The Case for Income Splitting.
Robair @ Mon Jan 28, 2008 12:48 pm
What do you guys think about income splitting in Canada?
The Case for Income Splitting.
And a petition.
Robair @ Mon Jan 28, 2008 1:18 pm
This is what I'm talking about..
$1:
Currently, Canada's income tax system requires each individual to report and pay tax on all of the income he/she earns. Income-splitting would allow couples to transfer income to the lower-earning partner, taxing them as a unit. Recently, there has been speculation that the federal government will modify the family taxation system by introducing income-splitting. If fully implemented, this tax change would affect all married or common-law couples in Canada and would effectively alter how income is redistributed to Canadian families.
Historically, income-splitting was recommended as part of a wide-ranging package designed to make the income tax system fairer in a 1967 Royal Commission headed by accountant Kenneth Carter. The Royal Commission on the Status of Women also recommended income-splitting in 1970. Thirty years later, in 1999, the Standing Committee on Finance of the federal government re-examined the issue of income-splitting in response to a parliamentary motion by the Reform Party. The goal of the examination was to determine if tax policies treat families with dependent children equitably. The Committee recommended maintaining individual taxation (see Committee report for more).
Tax splitting would benefit families where one spouse is a high-income earner and the other does not work outside the home or couples where one spouse earns significantly more than the other. For example, a family where one member earned $100,000 and the other had no earnings would pay the same tax as a family where both partners earned $50,000, or a family where one partner earned $75,000 and the other earned $25,000. In these cases, income -splitting would lower the tax rate paid by the higher earner. (See National Post article for example of tax savings on different family types.)
Critics of income-splitting maintain that altering the fundamental nature of the tax system – making the family, not the individual, the basic taxation unit – would make the tax system less progressive by reducing tax liability for higher earners who are usually male. Others take issue with the fact that this tax measure really serves higher income families best. And finally, critics are concerned that income-splitting could be detrimental to gender equality as it could discourage women's labour force participation, promoting financial dependence on their male partners.
Historically, income-splitting was recommended as part of a wide-ranging package designed to make the income tax system fairer in a 1967 Royal Commission headed by accountant Kenneth Carter. The Royal Commission on the Status of Women also recommended income-splitting in 1970. Thirty years later, in 1999, the Standing Committee on Finance of the federal government re-examined the issue of income-splitting in response to a parliamentary motion by the Reform Party. The goal of the examination was to determine if tax policies treat families with dependent children equitably. The Committee recommended maintaining individual taxation (see Committee report for more).
Tax splitting would benefit families where one spouse is a high-income earner and the other does not work outside the home or couples where one spouse earns significantly more than the other. For example, a family where one member earned $100,000 and the other had no earnings would pay the same tax as a family where both partners earned $50,000, or a family where one partner earned $75,000 and the other earned $25,000. In these cases, income -splitting would lower the tax rate paid by the higher earner. (See National Post article for example of tax savings on different family types.)
Critics of income-splitting maintain that altering the fundamental nature of the tax system – making the family, not the individual, the basic taxation unit – would make the tax system less progressive by reducing tax liability for higher earners who are usually male. Others take issue with the fact that this tax measure really serves higher income families best. And finally, critics are concerned that income-splitting could be detrimental to gender equality as it could discourage women's labour force participation, promoting financial dependence on their male partners.
Blue_Nose @ Mon Jan 28, 2008 1:31 pm
$1:
Critics of income-splitting maintain that altering the fundamental nature of the tax system – making the family, not the individual, the basic taxation unit – would make the tax system less progressive by reducing tax liability for higher earners who are usually male.
That's complete nonsense - "progressive" tax means rates are increased with increasing taxable income. The term has nothing to do with "progressively" taxing wealthy men over women.
If a woman (or man) decides to stay home because the family is financially better off under this system, what's the problem? I personally think women have come far enough along to make up their own minds without being treated like children in this manner.
Robair @ Mon Jan 28, 2008 1:48 pm
Yea there's two arguments on the equality side of this topic. One argues that it recognizes the value of a stay at home parent, and the other argues it will cause more women to stay home, therefore taking them a step back in the quest for equality.
I don't buy either of those arguments. I look at it more from the point of view of the first link I posted. We don't seem to be able to maintane our population in Canada, and financial well being is what is preventing a lot of couples from makin' babies.
BartSimpson @ Mon Jan 28, 2008 1:51 pm
Frankly, I am opposed to married couples being taxed as if their income was for one person.
Let their incomes be taxed separately at the same rate as a single person.
Robair @ Mon Jan 28, 2008 1:56 pm
BartSimpson BartSimpson:
Frankly, I am opposed to married couples being taxed as if their income was for one person.
Let their incomes be taxed separately at the same rate as a single person.
Reason being...
Let their incomes be taxed separately at the same rate as a single person.
karrie @ Mon Jan 28, 2008 2:41 pm
Frankly it irritates me to hear it dismissed as something which will keep women at home.
By not implementing something like this, it makes it harder for women to stay home.... a defacto value judgement stating what my life choices should be, based on someone else's ideal for my gender. That pisses me off, whether it's someone saying I should stay at home, or someone saying I shouldn't, based on what's under my pants. Ggrrrrrr.
And it's a gender bias to not grant men a chance to stay at home with their children. By making it as hard as possible to live as single income families, IF someone's going to stay home, it generally HAS to be the wife due to higher earning potential for many male dominated jobs. Now try to tell me that's fair.
Robair @ Mon Jan 28, 2008 3:48 pm
karrie karrie:
Frankly it irritates me to hear it dismissed as something which will keep women at home.
By not implementing something like this, it makes it harder for women to stay home.... a defacto value judgement stating what my life choices should be, based on someone else's ideal for my gender. That pisses me off, whether it's someone saying I should stay at home, or someone saying I shouldn't, based on what's under my pants. Ggrrrrrr...
...that's sort of what I was thinking when I said I don't buy either of those arguments. It would, I think, help address Canada's demographic decline. We either have to relax immigration policies, and support initiatives for new immigrants, or make living in Canada family friendly.
By not implementing something like this, it makes it harder for women to stay home.... a defacto value judgement stating what my life choices should be, based on someone else's ideal for my gender. That pisses me off, whether it's someone saying I should stay at home, or someone saying I shouldn't, based on what's under my pants. Ggrrrrrr...
hurley_108 @ Mon Jan 28, 2008 3:55 pm
Robair Robair:
karrie karrie:
Frankly it irritates me to hear it dismissed as something which will keep women at home.
By not implementing something like this, it makes it harder for women to stay home.... a defacto value judgement stating what my life choices should be, based on someone else's ideal for my gender. That pisses me off, whether it's someone saying I should stay at home, or someone saying I shouldn't, based on what's under my pants. Ggrrrrrr...
...that's sort of what I was thinking when I said I don't buy either of those arguments. It would, I think, help address Canada's demographic decline. We either have to relax immigration policies, and support initiatives for new immigrants, or make living in Canada family friendly.By not implementing something like this, it makes it harder for women to stay home.... a defacto value judgement stating what my life choices should be, based on someone else's ideal for my gender. That pisses me off, whether it's someone saying I should stay at home, or someone saying I shouldn't, based on what's under my pants. Ggrrrrrr...
Income splittign would help my family so much on both fronts though. My last dollar is taxed at about 40%. My wife's last dollar is taxed at just over half that. This is money that could be better spent in the form of reduced need for her to work now, but also later. My wife wishes to go back to university to get a B. Ed and teach, but finding the money to cover that is tough. Income splitting would make that so much easier, and then she'd be able to work MORE than now, not less.
I'll vote for any party that promises income splitting, as long as they don't have plans to make other things harder like reducing maternity benefits or taking away the child care benefit.
dino_bobba_renno @ Mon Jan 28, 2008 7:59 pm
I think income splitting is long over due. My job keeps me out of town 50% to 75% and because of the fact that I never know when I’m going it’s impossible to create stable schedule. We have two young daughters and because of my profession my wife pretty much has to be a “stay at home mom”. She carries the roles and responsibilities of two parents while I’m away as well as takes care of the house and our month to month finances while I’m away. I don’t see why revenues Canada doesn’t see this as full time job in and of itself and consider it worth associating a value to. If I were a single parent would I not have to pay some one for these services? There should be some type of tax break for single income homes.
Knoss @ Mon Jan 28, 2008 9:26 pm
This is why we should go to a flat tax system
If we go to a Negative Income Tax sytem we could require income taxes filed on the behalf of children so that they get a prosperity credit; this would replace family allowance further reducing beurocracy.
hurley_108 @ Tue Jan 29, 2008 9:02 am
d_b_r and lily both raise the same great point. Stay-at-home-parents do work - it's work to raise a child. The only thing they're not doing is working outside the home to pay for someone else to look after the kid and thus adding to the GDP. Screw the GDP - parents are the best people to look after their kids.
bluetooth @ Mon Apr 13, 2009 1:56 am
I'm surprised there isnt more support and strong voice for income splitting in Canada.
I do not understand how a family with two earning couples at $50,000 is less well off and hence eligible for a lower tax bracket for both than a family with one earning member of $100,000. As far as I can see, the fundamental cost of living is identical to both of them so why tax differently?
I work in software in a reputed company as a manager/architect and earn a good income while by better half prefers to stay home to take care of our kids and nurture our home. I find so many software developers who prefer contracting opportunities instead of full time so they can income-split and they end up making more than I do as a manager. Now I am glad that they are making their income, but I find it unfair that being in a more responsible role and working hard ends me with lesser pay. Now you may ask why I cannot do consulting like them. Of course, I could - but guess I'm still old school where I still prefer working for a company and working up the corporate ladder (and dont get me started on those special deals with workers who have contracts on paper and work full time in companies)
No wonder Canadians prefers small businesses over corporate growth due to such a tax system. We have far fewer of RIM and Nortel (I guess no more Nortel the way that is run) and far more people enthusiatic about starting their Tim Hortons or home based child care. Again, I am not intending to make fun of people working in Tim Hortons or child care - not the least, I deeply respect and appreciate every human being who works hard for a living. However, the tax system unfairly fails to promote the corporate culture for the common citizen - of course, the corporation itself gets good tax breaks and the executives get their bonuses and it is the employee that has to pay more - very fair!
There are quite a few people who are almost unwilling to find work and Canada pays them welfare (including some I know who end up doing illegal cash jobs while earning welfare - just great 
). There are the small business owners and contractors who cook every rule to maximize their dinner with the family as tax deducations - not to blame them if that is what the tax system allows. There are other families I know off who end up having 10 kids so that neither the husband or wife has to work hard enough because they had the ability to contribute more to our coutry's population that we love to pay them free tax dollars. And finally the average hard working salaried employee who cannot manipulate the system is given the finger! Thank you.
Finally, the worst irony of them all is that when I have to receive GST credits or child care savings or even the Canada Savings Bond for my child's RRSP, the overall family income is what is used by Revenue Canada. Wow, they just remembered that I have a family and a family income when it comes to giving me benefits while conveniently forgetting about it when taxing me first.
Thank you all. Be well and take care.