MercatorNet: Income splitting: Trudeau dumps Canada’s new policy

Income splitting: Trudeau dumps Canada’s new policy

The new Prime Minister doesn't 'get' the idea of family income.

Ada Slivinski | Apr 1 2016 | comment

Canada’s new Prime Minister, Justin Trudeau, took away income splitting for couples with kids in last week’s federal budget. The policy was short-lived – introduced by the Harper government in October of 2014, which means Canadian families can only claim “The Family Tax Cut,” for the 2015 tax year. The policy allowed families with children under the age of 18 to transfer up to $50,000 of income from the higher-earning spouse to the lower-earning one. Resulting tax-savings were capped at $2,000.

Campaigning on the idea of helping out the middle class, Trudeau argued that this was a tax break “for the wealthy.” Though studies have shown only 15 per cent of Canadians actually stand to benefit from the policy, Trudeau’s characterization that they are the wealthiest ones is way off.

Many middle class families make huge sacrifices in order for one parent to be able to stay home; income splitting allows to them to keep a little bit more of their money. It really is the only tax policy that is fair for families. When budgeting for children, parents look at their income as a whole, it only makes sense for the government to do the same. This holistic approach, “family taxation” helps encourage and support the fundamental building block of society.

According to an Abacus Data 2014 poll, 57 per cent of Canadians support income splitting, including 54 per cent of Liberals. So why scrap such a popular policy? Estimates are that it will save the government $2 billion per year, but for a government who campaigned on the idea of a deficit and projects to be $29.4 billion short this year that can hardly be the motivation.

It seems that at the root of this policy is the way Trudeau views the family; as a “nice to have” rather than a fundamental building block of society. In criticizing the policy, Trudeau claims nixing income splitting will “give Canadian families more money to raise their children.” But what most parents want is more time with their kids. Being taxed according to family income makes it possible for more families to have one parent at home while their kids are young.

Trudeau calls himself a feminist, but he has very narrow ideas of what women want. By calling the decision to stay at home a luxury, he overlooks the sacrifices many parents are making. His tax policy encourages more women to work and put their kids in daycare; though this may be ideal for some women many others would prefer to be home.

According to research from the Institute of Marriage and Family Canada, “across party lines, gender, and income levels, 76% of Canadians believe the best place for a child under six is at home with a parent.” Trudeau is right in saying that having one parent at home while kids are young is no longer the norm, but instead of using government policy to make that more difficult he should encourage those who are doing what they can to make it work.

The Liberal argument rests on the idea that “[income splitting] will not create a single job. It will not give one young person an opportunity to get ahead.” Supporting families may not create any immediate jobs, but it does help strengthen society’s fundamental building block and the long-term payoffs of that in terms of jobs and opportunities are huge.

Yes, income splitting might benefit some wealthy families, but it would also make a huge difference for those trying to make ends meet with one parent at home. If Trudeau wanted to put the power to decide how to raise their families back into their hands, he would bring back family taxation.

Ada Slivinski is a Canadian journalist who writes about family and social issues

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