Family Tax Cut benefits 15% of households: PBO

Income splitting could entice some spouses to quit their jobs



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OTTAWA – Canada’s parliamentary budget office believes the Harper government’s controversial income-splitting tax plan will encourage workers to leave the labour force.

In a new report released today, the federal budget watchdog estimates the so-called “Family Tax Cut” will reduce the workforce by the equivalent of 7,000 net full-time jobs as the lower earning partner in some families opts to stop working.

The Conservative government’s multibillion-dollar tax measure was introduced at a time when the country is trying to attract lower-wage workers into the labour force.

The measure was announced last fall and allows eligible taxpayers to transfer up to $50,000 of income to his or her spouse in a lower tax bracket in order to collect a non-refundable tax credit of up to $2,000 per year.

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The report also says the measure primarily benefits middle- through higher-income households — while earners in the bottom 20 per cent have “near zero” eligibility for the tax credit.

On the other hand, it says about 27 per cent of households in the 80th income percentile are projected to be eligible for income splitting.

The office also says income splitting will cost about $2.2 billion in 2015-16 — higher than the government’s projection of $1.935 billion.

It also agrees with other studies of the income-splitting measure in saying only 15 per cent — or two million households — will be eligible to benefit from the plan.

The income-splitting proposal was a key pledge in the Conservatives’ 2011 election platform.

3 comments on “Family Tax Cut benefits 15% of households: PBO

  1. It’s not clear to me why the lower income earner would quit their job just to become eligible for a two thousand dollar tax break.


  2. It continues to shock and amaze me that this is being touted as a benefit instead of a necessary equalization in the tax system which restores a certain level of fairness to families with children. Can anyone say that a tax system which would significantly penalize a household where one parent earns 100k, while the other parent earns 20k as compared to a family where both partners earn 60k each makes any sense? It’s ludicrous that without income splitting, the former pays more than 5k in additional income tax than the latter. Why does the press make such a big deal about how few (and who) is benefiting, and instead look at how the changes are addressing a significant injustice in the tax system.

    For military families, the former example is the norm as we move our families throughout our careers, frequently adversely impacting our spouses potential for income while we make the ultimate sacrifice. Shame on anyone who hasn’t taken the time to learn about who these families are that are benefiting from income tax splitting, and instead simply assessing a lack of merit merit based on gross income.

    I reiterate, a married couple with kids who gross $120k between the two of them should pay the same income tax no matter who earns what percentage of the income. If you agree than you have to accept that income splitting is about restoring fairness to the tax system. Anyone disagree?


    • Couldn’t agree more. This is absolutely not a benefit so much as a deserved move toward fairness.


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