Now this tax cut would bother me as a single male, pretty discriminatory in my opinion. I guess Harper has to do something to appease the "social conservative" crowd.
http://www.thestar.com/NASApp/cs/Co...401&call_pageid=968332188492&col=968793972154
OTTAWA—The Conservative government is looking at a radical restructuring of the tax system that would allow couples to reduce what they pay by averaging out their income, says a government source.
But introducing income splitting — something Finance Minister Jim Flaherty could touch on as early as Thursday when he delivers his annual economic update — is likely to set off sharp criticism from groups that consider it unfair to single Canadians and a disincentive to women working outside the home.
Critics say income splitting — transferring income to the lower-earning partner for tax purposes — would alter the fundamental nature of the tax system, making the family a basic unit and the system less progressive.
Income splitting was praised by Prime Minister Stephen Harper during the last election. And Flaherty, who brought in income splitting for pensioners on Oct. 31, has not ruled out extending it to all Canadians.
Doing so would be expensive — economists estimate it would cost Ottawa about $5 billion a year — but it would fit with Flaherty's personal ambition to establish a reputation as Canada's tax-fighting finance minister. Ottawa had a $13 billion surplus last year.
"Canadians pay too much tax, and the tax burden on individuals, families and businesses is still too great and must be reduced," Flaherty told the Commons finance committee earlier this month.
The 2007 federal budget, expected in February or March, is likely to include hefty tax breaks and income splitting would dovetail with the Tories' preference for policies that strike a chord with middle-class families.
The opposition parties are threatening to defeat the Conservative minority government over the budget. The income-splitting system would likely be a huge hit with taxpayers going into an election campaign and would help the Tories deal with criticism that the one percentage point cut in the GST earlier this year really didn't have much of an impact on ordinary Canadians.
Income splitting is common in other developed countries, including the United States, where couples have the option of filing joint or separate tax statements. Germany, Switzerland, France and Portugal also allow joint statements. It's not clear how the system would work in Canada.
Allowing spouses to pool their incomes and divide them evenly for tax purposes has long been promoted by Conservatives who feel a family where one spouse stays at home with the children is currently at a tax disadvantage.
Income splitting was established as a Conservative priority at the party's inaugural policy convention in March 2005. And Flaherty's personal website recently featured a question asking people to say if they approved of income splitting.
On Oct. 31, in an effort to soften the blow for seniors who lost money from the sudden crackdown on popular income trusts, Flaherty announced that, beginning in 2007, pensioners will be allowed to allocate a portion of their pension income to their spouses for tax purposes. This pension income splitting will cost Ottawa $1 billion a year in lost revenues.
When asked at the time if all taxpayers would see a similar benefit in his next budget, Flaherty would only say "that's an issue that we can look at going forward." But the move to help pensioners was seen as an irreversible first step toward income splitting for all Canadians.
"I can't really see any particular logic of why, as a concept, it would be accepted for pension splitting and not be viewed as acceptable for general income splitting," said TD Bank Chief Economist Don Drummond.
Income splitting would be a tax break for many couples, with the lion's share of benefits going to those in which one spouse is a high-income earner and the other does not work outside the home.
Under current tax law, a family in which one spouse works, earning $80,000 a year, and the other spouse has no income will pay $12,460 in federal income tax. Under income splitting, the couple would pay a combined total of $8,940, a saving of $3,520, according to calculations by the Canadian Taxpayers Federation.
A family in which one person earns $60,000 and the spouse earns $20,000 currently pays total federal income taxes of $10,280. Under income splitting, that family would pay a total of $8,940, a saving of $1,340.
A family with two partners earning $40,000 each pays a combined federal income tax of $8,940. There would be no change under income splitting.
Income splitting would be popular with many families, particularly social conservatives who form the Harper government's prime supporters.
"This would lower the tax burden on families," said John Williamson, federal director of the taxpayers' federation. "It would also change behaviour. It is definitely not neutral in terms of the impact on society. Families would look at their situation differently. Some families might choose to have one spouse stay at home. Others might choose to cut back on the amount of work they do."
But it would attract fierce criticism from singles who would feel disadvantaged by income splitting and by women's advocates who argue, by easing the tax burden for families with a stay-at-home spouse, it would tend to discourage women from joining the workforce.
There is also the question of whether the Conservatives, who have already promised a further cut in the GST, can afford the $5 billion a year in lost revenue from income splitting. But Ottawa's coffers continue to bulge beyond expectations. Last year, the federal government chalked up a $13 billion surplus and halfway through this fiscal year, the surplus topped $5.3 billion.
http://www.thestar.com/NASApp/cs/Co...401&call_pageid=968332188492&col=968793972154
OTTAWA—The Conservative government is looking at a radical restructuring of the tax system that would allow couples to reduce what they pay by averaging out their income, says a government source.
But introducing income splitting — something Finance Minister Jim Flaherty could touch on as early as Thursday when he delivers his annual economic update — is likely to set off sharp criticism from groups that consider it unfair to single Canadians and a disincentive to women working outside the home.
Critics say income splitting — transferring income to the lower-earning partner for tax purposes — would alter the fundamental nature of the tax system, making the family a basic unit and the system less progressive.
Income splitting was praised by Prime Minister Stephen Harper during the last election. And Flaherty, who brought in income splitting for pensioners on Oct. 31, has not ruled out extending it to all Canadians.
Doing so would be expensive — economists estimate it would cost Ottawa about $5 billion a year — but it would fit with Flaherty's personal ambition to establish a reputation as Canada's tax-fighting finance minister. Ottawa had a $13 billion surplus last year.
"Canadians pay too much tax, and the tax burden on individuals, families and businesses is still too great and must be reduced," Flaherty told the Commons finance committee earlier this month.
The 2007 federal budget, expected in February or March, is likely to include hefty tax breaks and income splitting would dovetail with the Tories' preference for policies that strike a chord with middle-class families.
The opposition parties are threatening to defeat the Conservative minority government over the budget. The income-splitting system would likely be a huge hit with taxpayers going into an election campaign and would help the Tories deal with criticism that the one percentage point cut in the GST earlier this year really didn't have much of an impact on ordinary Canadians.
Income splitting is common in other developed countries, including the United States, where couples have the option of filing joint or separate tax statements. Germany, Switzerland, France and Portugal also allow joint statements. It's not clear how the system would work in Canada.
Allowing spouses to pool their incomes and divide them evenly for tax purposes has long been promoted by Conservatives who feel a family where one spouse stays at home with the children is currently at a tax disadvantage.
Income splitting was established as a Conservative priority at the party's inaugural policy convention in March 2005. And Flaherty's personal website recently featured a question asking people to say if they approved of income splitting.
On Oct. 31, in an effort to soften the blow for seniors who lost money from the sudden crackdown on popular income trusts, Flaherty announced that, beginning in 2007, pensioners will be allowed to allocate a portion of their pension income to their spouses for tax purposes. This pension income splitting will cost Ottawa $1 billion a year in lost revenues.
When asked at the time if all taxpayers would see a similar benefit in his next budget, Flaherty would only say "that's an issue that we can look at going forward." But the move to help pensioners was seen as an irreversible first step toward income splitting for all Canadians.
"I can't really see any particular logic of why, as a concept, it would be accepted for pension splitting and not be viewed as acceptable for general income splitting," said TD Bank Chief Economist Don Drummond.
Income splitting would be a tax break for many couples, with the lion's share of benefits going to those in which one spouse is a high-income earner and the other does not work outside the home.
Under current tax law, a family in which one spouse works, earning $80,000 a year, and the other spouse has no income will pay $12,460 in federal income tax. Under income splitting, the couple would pay a combined total of $8,940, a saving of $3,520, according to calculations by the Canadian Taxpayers Federation.
A family in which one person earns $60,000 and the spouse earns $20,000 currently pays total federal income taxes of $10,280. Under income splitting, that family would pay a total of $8,940, a saving of $1,340.
A family with two partners earning $40,000 each pays a combined federal income tax of $8,940. There would be no change under income splitting.
Income splitting would be popular with many families, particularly social conservatives who form the Harper government's prime supporters.
"This would lower the tax burden on families," said John Williamson, federal director of the taxpayers' federation. "It would also change behaviour. It is definitely not neutral in terms of the impact on society. Families would look at their situation differently. Some families might choose to have one spouse stay at home. Others might choose to cut back on the amount of work they do."
But it would attract fierce criticism from singles who would feel disadvantaged by income splitting and by women's advocates who argue, by easing the tax burden for families with a stay-at-home spouse, it would tend to discourage women from joining the workforce.
There is also the question of whether the Conservatives, who have already promised a further cut in the GST, can afford the $5 billion a year in lost revenue from income splitting. But Ottawa's coffers continue to bulge beyond expectations. Last year, the federal government chalked up a $13 billion surplus and halfway through this fiscal year, the surplus topped $5.3 billion.
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