CONS income splitting to benefit earning more than $233,000 most

tay

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Families with income more than $233,000 a year stand to gain most under the Conservative government’s controversial income-splitting tax break, a new study of the costly program has found.


“The richest families are most likely to make at least $1,000 from the new policy,” says the study released Tuesday by the Canadian Centre for Policy Alternatives.


While two-thirds of the richest families will get at least $1,000 by splitting spousal income, with the lower-income spouse being assigned up to $50,000 of the other spouse’s higher income for income tax purposes, that chance that a middle class family will receive a benefit of even $1 is “as good as a coin toss,” says a 40-page report on the analysis.


“For low-income families with children, the probability of making even $1 is very low with only one in 10 getting that much,” the report says. “The probability of receiving at least $1,000 is vanishingly small.”


The study prepared by senior economist David Macdonald and Kate McInturff, a senior researcher with the policy think tank, provided the NDP and Liberal parties with fresh data Tuesday as the Commons was set to debate a New Democrat motion calling on the government to immediately prepare and table a new fiscal and economic update as Parliament awaits a federal budget that the government has delayed at least until sometime in April, possibly longer, because of the havoc plunging oil prices have wreaked on federal government revenues.


The Conservative income-splitting plan, which it calls a “family tax break” in ads and web promotions that have been running almost since it unveiled the plan last Oct. 30, is central to the fiscal upheaval the government faces, with a price tag of $2.4-billion for 2014 alone and further costs of about $2-billion each year for the next five years.


“In fact, 89 per cent of all families (including families with children under 18 and couples or singles without children) gain no benefit from income splitting. Only three per cent of all families in Canada will get the maximum benefit of income splitting worth $2,000,” the report said.
The study found that the bottom 40 per cent of families, in terms of annual income, have “essentially no probability of getting anything” through income splitting and a chart in the report shows families with incomes under $68,000 annually have either no chance of any benefit from income splitting or a chance of barely over one per cent.


The chance of any benefit at all increases to just under 10 per cent at $53,000 to $67,000 in family income, and only 25 per cent at $67,000 to $86,000 in family income.


“Only 48 per cent of families with children will receive $1 or more from income splitting,” the report said. “Of that half of families with children that do gain, 20 per cent will receive roughly a dollar a day from income splitting.”




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Families earning more than $233,000 will gain most from Conservatives' income splitting plan, says new report | hilltimes.com
 

Kreskin

Doctor of Thinkology
Feb 23, 2006
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The higher income earners already pay high marginal tax rates. Putting a portion of the high income into the hands of a no income earner (that gets the money anyway) will create more money going to lower marginal rates. It's really the only way it can and should work.
 

whitedog

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Mar 13, 2006
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The higher income earners already pay high marginal tax rates. Putting a portion of the high income into the hands of a no income earner (that gets the money anyway) will create more money going to lower marginal rates. It's really the only way it can and should work.
So to restate your comment, higher income earners pay more taxes, so they should get the higher reduction. Ok, but why burden Canadian people with added administrative costs of having to manage the program, assess the claims, audits etc., why not just increase the spousal tax credit, you know, "if married, and spouse earns nothing, enter 6000, if income earner earns 250,000 or more, enter 10,000." Simple enough?
 

tay

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The incoherent economics of Stephen Harper






The Conservative government says that it can spend billions more on tax breaks and expanded baby-bonus cheques without cutting other kinds of spending — and without running a deficit.



It says it can achieve this politically delightful result even though the economy overall is slowing.

An analysis released Tuesday by the independent Parliamentary Budget Office indicates that it is theoretically possible for the federal government to achieve all of these goals simultaneously.



But that happy result, the watchdog agency says, will occur only if sagging oil prices, now near $46 a barrel, start to bounce back quickly.



Moreover, the Parliamentary Budget Office bases its relatively sanguine conclusions on the assumption that Canada’s real economy, adjusted for inflation, will grow by 2.6 per cent this year — as the government predicted last fall.


Economists now say that prediction is singularly optimistic. The Toronto-Dominion Bank, for instance, said this week that it expects the economy to grow by only 2 per cent in 2015.


The basic elements were classically conservative. The Harper government cut taxes. And then it cut spending to push its accounts back towards balance.



During the recession of 2009, the prime minister experimented with textbook Keynesian remedies, running up record deficits to stimulate spending.



He then spent the next five years trimming spending in order to pay down those deficits — another textbook response.

Throughout, the government benefited from a worldwide boom in commodities such as oil.



The boom kept the economy in oil-rich provinces like Alberta humming. That in turn provided the tax revenue that allowed the federal government to move back towards a balanced budget.



Along the way, there was plenty to criticize. The Harper government’s fixation with commodities and pipelines led it to slash environmental regulations.



Its fascination with oil and the magic of market forces didn’t cause it to neglect Ontario manufacturing entirely (Harper was happy to subsidize the province’s big auto companies).



But throughout the tough years following 2008, the government paid far less attention to other Ontario manufacturers, particularly those hamstrung by what was, until recently, a grossly overvalued Canadian petrodollar.



Still, Harper’s approach was consistent. Mean-spirited maybe, particularly to the jobless, far too many of whom were denied employment insurance. But consistent.



Now it is not. Now, the prime minister is caught in a trap of his own making.



He has promised a balanced budget this year. But he has also promised families with kids that they will get pricey tax breaks and expanded subsidies.



With an election in the offing, he is loath to renege on any of these pledges.



Yet deep in his heart, Harper must know that he can’t do it all. Something will have to give.




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The incoherent economics of Stephen Harper: Walkom | Toronto Star
 

Kreskin

Doctor of Thinkology
Feb 23, 2006
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So to restate your comment, higher income earners pay more taxes, so they should get the higher reduction. Ok, but why burden Canadian people with added administrative costs of having to manage the program, assess the claims, audits etc., why not just increase the spousal tax credit, you know, "if married, and spouse earns nothing, enter 6000, if income earner earns 250,000 or more, enter 10,000." Simple enough?
In the end what is the income earner's average tax rate? Slice it any way you want, then tell us what their average tax is. That is the only measure that really counts.
 

JLM

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Nov 27, 2008
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Yep, perhaps a lot of people forget they are already paying $50,000 or more in tax! :)

In the end what is the income earner's average tax rate? Slice it any way you want, then tell us what their average tax is. That is the only measure that really counts.

I tend to disagree. I think there should be a ceiling on what a man has to pay. Should a person be taxed solely because they are rich or should they be taxed to cover what they are costing the country (plus maybe 25% to help offset for the non contributors)?
 

Kreskin

Doctor of Thinkology
Feb 23, 2006
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Most wealthy couples already have income on both sides. An income-split and tax credit has no value. Most high income earners in that range who don't already have assets split up to maximize their situations are generally not wealthy couples.
 

Kreskin

Doctor of Thinkology
Feb 23, 2006
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Define wealthy. No value? How so?
Not wealthy - Guy works in oil field (example) in major income paying job. Wife stays at home in their 500k home mortgaged to 400k. They don't have much in savings.

That kind of situation is quite common.

Probably wealthy - Guy is CEO and wife already claims 150k a year in various real estate income etc. Splitting income with her has little to no value. She will pay the tax that he doesn't.
 

DaSleeper

Trolling Hypocrites
May 27, 2007
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Income splitting for seniors on just the company pension sure worked for me saving me $2,000 a year since my wife never worked and her CPP is minimal
 

JLM

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Nov 27, 2008
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Income splitting for seniors on just the company pension sure worked for me saving me $2,000 a year since my wife never worked and her CPP is minimal

You're in exactly the same boat as I am. (Well my wife did work for 6 years at just above min. wage)
 

petros

The Central Scrutinizer
Nov 21, 2008
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Not wealthy - Guy works in oil field (example) in major income paying job. Wife stays at home in their 500k home mortgaged to 400k. They don't have much in savings.

That kind of situation is quite common.

Probably wealthy - Guy is CEO and wife already claims 150k a year in various real estate income etc. Splitting income with her has little to no value. She will pay the tax that he doesn't.

Then there is nothing to split if she is at home but that is rare these days. Getting a $500K mortgage will take two incomes.