So, back home for a few days. Watching Cheka on the back lawn eating bugs which have just emerged form the turf. Dorothy raking and pruning. It’s a time of year filled with promise, of course. Makes a boy want to go and shine his motorcycle.
But I resisted. Instead, of course, an MP’s work drags on and today I started on a communications piece for my riding on the five major priorities the government will be popping over the next weeks, starting with the Throne Speech in a few days. Ten weeks out from the election, I have sense that many people have forgotten some of the themes of that contest, and I want folks in Halton to understand clearly what directions the feds are about to lead them in.
These are five things I believe in, will support, and will vote for. But I still have a clear obligation to inform constituents of them, ask for their opinions and then make sure those comments are woven into what I plan to say in the House of Commons. I gave my promise months ago never to send out MP propaganda with a party logo on it or spend time telling people how great the federal government is. And I won’t. But I sure will tell them what’s going on.
One priority, of course, is child care. It’s contentious. I came home to a front-page story in the local paper quoting municipal politicians dumping on the Harper Tories for reneging on the old Liberal promises to create new day care spaces for lower-income mothers. No matter the old plan would provide a relatively few spaces for a tiny number of kids. No matter not a single space has yet been created. No matter that this plan would provide no benefit at all to 90% of the families with kids in Halton. And no matter that I met with the same local polticians in the past few weeks who did not then have the conviction to say what a reporter just heard.
So, I have an obligation to tell folks the truth, hear what they have to say and move this issue forward. Not everyone will agree. But not everyone voted for me or Stephen Harper. It’s all about choices, isn’t it?
Speaking of child care, and the media, this story was in the National Post today:
Tory MP wants party to rework child care policy
OTTAWA – Conservative MP Garth Turner is urging his own government to water down a key campaign promise on child care after surveying more than 11,000 Canadians.
Turner, who was in trouble with his own party last month for publicly criticizing the government, argued Wednesday that many Canadians are not satisfied with a pledge to offer a $1,200 annual allowance to families for every child under six.
He said he received thousands of e-mails and messages from families across the country who would rather see a real tax break, instead of getting the $1,200 allowance promised by the Harper government. Many single-income couples feel they are at a disadvantage under the current tax system, since they don’t have the option of income-splitting, he added.
“You’re in the highest income tax bracket. You got two people living across the street who are both working, and maybe their family makes exactly the same as your family, but you pay more tax,†said Turner who represents the Halton riding, outside of Toronto. “People say: ‘That’s not fair. And if I were able to split income with my wife or my husband and average between the two of us, we’d end up paying the same taxes as those guys across the street. So why penalize me for caring for my children?’â€
He said the issue is a popular complaint among many families who supported the Conservatives in the last election.
Turner said Prime Minister Stephen Harper and Finance Minister Jim Flaherty were attentive as he presented his 20,000-word report on how to revamp the tax system and redesign the budget to caucus.
“I think they accepted what I had to say and did it in a polite and professional manner. So we’ll see what happens from here,†said Turner.
Unfortunately this story is not too accurate. The reporter was interviewing me about income-splitting, not child care, and got the two issues mixed up. My pre-budget report did not argue for income tax cuts instead of child care payments. What it does argue for is a Family Tax Return which would allow income-splitting between spouses where one is staying home to care for kids. I also argued that families who elect to income-split should not get the child care payment, as a way for Ottawa to afford the income-splitting.
Hell, here it is. Read this section of the report for yourself:
Create a Family Tax Return and allow income-splitting
This, without question, is the most-requested tax code change in Canada. There is a wide-spread perception that our system, which is based on the individual, is patently unfair to many families, particularly those with a single income.
Typically, this family would have one wage-earner while the other spouse stayed home and cared for children. When this family’s income is equal to that of a dual-income family, then invariably, the single-income family would pay more in tax and have less disposable income.
As a result, we have families making the same amount of household income and yet being taxed at different rates. At the same time the immense contribution of care-givers is not being adequately recognized by the tax system. And we are, ironically, taking more disposable income from the hands of parents than we are from childless, working couples who may incur less in the way of household living costs.
By creating a Family Tax Return, akin to the Joint Return which exists under IRA rules in the United States, we could level the playing field and tax families more equitably and realistically. This would also allow for:
§ income-splitting between spouses, so that stay-at-home caregivers would assume part of their spouse’s earnings and pay tax on it, while the other spouse would be taxed in a reduced bracket. It is interesting to note that France allows income-splitting to occur even between parents and children.
§ Stay-at-home caregivers to make RRSP contributions in their own name, since they would share in the earned income of their spouses. This focus on retirement savings is a critical one, given our aging population and general unpreparedness of most Canadians for their after-work years,
§ Single-income families to make better financial planning decisions and to be less preoccupied with tax avoidance.
§ Families to make better lifestyle and personal care decisions, such as opting for income-splitting to allow a spouse to stay home and care for disabled family members or aged parents. The more home care which can be provided, the less impact there will be on precious and strained government resources.
§ Canadians to better cope with financial pressures over which they have no control, such as the rising cost of residential real estate. As home prices escalate, more income is diverted into debt servicing costs, creating a huge strain on those families who choose to provide in-home care for children or elders.
§ Recognition of the family as the basic economic unit of Canada. For this purpose, “family†could certainly be defined in traditional terms, or as a single-parent entity or same-sex union, provided that a child or children are included. Income-splitting among childless, working couples, or working couples with children of a certain age, would be too problematic and expensive to consider practical.
§ Less dependence by some families on the government child care allowance, should they be able to split income between spouses.
The big question with the creation of a Family Return and allowing of income-splitting for families with young children would be the amount of lost tax revenue to the federal Treasury. So, here is one concrete suggestion for dealing with that…
Make the child care payment elective and means tested
Let’s be consistent with our policy of empowering individuals and families by giving them more choices. At the same time, let’s make the tax system consistent, in that government assistance is truly based on need.
In order to offset the cost of reduced tax revenues that income-splitting in care-giving families would create, let’s give such families the choice of taking the $1,200 annual Child Care Allowance, or opting for a Family Tax return with the ability to income-split. The choice would be theirs to make, based on the best outcome in their particular circumstances.
An additional way to finance the tax cost of income-splitting, and of saving valuable public resources from going to families who do not require it is to means-test the Child Care Allowance. Should we not ask the basic question, do wealthier families who don’t need $1,200 a year to offset child care expenses get it? The overwhelming response from the taxpayers commenting on this budget was, no.
Your comments are most welcome on any of the above. I’m going to polish my Harley now.
21 comments ↓
I like the idea of the opportunity to have more choice as to which “family tax cut” you will choose… $1,200 or Income-Splitting… and having the Split portion of income eligible for RRSP contributions (Spousal RRSPs should be eliminated in any year that Income-Splitting is chosen)… and I like the means testing idea too. Well Done Folks.
And good on ya’ Garth.
Including your Conservative colleagues’ input before releasing your report was a good, honourable, inclusive, and necessary next step in living out your personally held beliefs on a daily basis… to have skipped this step would have been a SHORT CUT that would have had serious ramifications on the pursuit of your goals.
Inclusion… one small step at a time my friend.
Perhaps the next step is to hand deliver your recommendations to each member of the entire Parliament so that they can become more involved in the process that you, and each of them, set out to influence for the betterment of the people of this great country Canada.
At the very least you will meet some interesting people from across this great country of ours.
As I have said previously on these pages…Do not look at the results of your efforts or the approval of other as a measure of your success… these are hollow gods not worth seeking. As long as you keep showing up and pursuing your expressly stated and firmly held beliefs without taking a single short cut… results will and approval will accrue. It is the natural consequence of striving for the uncompromised attainment of your personally held beliefs on a daily basis.
Keep moving forward by sticking to your expressly stated and firmly held beliefs my friend.
We are with you.
Sincerely,
Mark Brown
P.S. Wouldn’t it be nice if all future Finance Ministers developed each of their budgets using your methodology for generating a taxpayer-centric budget priorities list Garth… Democarcy through inclusion…Keep pluggin’ along.
On a completely different note, does anyone find the following quite disturbing:
http://westernstandard.blogs.com/shotgun/2006/03/western_standar.html
So now people can sue magazines just because they don’t like some cartoon, all on the taxpayer’s dime? Are they going to sue all the university papers also? I think Mark Steyn has got the story just right:
http://www.westernstandard.ca/website/index.cfm?page=article&article_id=1511
I can’t believe the western media in general is folding to the demands of radical islamics. And now the cartoonists are in hiding — bounties on their heads, and their families are being threatened. All because of a couple cartoons? The western world should have taken a stand, and published the cartoons everywhere. This just shows the extremists that their scare tactics work — therefore, they will continue to use them. This is a perfect example of how we can take ‘political correctness’ to the extreme. If we continue to do so, it may be at our own peril.
Mr. Turner:
Any thoughts as to why income splitting has not been implemented in the past?
The current system is so obviously unfair (two families, same family income, different tax bill), I cannot understand why it has not already been fixed by past governments.
I think understanding why previous governments have not fixed the problem might be a useful in building a strategy to affect change. Is it just indifference on the part of the government toward the family unit? Cost? Left-wing ideological reasons?
Any ideas?
The root of this is the Liberal government’s redesign of the tax system more than 30 years ago to reduce the role and status of family and to base the system on individuals. As a result, total tax revenues increased and I believe that was the genesis of the change. In any case, it is wrong on many fronts, not the least of which is simple fairness. Without a doubt, this is the most-requested change to our tax system in my research, and one which I am in complete agreement with. A major role which I am mandatting for Mr. Fisher’s committee in Halton will be to strategize how this can be rectified for all tax-paying families of Canada. — Garth
Sorry, “affect” should have been “effect” in my post…
Ok, the logic is escaping me here (and bias note, I’m married with a higher income, we have no kids but might in the future).
You want to allow income splitting because it is unfair that a family with one working person making $100,000 pays more in taxes than a family with two working people making $50,000 each. However, if people choose that, then you want them to lose the $1200 per child tax break to make it affordable for Ottawa.
Who do you think needs income splitting the most? Wouldn’t that be families with one stay at home parent? And wouldn’t those be the families most likely to have children?
The end result is that immediately after making it fair you break it again. A family with two kids, one parent making $100,000, one parent staying home, will choose income splitting as it saves more than $2400. However, they will be paying $2400 more in taxes than a family with two kids, and two parents making $50,000 each.
If the current method of “charging” taxes is unfair, then fix the method and set new rates. Maybe that means that all taxes must go up 3% to offset the revenue loss from income splitting (since that would largely be high margin taxes). The income splitting families would come out ahead and the two-job families would come out behind, which would restore fairness on the family level.
As I wrote, my proposed option gives families more individual choices, to determine the financial system best suited to their needs, incomes and lifestyles. People get to choose the child payment or income-splitting, but not both, since that double-benefit would then tilt the unfairness meter in their direction. Each family is different, which is why a monolithic tax system leaves many inequities in its wake. This more tailored approach could be both affordable and flexible. Do not forget that income-splitting in a SIF would give both spouses the opportunity to make RRSP contributions, lessening their tax profile while saving for an independent retirement – also a social benefit. — Garth
hey wes – isn’t that western standard thing just ezra levant’s way of pissing people off? frankly, i think he deserves whatever he gets. sucks that the taxpayers dime is being used, but beat on him all you want i say. nutjob.
Correct me if I’m wrong, but doesn’t the stay at home parent also lose out on CPP growth under the current rules? In any case, I think the $1200 plan and income splitting are seperate issues. Fairness requires that changes allow income splitting, and I don’t believe that parents should have to choose to lose the $1200 in order to qualify for fair taxation. That doesn’t make sense.
As for a means test, isn’t that part of the program already? I thought the $1200 is taxable for the lowest income earner.
But really, the Federal gov’t needs to accept that reduced tax rates usually increase net tax revenue. If the CPC party won’t cut spending and taxes, who will?
Garth,
Thanks for your efforts on the issue of income splitting. The recommendations that you have developed through consultation with voters offer a very forward thinking approach to a problem. As usual, the writing and the thinking are clear, insightful and brilliant.
I hope that Mr. Flaherty will consider these proposals very seriously. The effect on tax revenue will have to be balanced against the benefit of having additional money in play in the economy.
I am looking forward to reading the rest of your report. I might not agree with you on every issue but I respect the work that you are doing. You have vision, integrity and strong convictions. The committee under the direction of David Fisher has a very distinct possibility of making a significant contribution.
As for MPTV, while it may well be a ground breaking conduit for more direct democracy and government accountability, it risks becoming a distraction that prevents our elected representatives from doing their job.
From all of the blogs both intelligent and angry, it would appear that there is a consensus that there is a very important and difficult job that needs to be done in Ottawa. The present government needs to maintain its momentum and keep a strong focus to ensure that the critical decisions and legislation happen. Just a reminder of something you have probably already considered.
I enjoy reading your blog. Your insight and vision are quite remarkable.
“As I wrote, my proposed option gives families more individual choices, to determine the financial system best suited to their needs, incomes and lifestyles. People get to choose the child payment or income-splitting, but not both, since that double-benefit would then tilt the unfairness meter in their direction.”
Making some choose one or the other leaves a two income family with children paying less taxes than a one income family with children even though both have the same number of children and the same total gross income. Allowing both means that they would pay EXACTLY the same amount of taxes, so how does that tilt the balance in their favor?
(Ok, I caught myself here, in that with CPP and EI caps a single income of $100,000 pays less of those than two incomes of $50,000… the solution here though would seem to me that if you choose to split, you have to pay equivalent CPP and EI as well.)
“Do not forget that income-splitting in a SIF would give both spouses the opportunity to make RRSP contributions, lessening their tax profile while saving for an independent retirement – also a social benefit. — ”
There’s only one problem with that. Right now the maximum per person is $16,500, which at 18% means a salary the year before of $91,666. To split and get the benefit on a second person that means your single income person needs to get a salary between that and $183,333. (Below those levels, a taxpayer can simply contribute to a spousal RRSP and get the same deduction). And while that benefit is not as great as it was for those people (income splitting dropping them from the 29% bracket to the 22/26% brackets) it still is a plus.
Ok, make that two problems with that… it’s also part of the fairness principle. Right now a single income family making $200,000 is capped at $16,500. A double income family making $100,000 each is capped at $33,000. So once again, this benefit to the income splitters only brings them into parity with dual income families.
Ultimately, I guess what it comes down to is, “what are you trying to encourage”? Penalizing the stay at home parent caused (or was a contributing factor to) a drastic increase in two income families, allowing income splitting will be an encouragement to have a spouse stay at home. Considering the projected employment shortage as boomers retire, is this the right time for this kind of change?
The $1200 appeared to me to be an encouragement to have children and increase the birth rate, which is why it appeared to be universal. If that’s not it’s purpose, what is it for? If that is it’s purpose, why would you take it away from single income families?
Income splitting appears to increase overall RRSP deduction limits in some high single income cases. While it brings it into parity with the contributions a dual income family can make it will affect government revenues in the short term. Does the government want to encourage more RRSP savings or is it comfortable with levels as they are?
Steve:
You give the example of $200k versus $100k x 2, resulting in RRSP deduction limits of $16.5k and $33k respectively.
That’s huge of course. In light of those numbers I’m not quite sure why you say there’s a problem with the RRSP proposal that Turner put foward. Just trying to understand.
You raise the discussion point regarding the relation between income splitting and people in the workforce. I think this is a good topic because I suspect it’s one that will be used by those who are opposed to income splitting.
I personally think it’s morally wrong for a government to create a system that pushes, through tax policy, both parents to work when their kids are young.
Second, Canada should look to solving its workforce problem in a multitude of ways. (1) Improved productivity would be a good start. (2) Forcing competent, productive workers to retire because of their age should also be illegal from coast to coast.
First and foremost I think a government must be fair in what it does. If Mary and Joe have more money to toss about than Peter and Jane, simply because their incomes split differently, that’s plain wrong in my mind.
Mike,
I don’t know if he was trying to piss people off, or make a stand to essentially say ‘I will not be intimidated, as a publisher, by groups using violence to control what is published, and what is not’. I would like to think it was the latter. And if so, I ask again — why did everyone else in north america bend to the will of some extremists? This isn’t the first time something like this has happened (remember the murder of that dutch film maker?). Probably not the last time either — especially if we show, by our actions, that their violent tactics work.
Acanuck, thanks for the reply!
In regards to the RRSP 16.5 Vs. 33K, I don’t have any problem with it at all, my point is that Mr. Turner said this was an additional benefit that income splitters would get compared to dual-incomes, which offsets the loss of the $1200/child benefit. My point was that this is not an additional benefit to income splitting that tips the scales in the income splitters favor, but rather just something that equalizes the two for incomes above $91,666, or does nothing at all for incomes below $91,666. And yes, this would be a HUGE benefit to single incomes making such high incomes.
As for income splitting and the fairness of it, it brings up a question that I don’t know the answer to. Are all childcare expenses deductible? Ie, Nannys, daycare expenses, babysitting expenses, etc.
In other words, let’s say you have a couple with $100,000/$0 and 3 kids, and a second couple earning $50,000/$50,000 with three kids, but they pay $2,000/month for babysitting. Does the first couple pay taxes on $100,000, while the second couple pays taxes on $100,000-$24,000? If so, then that is another argument on why income splitting should not affect the child benefit.
If not, then that could be an argument for the people who are against income splitting, because with income splitting, the two would pay identical taxes, but the second couple has the additional $24,000 expenses that the first couple doesn’t, which would mean an overall bias towards single worker families.
I don’t think you’ll ever get everyone to agree on anything being fair… go flat tax and watch people complain about the percentage of their income they pay. Go with a straight percentage and watch people complain about the amounts. Give a child deduction and watch the childless complain. Give an old age benefit and watch the young workers complain. The government can’t really set tax policy on “fair” (although it should try for balance) but should try and have tax policy support the governments strategic objectives… taxes on cigarettes is the best example. The government wants people to stop smoking, and the increased costs do seem to reduce it. Is it “fair” that smokers pay such high taxes? Probably not, but at least at the end of the day the taxes that were going to be collected anyway have also done society some good.
As you can probably guess, I personally am easy one way or the other on income splitting. My attitude is that either way government is going to want the same amount of revenue, so if I gain through income splitting it means someone else loses which is fine by me, but on the other hand, I’m doing ok with things the way they are, so if it doesn’t change, that’s ok too. I’m much more interested, personally, in first eliminating the national debt, and secondly, in reducing everyone’s taxes accross the board.
A recent comment asked what Garth was going to tackle after he straightened out the country’s tax system.
A little girl phoned me yesterday from the bank that issues one of my credit cards. For fifteen bucks a month this bank will protect me from identity theft (someone wants to be me? don’t they know I run on a battery?)and credit card fraud. Protection.
When we got our first TV in 1954(a lot of people were getting TV and TB that year)and you plugged it in and you got one channel(CBC)and a couple of days later they put an antenna on your roof and you got another channel(WBEN) the cop shows were about chasing criminals involved in the numbers racket and the protection racket. Now the governments,hospitals and CNIB(no more pencils and tin cups)run the numbers racket and the banks run the protection racket.
Would a family return option be available to families with 2 working spouses?
The example given is based on a family comprising 2 primary wage earners making $50,000 each vs. a family with a single wage earner making $100,000. In reality, few working couples have equal income. If one spouse earned $30,000 while the other earned $70,000, they would end up paying more taxes than the 1 salary family allowed to income split.
If the objective is equitable tax treatment would it not be fairer to treat all families as economic entities for tax purposes?
Why was my post deleted?
No post was deleted. — Garth
As I understand it the income splitting proposal has the goal of creating fairness within the taxation system, whereas the $1200 per child under six annual plan has the goal of redirecting funds from the universal child care system, which many families do not / cannot take advantage of, directly into the hands of parents. Consequently I do not understand the suggestion/proposal according to which tax payers would have to choose one or the other. One must choose between fairness or $1200? Is $1200 the value of fairness? Why are these two separate issues being discussed as one or the other? Just because they both affect families? Is there a threshold for decisions/changes that affect families?
The attempt is to find a way to afford income-splitting, which would be costly in terms of lost tax revenue, otherwise it simply will not happen. By giving families a choice of taking $1,200 or income-splitting they can choose what works best in their situation, and still not strain the treasury. In many instances, splitting income, with the attendant benefits, will be of far greater worth than the child care allowance. In any case, it is all meant to open a discussion on finding more equitable ways of taxing families. — Garth
Hi Garth
I’ve been following the National Child Care Plan, or whatever the monster is actually being called these days, with increasing interest. The more I read of “the plan” the more concerned I become. It appears the claim that we actually have much beyond a framework of sorts is dubious, to say the least.
From various sources the plan we keep hearing about will cost something in the range of $5-10 billion per year, every year, from now on. How in the world can Canadians be expected to enter into such a massive undertaking without any commitment on the part of any level of government toward paying for it? The $1 billion per year the Liberals committed certainly doesn’t cover the cost of what they claim to be advocating, the provinces are forever crying poverty and parents are apparently expected to cover a small portion of the cost, something in the range of $7/day. Sort of the mother of all fiscal imbalances!
I do find it curious that the Tories don’t point out that the Liberals made no committment, when in power, to fund the program they claim to be advocating at anywhere near the amounts needed to make it doable. If nothing else pointing out the dubious accounting would make the Liberals explain themselves; always a good thing
Good Afternoon Mr. Turner:
It was so refreshing to hear your remarks about representing your constituents. Is there anyone else who does this, after all that is what government is supposed to be about.
i would be interested in hearing your definition of a democracy. It seems that in some governments almost all decisions are made by Cabinet leaving little opportunity for meaningful debate.
Perhaps you could encourage your colleagues to adopt your approach.
John Ryan, Halifax.
Garth
This is to express my support for the position you have taken in questioning some of your party’s policies. Although this independent stance has generated some criticism from within your own party, it is important for Harper to recognize that the moribund Liberal party could be revitalized with a leader such as Bob Rae at the helm and that to retain power, the Conservative Party will require candidates of your stature who have strong voter support..
It is critical that the Conservative Party concentrate on the efficient execution of programs. Many Liberal programs were poorly conceived and incompetently managed, leading to program deficiencies and substantial cost overruns.
Two thoughts on Health Care
1) A proven, successful model for providing specialized healthcare services is exemplified by the Shouldice Clinic. Specializing in Hernia surgery, this private clinic, with public funding through OHIP, provides the efficiency of private involvement without the “two-tier” ramifications. Jack Layton underwent surgery at this clinic, which I assume he selected because of it’s reputation for providing excellent treatment. This should be the criteria used in deciding how to model our healthcare system, not the head-in-the-sand position taken by the “public-care’ only ideologues. Layton claims that he was unaware of the private nature of the clinic. How can one make an informed judgment if one cannot distinguish between public and private care?
2) Another model that appears to be working are the specialized Centres established in Ontario. to provide “Cardiac Care’ I recently underwent heart surgery at the Trillium Health Centre. and the wait time from diagnosis to scheduled surgery was only a few weeks . Once a diagnosis had been made, procedures through pre-op to post-op rehabilitation were well organized.and surgery was performed using the most advanced surgical techniques (Successfully I hope). Some improvement is required, however, in reducing the time to arrange an appointment with a cardiologist.
B. Lepore
what country allows a dedution of $24,000.00 for child care?
please tell me i have my bags packed
Hi Sophie:
I think the short answer to your question “Would a family return option be available to families with 2 working spouses?” is yes.