Apolitical Staples

The rich are unaffected because splitting does not change income tax brackets for high-income earners. Income splitting is a middle class break

Thank heavens. We wouldn’t want to give Canadians any encouragement to work hard and get rich, would we! Wealth leads to inequality, you know. And who knows what those rich SOBs would do with the money they save. Probably invest it in new businesses, send their kids to graduate school, build a new sports facility in their town, or something stupid like that.

Such is the lamentable state of Canadian political thinking, that supposedly conservative pundits are reduced to selling their policies on the grounds that they will not impede the advance of socialism.

“The rich are unaffected because splitting does not change income tax brackets for high-income earners. Income splitting is a middle class break”

No - I can’t be bothered to look up the break-points of each tax bracket (or the tax rates) - but they will differ province-to-province in any event. Let’s assume we are talking about a married taxpayer who makes more than double the amount that puts him in the top bracket - say $300K. If the income is split to two spouses then they each report $150K, and both pay the top rate at the margin - but their average rate includes the lowest rate on the first ~$30K, as well as the (lower than maximum) rate on the next ~$40K. The result is that they get the lower rates applied to the first $70K (or so) of income for both of them - in effect, they double up on the benefit of lower rates. This effect makes income splitting a benefit to any taxpaying household, regardless of income level, so long as the two spouses have different levels of income. The relative benefit is greatest if the total income is just less than twice the highest bracket threshold, and if the income differential is highest - but the benefit exists for all income levels above the lowest bracket threshold.

I am not arguing against income splitting - I think it (or ther equivalent, of joint filing) is an idea long past due - but it would be nice if commentators understood it. It may be that he was referring to ‘pension income splitting’ only - but even that remains a benefit at all income levels, albeit a reduced one, primarily due to the (normally) low levels of pension income.

Well, it can be argued that the two income family making the same as a one income family suffers more costs and is entitled to a break. Under income splittlng they wouldn’t lose that break, but could argue that they should have more tax breaks as they statistically have more costs to keep the same household working.

In other words, should we look at the current system as one that penalizies single income households, or as one which subsidizes dual-income families?

(For the record, mine is a single-income family. I have four dependents.)

Except that individuals don’t “get a tax break” for their costs of earning income - transportation to/from work, clothing, meals at work, etc, are not deductable. To the extent work-related costs are deductable (like union dues, professional fees, or educational costs) they are equally deductable by single and dual-income earners. Every worker has to decide whether the benefits of their job (financial and other) justify the costs they incur (both direct and indirect, and icluding the opportunity cost of whatever else they would do with their time), whether they are the first or second income in the household.