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Originally Posted by Bill Bumface
I'm super biased, but I've never understood why this wasn't a thing. I guess it could lead to marriages of convenience and other ways to abuse it.
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2 big reasons I can think of:
1) Basic fairness. With full income splitting, a single person would pay about 30-50% more income tax (depending on the income level) than a person earning the same amount but with a spouse who didn't work. Which can create some sort of perverse financial incentives, both marriages of convenience and people staying in relationships they'd otherwise leave.
2) It disincentivizes working for the lower earning spouse (primarily women) because it makes marginal income for that person be taxed at a higher rate than it otherwise would. Under the current system, if you had a person making $200K and their spouse didn't work, if that non-earning spouse rejoined the labor force and earned say $50K, they would keep almost all of that money with an average tax rate of about 15%. But with income splitting, if the non-earning spouse took that same $50K job, the effective tax rate on that additional income would be more like 35-40%. High labor force participation is generally a good thing for society but income splitting can discourage it, as can things like high childcare costs.
Granted, there are cases where you may want to encourage a member of the household to not work if they don't want to, like a family with very young kids. But if you want that, then you target that group with supports or tax incentives, rather than any random person who happens to be married.