Tuesday, February 13, 2007

Income-splitting is about fairness

Income-splitting is a must for Canada. It is imperative that we remove the discrimination against stay-at-home parents that is currently built in the tax system. This not about giving them special treatment. It's about stopping the discrimination against them. The U.S. and many European countries already have income-splitting. Are we dumber than they are? What are we waiting for?

Currently, the tax system is set up so that each individual in a family files his/her own income tax return. Under this system, the percentage of your income going to taxes increases as your earnings increase. As a result, a family with two working parents each earning $30,000 will pay much less taxes than a family where one parent earns $60,000 and the other parent stays at home, despite the fact that total family income is the same in both cases.

This treatment is unfair. It discriminates against families that chose to have one parent stay at home with the kids (P.S.: it's better that your kids get raised by one of the parents rather than by an under-paid and over-worked day-care worker).

Income-splitting would fix this problem and put both types of families on equal footing.

Myths about income-splitting

1. It gives preferential treatment to "lazy" families where only one parent wants to work.

This is totally false and very insulting. As explained above, families with one earner do not get any preferential treatment. Rather, they are placed on an equal footing with double-earning families by ending the discrimination in the tax code. Moreover, it is extrememly arrogant to claim that stay-at-home parents are lazy. They work very hard and deserve that the tax system treat their family fairly.

2. Income-splitting only benefits the wealthy

This is a popular myth among left-leaning groups. They think it's their best argument but it's really just hot air. First, the truth is that every single-earning family will benefit from income-splitting. Rich or poor, all families will benefit. Even some double-income families will benefit if there is a significant gap between the earnings of the spouses.

Second, you have to remember that low-income individuals usually don't pay much tax. It's the middle-class and the wealthy that pay all the taxes in Canada. Consequently, any tax cut is only going to benefit people who pay taxes, i.e. middle-income and wealthy people. It's not a crime to reduce the tax burden of those groups, as long as low-income people aren't affected.

3. Instead of income-splitting, we need subsidized daycare.

This is a classic NDP argument. Unfortunately, it's not very consistent with their anti-rich ideology.

Think about it: which families are most likely to have the highest incomes, the families with two-income earners or the families with just one income-earner? You guessed it, two income-earners will typically be more wealthy. Families with two-incomes are also the ones that need daycare, because there's nobody home to look after the kids. So the NDP is essentially saying that we need to provide a subsidized program that will benefit the more wealthy families, while the poorer families with only one income should continue to be discriminated against by the tax system.

Call it a reverse-Robin Hood. That's not the Canada I want to live in.

In the end, it's a no-brainer. Income-splitting is the way to go.