Letting families keep more of their money is good policy

Posted on in Child & Family Policy Context

TheGlobeandMail.com – Globe Debate
Oct. 31 2014.   Andrea Mrozek

Andrea Mrozek is executive director of the Institute of Marriage and Family Canada.

The idea of income splitting for Canadian families has proven politically controversial. It shouldn’t be.

The principle is simple: Families that live together, work together and share resources of all kinds ought to be allowed to share their income thereby decreasing their taxes at tax time.

Families that look the same and make the same amount of money ought to be taxed the same amount. The tax code should recognize families as the team they are.

Taxing individuals in a household has led to a bias whereby two families of similar means often pay very different amounts of taxes. This puts an unfair strain on families with one lower-income spouse.

Income splitting therefore corrects an existing inequity, and lucky for many Canadians, it does this by reducing taxes.

Even those who are profoundly against the practice reveal that it benefits almost half (48 per cent) of all families with children under 18.

Importantly, this tax reform allows families to do in their taxes what they are already doing in almost every other way: Sharing resources to get by. As such, it is non-coercive. And so we must address one of the myths associated with income splitting.

Many will claim that income splitting forces one partner, typically the woman, to stay home. Certainly, this is counter-intuitive, so far as critiques go. Who among us believes that more money in a family’s pocket forces anything?

The reality is quite the opposite. Look at another family-oriented public policy, national daycare, by contrast. With national daycare, the government offers only one, one-size-fits-all “choice” at a subsidized price, taking tax dollars from all to do so. It acts as a carrot in the one direction that government has chosen for you.

Economics 101 teaches that offering something at cheaper than market levels increases demand – not because it is what people choose but because it is cheap. Once families have been forced to pay taxes into a system that provides cheap daycare, they are financially burned if they do not use the “freebie” on offer. That is coercion.

When critics say income splitting coerces choice, what they really mean is that they don’t like the choices some families will make.

Government, after all, has its own agenda. Getting people working so they can pay income taxes is one of them. Yet it is not ideal for hard-working parents of small children to be forced into the work force for the short-term benefit of the GDP.

“Stay-at-home mothers” as a term is a red herring, anyway. Parents and family who care for their own kids are so very often working part-time, and juggling various obligations in and outside the home. For the limited time that they are caring for small children they are working – and hard – but making less. Income splitting helps to acknowledge this short-term sacrifice of their usual income.

More to the point, “stay-at-home mothers,” is a term used with derision by elites who believe life in glassy office towers should be the main source of an individual’s fulfilment. The derision toward mothers becomes even more evident because it is generally not applied to “stay-at-home fathers,” who are doing precisely the same thing, but are apparently more avant-garde about it.

Add in the fact that those same families looking after small children are very often also looking after aging parents and we have more cause to allow families to keep more of their own money. (As an aside, there is great consensus on enabling the elderly to “age in place.” Ironic, then, that any baby over the age of 18 months is supposed to get out of the house as quickly as possible.)

Looking to international example, we can see that income splitting has been implemented to no ill effect. Ireland, France, Germany, the United States and the Czech Republic, among others, all enjoy income splitting at tax time. For people living in these countries, left or right, “stay-at-home” or not, the idea is entirely uncontroversial.

Letting families keep more of their resources to help raise their children shouldn’t be controversial. It is just good policy.

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