the partner transferring the money is in a higher tax bracket, the net result would be a lower tax bill for the family. According to the party, 1.8 million families would benefit, to the tune of $1,300 a year on average. The whole plan would kick in once Ottawa balances its budget - conveniently in time for the 2015 federal election.

Sounds great - until you spend a moment figuring out who would really pocket the most cash. The Canadian Centre for Policy Alternatives, which leans left, calculates that fully 86 per cent of households won't benefit at all, but the measure would cost the federal treasury $3 billion a year and the provinces would lose another $1.9 billion if they went along.

And even for those couples with children under 18, the benefits would be hugely concentrated among high earners with one partner earning nothing or very little - for example, the stereotypical well-paid husband with a wife staying at home to take care of the kids. The CCPA concluded that the top third of eligible families would get three-quarters of the benefits, while the bottom 60 per cent of families, earning $56,000 or less, would get a paltry $50 each on average. …

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