Flaherty’s pension move opens a door
to family income-splitting
So, here’s my next big suggestion for Jim Flaherty: Income-splitting and a family tax return.
Now that pensioners will average out income between husband and wife – which is only fair – families should be able to do the same thing. The tax code’s been designed in a way (by Liberals) that bases taxation on individuals, when it’s actually the family which is the basic economic unit of society. So, Jim, it’s high time we joined other civilized countries and allowed families, or at least spouses, to pool income for tax purposes.
This would drop family taxes overall, permit stay-at-home spouses to make RRSP contributions as well as CPP payments, allow for better retirement planning, and hike household cash flow. It would also end the inequity between single and double-income families, and cause the tax system to finally recognize the massive social and economic benefit that caregivers give society. I mean, how can you be against moms? Let’s do it.
Despite the recent hundred bucks-a-month child care payment, the level of government assistance to families has been eroding for the past thirty years. And yet, the financial burden of raising children has only increased, especially as costs for higher education have been downloaded by the provinces onto parents, and with the advent of the health tax in Ontario.
In my mind, it is no coincidence that this ongoing government war on the family has resulted in fewer couples deciding to have children. Canada today has only 1.5 births per woman, a rate so low that were it not for immigration, we would die out as a society. At the same time, the age of our population is rising fast, and the number of seniors will about double in the next 20 years. More people draining resources. Fewer new workers entering the labour force – this is a recipe for national bankruptcy.
So, from a tax fairness, societal and economic point of view, giving families a break through income-splitting makes plain sense. It would encourage more families to have stay-at-home caregivers since the tax on single-income families would be cut. It would encourage more couples to have children, since the financial sacrifice involved would be lessened.
Finally, one would think that if ever there was a government ready to walk the walk after talking the talk, it would be this one, on this issue. The Harper Administration is avowedly pro-family, and I would expect income-splitting would be one of the goals most worthy of achieving. It certainly is for me. I campaigned for this in the last election. I promoted it in all my literature. I lobbied Jim Flaherty for it while he was writing his first budget.
It is the right thing to so. This is the right time to do it. This is the right government to pull it off. And once Canadian couples with kids are allowed to split income, no government will ever be able to take it away.
But, what will this cost? Can we afford it?
If we restrict this to two-parent families with children under 18 years of age, the cost would be $1.561 billion per year, based on 2005 numbers. Of that, two-thirds of the cost would go to benefit double-income families, and the remaining amount for the 26% of all families that have just one income. The greatest number of people to benefit would be in the income range of $60,000 to $80,000 per year.
I have no doubt Jim Flaherty will argue this is too rich, since he also has to find $5 billion to cut the GST by another 1% in the coming budget and maybe a billion or more to allow investors to roll over capital gains without paying tax.
But I believe this is a pivotal time. The economy is strong. The books are balanced. The money is flowing in.
Beyond that, we’re a country in need of the moral backbone to admit families are the basis of our society, and that government needs to do much, much more to support them. The middle class voters of Halton have asked me for this. I gave my promise it would be my work in Ottawa. I will not let them down.
21 comments ↓
My sincere congratulations to my government for having the courage and
fortitude to do the right thing for our seniors. I am very pleased with
your actions on this one.
I would particularly like to thank Garth Turner for his tireless
advocacy on this file. His first question in the house as an
Independent, to our Minister of Finance, showed the high priority that
he has regularly assigned to this topic. I give him a great deal of the
credit for this advance/improvement in relations between the CPC and the
seniors of this country that I hope will result from this move. It is
SO GOOD to see the “right thing” being done!
As I have previously stated to my MP, Mr. John Baird, I believe that
Garth Turner is a very talented man and potentially of great benefit
to the CPC and to Canada. I would very much like to see him
reintegrated into the party, if he is willing. If not, my highest
priority is to see that his talents are of use to the CPC and Canada. I
would like to see him reassigned to (and possibly chair) the Finance
committee. The fact that he is an independent does NOT render him
inimical to the aims and objectives of the CPC and definitely he is a
great asset to Canada.
Respectful regards,
Tom,
Nepean Ont
I believe that Flaterly position on income trusts will bring down the government and I personally would agree!! Leave income trusts alone the government will collect more tax dollars in the hands of investors than they will from corporations.
You are going to affect every pensioner or near pensioner in this country and we all vote if you wish to stay in power you should shuffle your cabinet and get rid of James Flaterly as finance minister He is now a liability!!
To morrow I will most likely loose $80,000 in my portfolio because of this announcement I and many other Canadians vote our wallets. James
Dear Garth,
Congratulations in your new independent status! We hope you will be
able to choose wisely and freely in a non-partisan way.
We would like to urge the opposition parties to vote down the
Conservative minority government at the first opportunity: the damage
being done to Canada’s reputation and policies is too great to
continue.
We urge the opposition parties to form a temporary coalition government
to avoid an immediate election. This government would govern for long
enough to bring in legislation that the Bloc, Liberals, NDP,
Independents and Green Party (although they hold no seats, Elizabeth
May has expertise in climate change issues, and considerable respect
among Canadians) can agree on.
I would think that could include:
• legislation to meet and exceed Canada’s Kyoto commitments;
• recommitting to the cancelled National Childcare program, the Court
Challenges Program and the small but significant cuts to equality of
women, small museums, and literacy programs;
• urgently reconsider in a non-partisan way Canada’s foreign policy,
especially our military actions with NATO in Afghanistan.
If a temporary coalition government could find common ground to make
progress on these three areas, you would all be heros in the eyes of
most Canadians and gain a permanent place in Canadian history.
Thank you for your consideration of this.
Respectfully yours,
Carolyn Whitney-Brown
Cowichan Bay, BC
Correct me if I am wrong but doesn’t this taxing of income trusts actually hurt seniors the most? I am saying that because seniors usually look for income out of their investments and you guys just shoved one up their, you know what.
Hmm, I guess I don’t really see the good news when the govt. gives someone 1$ and asks for 2$ in exchange.
I loved you on 22 minutes! Good for you Garth!
Like pension splitting, this is hardly a new idea…however, it’s time has certainly come……
Beyond that, we’re a country in need of the moral backbone to admit families are the basis of our society, and that government needs to do much, much more to support them.
That’s a great statement Garth… but just out of curiosity, what is exactly your definition of a family?
Garth, I’m all for family income splitting and personally stand to gain from it since we’re a single income family of 4.
I’m wondering if you could clarify something though. You say:
and then in the next paragraph:
Doesn’t this also keep fewer workers out of the labour force? More parents at home means fewer workers. Ideally, they’ll be at home raising their brood of children, but that’s a best case scenario.
So NO-ONE is actually addressing the fact that there are many single seniors, who desperately need our help. These single seniors may be widowed or divorced and are earning less than 18,000 a year. They still have to pay rent or mortgage/property tax. They still have to pay heating and lighting. But, I guess they don’t count because “income-splitting” is the new sexy issue for the well-to-dos in our society – so they can go off to their winter Florida homes!
Garth
Way to go, this is the Garth I remember from columns of yesterday.
I have listened to a few QP’s since you have brought my focus back to Canadian politics.
SH and his band of sheep shpould resign enmass and let some talentd people run this great country instaed of George Bush.
We’re a soveriegn nation and dont need any American patriotism or interference here as we’re being let down the royal path of destruction by a bunch of jackass’s who can’t even run their own country which has been sold out to the Chinese on the west coast- Middle East on the east coast-drug dealers(cartels) on their southern border.
Keep up the good work-nice job your upto in Ottawa.
Free Canada stands with you.
You’re doing a great job, Garth, and you definitely have more clout now as an Indie.
Just remember to continue to be positive and constructive and try not to goad or bait the government; otherwise they’ll likely stop listening.
The way things are going you could end up being one of the most influential M.P.’s in Parliament!
One of the things I have learned (and I learned it very early) is that no matter which party is in power, now matter what the government does regarding taxes, for the individual Canadian, they never go down in total. I have lived through more than one income tax “reduction” only to see my deduction rise, in total, due to a surtax (not the income tax rate, technically) or bracket creep. I have had raises which resulted in lower take-home pay due to the government’s shell game.
It is all bull – no matter the posturing or the shifting, we Canadian taxpayers end up with less; less discretionary income and less value for our money.
Just once before I leave this life, I would like to see a government which reduces the real amount of taxes we pay.
Oh, and of course, the moment one level “reduces” taxes, another level raises them. It is a pack of lies and we accept them over and over again.
The problem with our tax structure is that its so complicated. The idea of the dividend markup, for example, is that total taxes from the corporation and dividends paid to shareholders should be the same as if the income came directly to the shareholders. But depending on a persons circumstances it doesn’t work. And thats how income trusts reduce the total tax paid to the government because the total taxes paid is less than if they were paid as dividends. This is a loop hole that income trust unit holders have exploited.
So tax income trusts like corporations and treat their distributions like dividends.
Secondly, any change in tax rules benefits some and negatively affects others…depending on who shouted loudest and got their tax reforms passed.
Maybe a wholesale change in the way taxes are calculated needs to be considered……can anyone say flat tax?
Incidentally, Garth, the Ontario Health Tax is nothing new. When I came to this country in 1988, there was a health tax taken from my paycheck. This was removed, actually placed on the employer, by Bob Rae. The Mike Harris/Ernie Eve’s Conservatives, with Mr. Flaherty didn’t know the difference between a balanced budget and a deficit and so Mr.McGuinty reintroduced the Health Tax to help balance the budget. Bottom line, Ontario governments have spent more than they collected and now the tax payers of Ontario are having to pay the piper.
As much as I did criticised you in some of your actions, I must give credit where credit is due. I know you championed this, and it worked. You ran with it and make it happen so my hat’s off to you for a job well done this time.
The number one complaint against income splitting that I have seen is that it hurts single parent families. I’m not sure if you have already touched on this, but could you advocate that a child under 18 can substitute for a spouse when income splitting (or something along those lines) so single parent families aren’t left out in the cold? Maybe if you have joint custody each parent can split half of half their incomes, I’ll leave the details to you.
Also, I think the fact that income trust changes will take place over a few years should help take the sting out of the announcement. Stocks that pay high dividends should be the big winner in all this, thats why its good to diversify.
Catherine-you are such a negative Putz.Income splitting for seniors is just the thin edge of the wedge.Income splitting for Families,more tax relief for Elderly are things that evolve.
One can’t get the whole package on anything in life in one shot-this is no exception.
Progress is picking off one thing at a time which ultimately leads to being a great deal better off.
This win is a great tribute to Garth’s single minded belief that one person can make a difference.Too bad other MP’s didn’t adopt sensible ideas and push for them.
There is little doubt that the taxation leakage either must be stopped or we need to seriously slash social spending in this country. You can’t have it both ways without massive debt (thus where we are now).
Still, though, missing the point on income trusts. With the majority of income trusts paying out more money than their net income the seniors are getting fleeced. Just like the government, the money has to come from somewhere, and that somewhere is on the balance sheet.
Don’t just tax income trusts fairly – revisit accounting rules that force distributable cash to be defined instead of whatever anyone wants it to be (no its not a GAAP term), and enforce rules that tell shareholders in layman terms – if there not making the money they are paying out (net income), then where EXACTLY are they getting it from.
Thanks Garth!!
So I have been reading these blogs and comments for the past couple of weeks, I admit I was blissfully unaware of all this until the CTV news reported your suspension from caucus (never really paid close attention to political matters). I think that this is awesome for our country and hope that more MP’s follow your lead Garth and start speaking up for the people they represent, those that elected them in the first place, if not for them these politicians would not have these jobs!
I think that income splitting for seniors is a great thing and will ease the burden on many people who have worked hard through their lives and contributed to this most excellent country of ours (no it’s not perfect, nothing in life is). I hope that Mr Flaherty carries on and passes this onto families as well, we will see. This will definatly benefit me and my family and will be most appreciated, this will allow us to do more for our children.
On the subject of the National Child Care Supplement, I was not impressed to find out that this money I did not ask for was going to be taxed at tax time to the lowest income earner being me??? I feel those of us who qualify for this should have been given the option of saying “no thanks” as $100/child does not really make much of a difference when paying for childcare that is required when working outside of the home, especially since we have to pay tax on this as it’s a taxable benefit. I personally pay anywhere between $500 and $750 per month for my day home which my children go to on a part time basis, if my shifts were more full day shifts I would be paying $900 or more, if they were going to a daycare this would be about double on average.
I would have preffered to see this money go directly into the hands of Daycares and Day Home Agency’s as they would have utilized it best in being able to pay their workers higher wages and assisting with additional training for employees that, in my experiance, is lacking in some cases(mostly in daycares). This is based on my experiances in Alberta where I currently live, I can’t yet speak for the costs elsewhere as I have yet to move elsewhere. Parents elsewhere, what are your costs for care?
Just as side note to Catherine, we all know your stand on things, you repeat yourself with every post, you’ve said your piece, move on.
Thanks for listening to my ramble Garth, stay Independant, it looks good on you!
I think I like this idea. But I wonder, why limit it to traditional families? (Perhaps that is not your intent.) It sounds like it could be generalised to include any group that is sharing income and expenses. A sort of “personal corporation”.
Couples who are still working will benefit from income splitting when they retire. So it may be fair to say that “just for retired” folks is still fair to all. Just wait your turn.