Income Splitting [Policy discussion]

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Re: Income Splitting

Post by kombat »

Thanak wrote:The big question I have for people who oppose this is why should a familly where one person earn 75k$ while the other earn 25k$ pay more tax than another familly where both earn 50k$ ?
Because Canada's tax system is based on individuals, not families.
Thanak wrote:If the government recogniser a familly as a fiscal unit, then their income should be treated as one unit.
Sure, but it doesn't. The tax code contains a few provisions and credits that families can avail themselves of, but there's no such thing as "married filing jointly" in Canada, as they have in the US.

To extend your example, why should a family where one parent earns $75,000 and the other earns $25,000 pay less tax than a family comprised of a single mother earning $100,000? The "household" is bringing in the same income, yet the two-parent household is able to claim the basic personal exemption twice, in addition to all other credits. Is that fair?
Thanak wrote:Limiting it to famillies with children is more questionable but again, if the governement makes the choice of helping the local population raise children, then it makes sence.
Is it the government's job to encourage breeding?
Thanak wrote:I would rather have the governement cancel all TFSA, RRSP, RESP, income splitting, child benefit, devidend tax credit,... basicly everything that makes the system complex and replace all of these with a lower flat tax rate that no one can avoid.
Agree 100%, with the exception that capital gains should still receive preferential taxation (otherwise why would anyone put their after-tax dollars at risk if their gamble pays off and any gains are just going to be fully taxed as income again anyway?)
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Re: Income Splitting

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Thanak wrote:Ultimatly if you view familly as a unit, then all of them should be treated as a unit.
You mean "view a family as a TAX unit." But even then, you're now left with the sticky problem of defining what constitutes a "family."

Clearly, a married couple with 1 or more children under 18 is a "family." I think we can all agree on this, but this also appears to be the only definition that the current government accepts.

Is a single parent with one or more children a "family?" If so, then why are they excluded from this benefit?

Is a married couple with no children a "family?" Apparently not, although that comes as shocking news to my wife and I.

Is a single person living alone a "family?"

Again, I come back to the same question I keep asking on this subject: Is this about "fairness," or is this about social engineering? It's clear to me that it's about social engineering, yet many folks in this thread seem intent on portraying it as injecting a measure of "fairness" to a tax code that is perceived as "unfair" simply because it is based on the notion of an individual (which applies to the entire population) rather than a narrowly-defined concept of a "family," which only applies to a portion of society.
Thanak wrote:Income splitting solve one unfairness not all of them... it doesn't mean it's not a step in the right direction.
No, there are plenty of other reasons why it's not a step in the right direction. For example, it muddies the notion of the accepted atomic unit in our tax system (which, until now, has been clearly individual-based) by suggesting it would be better to base our tax system on two units: "families" (2 married parents with 1 or more minor children), and "individuals" (everyone else not meeting that narrow definition).
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Re: Income Splitting

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kombat wrote:Is it the government's job to encourage breeding?
I take offense to your repeated use of this word, which I'll guess you'll apply also for your own process of coming into existence.

To answer the question, in a word, yes!
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Re: Income Splitting

Post by izzy »

Even if not everyone agrees I think it furthers the concept that income should be taxed according to the number of people in the family who are dependent on that income rather than the number of people who earned the income. I'm just surprised that it is the conservatives who have suggested it and the more left wing parties who are opposed!!
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Re: Income Splitting

Post by Thanak »

kombat wrote:... For example, it muddies the notion of the accepted atomic unit in our tax system (which, until now, has been clearly individual-based) by suggesting it would be better to base our tax system on two units: "families" (2 married parents with 1 or more minor children), and "individuals" (everyone else not meeting that narrow definition).
Well you already have pension splitting for retiree so the notion was already muddied.

If you want something clear, just put a flat tax for everyone. Then it no longuer matter who earn's the money.
Last edited by Thanak on 04 Nov 2014 08:58, edited 1 time in total.
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Re: Income Splitting

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adrian2 wrote:
kombat wrote:Is it the government's job to encourage breeding?
I take offense to your repeated use of this word
If you're being serious, then I apologize, I meant no offense. It's what I considered the most appropriate and accurate term, it's a perfectly valid medical word, I'm not sure what other term would have been more appropriate. "Spawning?" "Reproducing?" "Multiplying?" Breeding simply seemed the most apt to me.

For what it's worth, I find the term "child-less" offensive, but I find leftist PC whining even more offensive, so I didn't say anything. But the suffix "-less" implies that the subject is desirable, and being without it is a bad thing (eg., penniless, homeless, hopeless), whereas the suffix "-free" implies that the subject is a bad thing, and being without it is a good thing (eg., cancer-free, debt-free, smoke-free). Those of us who are child-free by choice prefer the latter.
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Re: Income Splitting

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kombat wrote:
adrian2 wrote:
kombat wrote:Is it the government's job to encourage breeding?
I take offense to your repeated use of this word
If you're being serious, then I apologize, I meant no offense. It's what I considered the most appropriate and accurate term, it's a perfectly valid medical word, I'm not sure what other term would have been more appropriate. "Spawning?" "Reproducing?" "Multiplying?" Breeding simply seemed the most apt to me.
Yes, I am serious, and I accept your apology.

Animals breed, humans have children. In my native tongue there's a different word for giving birth as a woman vs. giving birth as a female animal.
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Re: Income Splitting

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Thanak wrote:Well you already have pension splitting for retiree so the notion was already muddied.
True enough, and I'm opposed to retiree pension income splitting too.
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Re: Income Splitting [Policy discussion]

Post by bcjmmac »

I support income splitting for families with kids under 18 - doesn't apply to me, but would have during my earlier working career as we moved often (& I was away a lot) so my spouse gave up her career to look after our children. She didn't re-enter the workforce, and as such, was always active/volunteering at their schools/clubs, and in the community. Worth more to society than what is being offered IMO, but I also realize that many people don't feel this way.
I agree that this is social engineering by the government - as are many tax measures. I also think the main goal of this "break" is to allow one parent to stay at home & raise the children. In general, I think that is worthwhile & is backed up by clinical studies.
On a side note - I lived in Germany for 5 years in the 90s. One of my German colleagues related that Germany might change it's regulations such that childless workers would have to contribute more to their pension plans than ones with children. The rationale was that the childless workers would not have their pensions partially funded by the contributions of their children when they entered the workforce. Don't know if that regulation/law was ever enacted.
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Re: Income Splitting

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ig17 wrote: Family A: one income 120K
Family B: two incomes 60K + 60K

Total income is the same. Both families are in the top 5% or whatever the number is.
But the families are not the same at all. In Family A one spouse is earning more than 89% of individuals in Canada earned in 2012 for putting in one person's worth of full-time employment. In Family B each spouse is putting in a person's worth each of full-time employment to reach the same amount. Both Families A and B are also putting in the work of raising the kids although during certain hours Family B may be putting down money to have someone else take care of the kids when they can't.

I can say without devaluing the intensive labour of child-raising that both families are putting in that work to approximately the same degree. Hence I can comfortably say that Family B is doing more work to maintain the same standard of living, or perhaps a lower standard because some of their earned money goes to childcare. Family B does not have the choice of turning into Family A because they likely cannot find jobs that pay twice as much.

At the end of the day there is more exhaustion in Family B. Family A has more options. The unearning spouse of A could start a home business or work part-time. Family A is taking home the same pay without putting down childcare expenses so they have more disposable income, probably even after taxes. Family A has the freedom to experiment with different divisions of labour to suit one another's circumstances. Family A's earning spouse probably has more weeks of vacation, and they can go on family trips without having to co-ordinate the limited vacation days of two spouses. Family B does not have all these options without sacrificing their standard of living.

It would seem to me Family B needs more help to get by than Family A. So why shouldn't family B receive preferable tax treatment?
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Re: Income Splitting

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queerasmoi wrote:
ig17 wrote: Family A: one income 120K
Family B: two incomes 60K + 60K

Total income is the same. Both families are in the top 5% or whatever the number is.
But the families are not the same at all. In Family A one spouse is earning more than 89% of individuals in Canada earned in 2012 for putting in one person's worth of full-time employment. In Family B each spouse is putting in a person's worth each of full-time employment to reach the same amount. Both Families A and B are also putting in the work of raising the kids although during certain hours Family B may be putting down money to have someone else take care of the kids when they can't.

I can say without devaluing the intensive labour of child-raising that both families are putting in that work to approximately the same degree. Hence I can comfortably say that Family B is doing more work to maintain the same standard of living, or perhaps a lower standard because some of their earned money goes to childcare. Family B does not have the choice of turning into Family A because they likely cannot find jobs that pay twice as much.

At the end of the day there is more exhaustion in Family B. Family A has more options. The unearning spouse of A could start a home business or work part-time. Family A is taking home the same pay without putting down childcare expenses so they have more disposable income, probably even after taxes. Family A has the freedom to experiment with different divisions of labour to suit one another's circumstances. Family A's earning spouse probably has more weeks of vacation, and they can go on family trips without having to co-ordinate the limited vacation days of two spouses. Family B does not have all these options without sacrificing their standard of living.

It would seem to me Family B needs more help to get by than Family A. So why shouldn't family B receive preferable tax treatment?
Seems to make sense but may not always be true though.$120k is often an executive level income in Canada or similar and to earn that kind of dollars may require a lot of overtime hours even if those hours are not formally recognized .Thus there may be very good reasons whilst the other spouse may not be able to indulge in gainful employment, especially if there are children. Its a big assumption that someone earning twice what you do is not working more and /or irregular hours which preclude the other spouse from participating in the workplace.
Unfortunately how we interpret a situation is biased by our own experience which may not truly represent that of others in our society.
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Re: Income Splitting

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queerasmoi wrote:
ig17 wrote: Family A: one income 120K
Family B: two incomes 60K + 60K

Total income is the same. Both families are in the top 5% or whatever the number is.
.... It would seem to me Family B needs more help to get by than Family A. So why shouldn't family B receive preferable tax treatment?
Family B can deduct the cost of day care
Family A can't.

Family B is in a lower tax bracket than Family A.

Family B votes for governments that will provide universal all-day Jr. Kindergarten and Sr. Kindergarten (aka free day care), at taxpayer expense. Family A pays for them, so they use them, but they could live without them.

Family A (or at least one member) invested enough in education that they can command a salary of $120K/yr. Family B didn’t. Yet Family A subsidizes Family B.

How many more breaks do you want Family B to have?
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Re: Income Splitting

Post by OhGreatGuru »

kombat wrote: Because Canada's tax system is based on individuals, not families....
This is a bit of myth. Whenever it is to CRA's benefit they treat families as a single economic unit, but never when it is to yours. (My apologies for shooting CRA as the messenger - it is Parliament that makes the rules.)
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Re: Income Splitting

Post by ig17 »

Family A earns one CPP. Family B earns two. What is the present value of one extra CPP?

Stay-at-home parent A may be doing it out of necessity: health issues, taking care of ill elderly parents, full-time retraining, etc. Current system penalizes them regardless.

Why focus exclusively on A vs. B? What about Family C: 90K + 30K? They face the same challenges as Family B. Why should C pay more than B?
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Re: Income Splitting [Policy discussion]

Post by Shine »

So many comments and different views on this topic suggests that the entire issue is not based on economics but is only a political gambit. Let's not forget that Saint Flaherty cast doubt on the policy.


On the upside maybe the policy can squeeze more kids out of a reluctant generation in order to provide additional unpaid interns - workers - to satisfy Poloz's solution. Imagine a generation of unpaid workers - hmm, were they not called serfs in the grand empires of yore?

I know of young people in the 1990's and early 2000's who had to pay for the opportunity to article, for free, at law firms.
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Re: Income Splitting

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OhGreatGuru wrote: Family A (or at least one member) invested enough in education that they can command a salary of $120K/yr. Family B didn’t. Yet Family A subsidizes Family B.

How many more breaks do you want Family B to have?
Speaking as someone who has invested plenty in education, in a very practical field, and who has been flat-out unemployed for 19 nearly uninterrupted months nonetheless since my layoff... A is not just someone who tried harder and got what they deserved. Luck and privilege are a huge factor. Family B is putting every single ounce of blood sweat and tears into sustaining their livelihood that Family A is putting in, plus a considerable number of hours more. Family A is privileged enough and is not suffering any sort of "financial injustice" that would need to be rectified by another tax cut. The whole premise is a false equivalency.
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Re: Income Splitting [Policy discussion]

Post by Bylo Selhi »

These are the wrong tax cuts for an economy in peril
The Conservative government is, however, committed to income-splitting because they promised it during the 2011 election campaign — and because they truly believe it corrects a fundamental point of unfairness in the tax system... But that’s a pretty narrow definition of ‘fairness’ — and it falls apart when you examine it closely...

The Harper government intends to fight an election on the theme of ‘putting money in taxpayer’s pockets’. The money they’re talking about is small change — an extra $9.80 a day for the lucky 15 per cent, or $2.77 a day for the unlucky remainder. Depending on what city you live in, childcare costs can amount to up to $1,000 a month per child, or $2,000 for a family with two kids. So these cuts won’t accomplish much on their own.

And this tax conversation is simply the wrong one for us to be having right now. Why the rush to cut taxes? More importantly, why these tax cuts — ones which will do nothing at all to jump-start Canada’s anemic economic growth rate?
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Re: Income Splitting [Policy discussion]

Post by Thanak »

Bylo Selhi wrote:The Harper government intends to fight an election on the theme of ‘putting money in taxpayer’s pockets’. The money they’re talking about is small change — an extra $9.80 a day for the lucky 15 per cent, or $2.77 a day for the unlucky remainder. Depending on what city you live in, childcare costs can amount to up to $1,000 a month per child, or $2,000 for a family with two kids. So these cuts won’t accomplish much on their own.
I always find those it only cost/give x a day argument silly. 3.4k$ a year is a significant amount of money for most people. Most people would welcome a 1$ an hour raise.

I'm not saying tax cut are the best way to stimulate the economy or that this specific tax cut is better than something else, just that the amount will be significant for the people that get it.
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Re: Income Splitting [Policy discussion]

Post by Bylo Selhi »

Thanak wrote:I always find those it only cost/give x a day argument silly. 3.4k$ a year is a significant amount of money for most people. Most people would welcome a 1$ an hour raise. I'm not saying tax cut are the best way to stimulate the economy or that this specific tax cut is better than something else, just that the amount will be significant for the people that get it.
According to the linked article those 15%ers generally earn upwards of 6 figures While $3.4k isn't peanuts to them it's not likely to have a significant impact on their spending habits. It's not e.g. going to make daycare "affordable."

And to someone who earns $100k/year or ~$62/hr a $1/hour raise isn't likely to be significant either.
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Re: Income Splitting

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ig17 wrote:Family A earns one CPP. Family B earns two.
Earrns is right. CPP is paid for by employees and employers. It's not a handout. There's no justification for giving Family A a tax break just because they will have only one CPP between them. The earner in Family A can make RRSP contributions and deduct at a higher marginal rate and use an spousal RRSP and/or get income splitting on the RRIF withdrawls, which means a higher after-tax return than Family B would get.
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Re: Income Splitting

Post by queerasmoi »

patriot1 wrote: Earrns is right. CPP is paid for by employees and employers. It's not a handout. There's no justification for giving Family A a tax break just because they will have only one CPP between them. The earner in Family A can make RRSP contributions and deduct at a higher marginal rate and use an spousal RRSP and/or get income splitting on the RRIF withdrawls, which means a higher after-tax return than Family B would get.
Aha very good point. I hadn't even thought of that when CPP was mentioned. It's a forced savings program, but there is nothing preventing a single high income earner from saving more than they were forced to.
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Re: Income Splitting [Policy discussion]

Post by Thanak »

Bylo Selhi wrote:
Thanak wrote:I always find those it only cost/give x a day argument silly. 3.4k$ a year is a significant amount of money for most people. Most people would welcome a 1$ an hour raise. I'm not saying tax cut are the best way to stimulate the economy or that this specific tax cut is better than something else, just that the amount will be significant for the people that get it.
According to the linked article those 15%ers generally earn upwards of 6 figures While $3.4k isn't peanuts to them it's not likely to have a significant impact on their spending habits. It's not e.g. going to make daycare "affordable."

And to someone who earns $100k/year or ~$62/hr a $1/hour raise isn't likely to be significant either.
3.4k$ in after tax money !

I earn 100k$, after tax I have 70k$ left. That's a 5% increase in available money. It's significant.
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Re: Income Splitting

Post by OhGreatGuru »

adrian2 wrote:...
- the TFSA system is one of the few ideas whose benefits are equal across various income levels.
...
Not really. TFSA benefits those who have disposable income, and the more you have, the more you can benefit.
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Re: Income Splitting

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OhGreatGuru wrote:
adrian2 wrote:- the TFSA system is one of the few ideas whose benefits are equal across various income levels.
Not really. TFSA benefits those who have disposable income, and the more you have, the more you can benefit.
If you want help, sometimes you need to do your part, too. :P
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Re: Income Splitting [Policy discussion]

Post by Quebec »

This week information was leaked to the media, according to which the Quebec govt plans a major sudden increase (from the current $7.30 to a max of $20 a day) to the price of subsidized childcare, for the upper middle class and the "rich". This will cost me several thousands dollars extra per year, payable at tax time. Yet the election promise of the liberals (for whom I voted!) was to index the price to the cost of living, hence the modest Oct. 1st rise from $7.00 to $7.30.

This bad news made me very unhappy indeed, whereas the "good" news (i.e. personally advantageous news) on income splitting left me mostly indifferent. Lesson: don't fiddle with taxes or prices if you want my vote!
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