Can income-splitting split families?

Chris Moise –

As we now know, the Harper Conservative government has decided to forge ahead with an income-splitting scheme in order to provide “tax relief for families.” Or so Harper would have us believe.

Just this past February, Harper’s former finance minister, the late Jim Flaherty, expressed concern about income splitting because, as he plainly stated: “It benefits some parts of the Canadian population a lot.

And other parts of the Canadian population virtually not at all.”

In fact, from the right side of the political spectrum to the left, there are very few supporters for income splitting to be found.

The C. D. Howe Institute, a think tank known for its promotion of right-wing economic ideology and policies, concluded that “income splitting would fail to achieve its ostensible horizontal equity goal” and that “it would distribute most benefits where they are least likely to be needed.”

It added: “Splitting would also be revenue costly, adverse to work incentives, and gender-biased.”

The left-leaning Canadian Centre for Policy Alternatives was more to the point, calling income splitting “an expensive tax gift for the rich.” Likewise, the Broadbent Institute called the scheme “a new tax measure which will mainly benefit traditional families with a stay at home spouse” and that “turns its back on the pressing need for affordable, high quality child care.”

With the specific details of Harper’s income splitting scheme now available for scrutiny, we have some solid estimates to review. We now know that income splitting will cost the federal treasury about $2 billion annually.

What that means, of course, is $2 billion in foregone revenue for the federal government.

It means $2 billion less, per year, which could have been invested in schools, healthcare, housing and city infrastructures.

In Toronto alone, we are desperate for funding for public transit, roads and bridges.

Instead, the top 1% of families in Canada stand to gain up to $6500, the top 5% will gain up to $1100, and the bottom 60% of families stand to gain a whopping fifty bucks—about two bags of groceries, these days.

Clearly, the people who need this tax cut the least are the ones who stand to gain the most.

So, why introduce such an income-splitting scheme that has little support among politicians or public policy experts from across the political spectrum?

I believe Broadbent Institute Executive Director Rick Smith made an important observation: “The ‘Family Tax Cut’ will apply for the 2014 tax year, so refund cheques will be arriving on income-splitting family doorsteps in the summer of 2015. And July 2015 will see the arrival of six months’ worth of the increased UCCB benefits going to all families with children.”

With tongue firmly in cheek, Smith concluded: “The timing of the 2015 election is, of course, purely coincidental.”

Clearly, income splitting will please and ignite a sizable section of the Conservative Party’s base as we head into the next federal election, now less than a year away unless it’s called sooner.

And it’s the kind of “tax relief,” I suspect, that spurs campaign donations from such relieved supporters.

And what of Toronto’s needs?

A week after income splitting was announced by Harper, the City of Toronto held a summit on child and family poverty in our city.

There, a joint study presented by a number of non-governmental organizations revealed that Toronto has the highest level of child poverty among municipalities in Canada.

In Toronto, nearly one in three children in our city is from a low-income family. At the same time, Torontonians pay the most for childcare at $1676 per month. Quebec residents, thanks to provincial government subsidies, have been paying just $152 per month—a staggering difference of $1524 per month.

We know, from evidence-based research, that affordable childcare provides parents with a real choice about whether they want to work or remain at home.

We also know that affordable childcare lifts single parent families out of poverty and ensures greater equality of opportunity for children.

The vast majority of Toronto families bear no resemblance to the top 1% and 5% of families who stand to gain from Harper’s income splitting scheme. Income splitting is a wholly inadequate substitute for affordable childcare.

It will not provide Toronto parents—especially women—with the liberty to choose between staying at home and going to work.

It will not lift any Torontonians out of poverty and it will not level-out the field of opportunity for kids from less advantaged backgrounds.

Once again, tax-cut schemes like Harper’s income splitting leave me asking: Who is looking after the interests of the majority of families? When will the wealthiest in this country begin paying their fair share?

Provincial and city leaders need to send a clear message to the Harper government: this policy is not appropriate at a time when inequality continues to grow, the fragility of the Canadian economy persists, and the world economy continues to falter.

At the grassroots, citizens, too, must voice strong opposition to policies like income splitting which are actually hurting most families and weakening community bonds.

If we truly love our country, then why are we not pushing for policies that strengthen the social fabric by enabling those with the greatest needs to participate in and contribute to this society?