Income-splitting changes to be announced

[SebC]

Calling this a tax break for single-income families is a bit disingenious. Single parents are also single-income, but don't qualify - despite having childcare needs that two-parent families don't.

[GGG]

Originally Posted by Calgary14

Child tax credit - Line 367 which works out to about $350 per child maximum per year

Does this disappear for those who income split or for everyone?

[Rerun]

This really won't help me in the least. I work and my wife works. My wife's income is only $10,000 less than mine.

From what I understand, this will only help those married people where one person makes more than enough money so they can afford to have the other one stay at home.

As usual, the rich will pay less taxes and the middle class ends up taking the hit.


... unless I've completely have missed the point here.

P.S. We miss you Jim Flaherty .

[Flash Walken]

'Fiscal responsibility'.

[chemgear]

Originally Posted by Rerun

As usual, the rich will pay less taxes and the middle class ends up taking the hit.

P.S. We miss you Jim Flaherty .

Indeed. The details have changed a little since but the premise is still the same before his death.


http://www.cbc.ca/news/politics/jim-...mise-1.2533641

Earlier, Flaherty said the measure needs "a long, hard, analytical look" by experts "to see who it affects in this society and to what degree. Because I'm not sure that overall it benefits our society."

"When you have groups as diverse as the Canadian Centre for Policy Alternatives on the one hand and the C.D. Howe Institute on the other hand, saying the exact same thing, that it won't benefit the vast majority of Canadian families, I think it's quite clear that they're starting to realize that they've got problems."

"And if the objective is to provide support to families in raising children, it would distribute most benefits where they are least likely to be needed. Splitting would also be revenue costly, adverse to work incentives, and gender-biased," the report concluded.

The researchers found that the Conservatives' income-splitting proposal would:

• Highly concentrate the benefits among high-income, one-earner couples: 40 per cent of total benefits would go to families with incomes above $125,000.
• Be of no benefit to 85 per cent of all households, including single-parent families, and that even among couples with children nearly half would gain nothing or less than $500.

The Broadbent Institute, a think-tank named for former New Democrat leader Ed Broadbent, argues income splitting would benefit Canada's wealthiest families and come with a $3-billion price tag.

[Rathji]

Anyone want to dumb this down for me? Seriously, I pretty much understand how taxes work now, but can't understand where the change is being made.

[Calgary14]

Originally Posted by Rathji

Anyone want to dumb this down for me? Seriously, I pretty much understand how taxes work now, but can't understand where the change is being made.

Income splitting: moving income from a high income earner (high tax rate) to someone with a lower income (lower tax rate) - usually a spouse. End result is that the income gets taxed at a lower rate and the family pays less taxes.

Income taxes are paid using marginal tax rates. The higher your income, the higher your tax rate (and taxes paid). Lower income earners pay taxes at a lower rate than high income earners.

The announcement by the conservatives calls for $50k of income to be split with a maximum of $2k tax savings. Best case scenario: a couple has one high income earner and one with little/no income. The income would be taxed in the hands of the lower income earner resulting in $2k tax savings (maximum). Worst case scenario: a couple has the exact same income - which means moving income from one person to the other is meaningless because it would be taxed at the same rate.

[Bunk]

Here's who gets what:


https://pbs.twimg.com/media/B1XpXV7CEAAIjmd.png:large

[Rathji]

Originally Posted by Bunk

Here's who gets what:


https://pbs.twimg.com/media/B1XpXV7CEAAIjmd.png:large

Thanks, this more or less let me visualize to understand what was going on.

[rayne008]

Originally Posted by Bunk

Here's who gets what:


https://pbs.twimg.com/media/B1XpXV7CEAAIjmd.png:large

That's weird.. I've always thought there were basically 3 tax rates..

And that 200k got taxed at the same rate as 100k and splitting would be any benefit in this scenario.

[darklord700]

Originally Posted by rayne008

That's weird.. I've always thought there were basically 3 tax rates..

And that 200k got taxed at the same rate as 100k and splitting would be any benefit in this scenario.

There are 4 tax rates in AB, 25%, 32%, 36% and 39%. At 100K you are not talking about top 1% yet as it is only taxed at 36%. About 136K net you'll be taxed at 39%, I believe 99% of CPers are in this bracket

[Fire]

No one should be surprised if a tax break benefits the ones with the heaviest tax-burdens the most. Damn those rich people!

[cracher]

I'd like to see that graph again in 50 years when society finally recognizes polyamorous relationships as legit. Then there will be some use for these new income splitting rules.

[MarchHare]

Originally Posted by Fire

No one should be surprised if a tax break benefits the ones with the heaviest tax-burdens the most.

The problem with income-splitting isn't that it benefits the rich "the most"; the problem is that it provides no help at all to 90% of Canadian families and only a very small benefit to those that aren't already wealthy. This is purposely designed to give a tax break to the households that need it the least while also providing a financial incentive to reduce workforce participation. Even Jim Flaherty recognized it for the bad policy that it is (see chemgear's link above).

Damn those rich people!

Nobody in this thread has demonized rich people.

[Locke]

Originally Posted by MarchHare

Nobody in this thread has demonized rich people.

Thats unusual, we should rectify that.

Damned rich people and their...riches!

[chemgear]

Originally Posted by MarchHare

Nobody in this thread has demonized rich people.

Originally Posted by Locke

Thats unusual, we should rectify that.

Damned rich people and their...riches!

For most members of CP, isn't that like self-immolation or self-flagellation?

[bubbsy]

stupid question....

was there ever any income splitting or refund splitting concepts prior to this? I typically do my taxes using software, and it simply asks if i want the tool to optimize our inputs across both our tax returns.

i also don't see what this policy change is intending to reward/punish (or help). Why would a family with X kids where both parents earn 75k/year garner less of a reward than a like sized family where 1 parent is a stay at home parent and the other earns 150k?

[MarchHare]

Originally Posted by bubbsy

i also don't see what this policy change is intending to reward/punish (or help). Why would a family with X kids where both parents earn 75k/year garner less of a reward than a like sized family where 1 parent is a stay at home parent and the other earns 150k?

The Harper Government believes that the best way to raise a child is to have one parent (typically the mother) stay at home while the other is the sole breadwinner. Income-splitting provides a financial incentive for this type of family, or conversely, it provides a financial disincentive for families where both parents participate in the workforce.

[Fire]

Originally Posted by MarchHare

The problem with income-splitting isn't that it benefits the rich "the most"; the problem is that it provides no help at all to 90% of Canadian families and only a very small benefit to those that aren't already wealthy. This is purposely designed to give a tax break to the households that need it the least while also providing a financial incentive to reduce workforce participation. Even Jim Flaherty recognized it for the bad policy that it is (see chemgear's link above).

90% of families with children won't get any benefit? Can you provide a link? I have hard time believing that.

[MarchHare]

Originally Posted by Fire

90% of families with children won't get any benefit? Can you provide a link? I have hard time believing that.

It was already linked previously in this thread.