Monday, March 28, 2011

Stephen Harper doesn't want my vote

Stephen Harper doesn't want my vote, but he'll use me to get yours.

I'm educated and fairly well paid. My companion 'Loon in this lake, as a full-time artist, is not so well paid. What probably makes Harper less interested in us is that we're childless.

(I should amend the above: Erin is an artist quasi-full-time, and also holds things together on the home front. I do her a disservice if I fail to mention the quality of life improvement I have benefited from since she left traditional full-time employment. For more on the true value of this unpaid work, and the threat of a so-called "Mommy War", read this excellent Globe article. But I'm getting ahead of myself.)

Given the situation we're in, whenever someone starts talking about income-splitting models for taxation, I sit up and take notice-- the same way I would if anyone proposes something that could put thousands of dollars in our pocket.

Income splitting, to put it briefly, is the practice of transferring part of the higher earning spouse's income to the other spouse for tax purposes. Under a progressive tax model, this means less tax is paid over all.

Of course, the promise itself is absolutely worthless. The Conservatives pledge to implement income splitting "when the deficit is eliminated"-- in other words, 2015 or 2016 (though Soudas has tweeted "as early as 2014".) Even in the event of a Conservative majority, we would see another election before this promise could be fulfilled.

Be that as it may, the really toxic part of this already cynical promise is that it is targeted at families with children under 18. In other words, you must be raising children to split your income for tax purposes. This is not tax reform, this is a baby bonus.

I'm not against some amount of support for families with children: our system aims to reduce taxation to compensate those with extra burdens. But besides the fact that someone is talking about income splitting in about the only form that would be of zero use to Erin and me, there are two fundamental flaws with this proposal as a means to support families.

One, of course, is that the size of the tax benefit scales with the size of the senior earner's income. Up to a certain point, the more you earn, the more tax break you will see. Since we base the argument for supporting families on the premise that they carry a heavier financial burden, what sense is a scheme doesn't help poorer families more?

The other flaw is clearly laid out in the Globe article I mentioned above. Two scenarios where a couple earns $110K (and you can already see how high we need to crank the income before the benefit is meaningful!) Couple A is a single-income family, while Couple B is split $60K/$50K. Under the current model Couple A is taxed more. And yet, Couple B has the lower standard of living! That's thanks to the fact that Couple A is richer-- the homeworking spouse can provide the same services that Couple B has to pay a lot more for: child care and even housekeeping. This labour is untaxed but it definitely has value.

So, not only is this a regressive tax break, but it also helps the couple that's better off to begin with.

In the meantime, there's a big hole left in our theoretically balanced future budget. A $2.5B hole. Someone is going to have to fill it, or cut that much out of the Government. Either way, it's paying more and getting less for Erin and me.

If you haven't been keeping score, let's recap. Harper's tax break promise:
  • Benefits richer families more by flattening our progressive taxation system.
  • Benefits single income families despite the fact they are better off already.
  • Effectively forces everyone else to subsidize already well-off families.
  • Is worthless as a campaign promise because it almost certainly won't be implemented before the next election.
Maybe it's just me. But at best, this is a campaign promise that asks me to subsidize a group that doesn't really need it. At worst, this is a cynical scheme by Harper to either buy you (for cheap!) or make a fool of you. Or both.


  1. I wish you had a larger soapbox. Or one that shouted louder. I wish one of us was really famous, or a well respected journalist with no qualms about bias. Everything to do with this election and Stephen Harper and EVERYTHING just makes me utterly want to vomit. It's almost enough to keep us where we are; where despite much small-town-mindedness, the vote tends to go in a sane direction.

  2. Income splitting is in the Green Party Platform - Vision Green (has been for years) there is no qualification to have children in their platform. GPC realizes that it does not help everyone who needs it and other programs will help them.
    Harper is taking a good program and making it sound bad.

  3. So the CEO making 7 figures with his trophy wife and their ignored kids is who this is really for...

  4. The income point at which this plan gives the biggest benefit is in the $260K range (now that's a problem we'd all like to have!) After that, there's no further benefit to splitting income.

    But because of smaller rate differences as you split more and more to your spouse, it provides diminishing returns as you approach that point. So the sweet spot (% tax savings) is somewhere lower.

    This is, of course, still ignoring the policy problems with this tax break. It burdens single people. It burdens couples without children. It can reinforce the trends which cause unequal representation in the workforce. Some of these problems are endemic to any income splitting plan, which is why I'd rather not see it happen if I could choose between that and (let's say) a nice simple progressive taxation scheme without special interests mucking it up.

    Every tax break is subsidized by everyone outside the benefited group, and we have so many tax breaks that our tax rate is higher than it needs to be to pay for it all. Nobody wins, except tax accountants.