Income splitting: little relief for those who need it

There's a policy proposal up for debate at the Conservative Party convention to make income splitting for married and common-law couples official party policy. It likely won't be contentious - and that's too bad.
 
The Harper government has already pledged that once it balances the federal budget, parents with children under 18 would be allowed to split up to $50,000 of income with their partner. This means that some additional income could be declared for tax purposes by the spouse in the lower tax bracket, reducing the overall taxes paid by the couple.
 

The idea is usually pitched as a panacea for everyday families, but the largest share would go to high-income families where one partner is in the top tax bracket and the other has no earned income. The Conservative approach to income splitting would provide no benefit at all to single-parent families – even though more than a quarter (28%) of all children live in families headed by a single parent. The same holds true for families where both partners work and have incomes below $43,561.

In other words, income-splitting provides zero relief to families with children who are most in need, including those who live in poverty. Rather, what it does is transfer more of the tax burden onto single-parent families and lower- and middle-income families. It promises to exacerbate – not reduce – existing income and gender inequality.

It will also hamstring future federal governments to invest in critical social programs. Maybe that's really the point.

Photo: mike52ad. Used under a Creative Commons BY 2.0 licence.

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