Prime Minister Stephen Harper fulfilled an election promise Oct. 30 with the announcement of income-splitting for families with children. The government will also increase the Universal Child Care Benefit (UCCB) to $160 per month from $100 for children under six and add a new benefit of $60 a month for children seven-17. Parents can expect to receive cheques in July that will include amounts for January to June.
The move has been welcomed by pro-traditional family groups, but the Opposition parties and the social justice think tank Citizens for Public Justice (CPJ) expressed concerns the program fails to help those who need it most.
“Our Government is fulfilling its promise to balance the federal budget,” said Harper. “We are now in a position to fulfill our promise to help Canadian families balance theirs.”
In the last federal election, Harper promised income-splitting for families when the budget is balanced. The measure is expected to cost a little more than $3 billion in 2014-2015 and $4.6 billion the following fiscal year.
When Canadian families file their 2014 tax return, couples with children will be able to transfer up to $50,000 in income from the higher earning spouse to the lower earning spouse, to bring tax relief capped at $2,000. This kind of income-splitting already exists for seniors in Canada.
For the 2015 taxation year, the government will raise the amount a family can deduct for child care expenses by $1,000 to $8,000 per child under age seven, and to $5,000 for children seven through 16.
“Our Government is focused on helping hard-working Canadian families make ends meet, by making important priorities like child care and after-school sports more affordable,” said the Prime Minister. “Under this plan, every family with children will have more money in their pockets to spend on their priorities as a family.”
“Income splitting corrects a longstanding injustice in Canada’s tax code whereby two families earning the same total income pay different amounts in taxes depending on who earns that income,” said the Institute of Marriage and Family Canada (IMFC) in a news release. “Currently, families with a single primary earner often pay significantly more than families with income evenly distributed between two earners.
“This bias puts a financial strain on families with a lower-earning spouse — typically families struggling with child care, elder care or the care of family members with special needs,” said the IMFC.
“Family income-splitting is a legitimate form of tax sharing, and is a welcomed remedy for the disparity in taxes paid by sole and dual family income earners with the same income,” said REAL Women of Canada in a news release. “This blatant discrimination has now at last been remedied.”
CPJ welcomed the increase in the UCCB, but criticized the income-splitting approach.
“This isn't, as the Prime Minister says, ‘about Mom and Dad,’ ” said CPJ executive director Joe Gunn. “Income splitting is more about encouraging Mom to stay at home and giving Dad's boss a bigger tax cut than Dad will ever see.
“CPJ's Burden of Poverty report released on Oct. 17 shows that 10 per cent of couples with children live in poverty,” he said. “They need help and increasing the UCCB will help these folks somewhat. But 33.8 per cent of female lone-parent families struggle to live under the poverty line, as do 28.6 per cent of unattached adults — and income splitting totally ignores these larger populations in need.”
Opposition parties also slammed the program.
“We’re going to do our job of standing up to Mr. Harper’s plans,” said NDP Leader Thomas Mulcair following Question Period Oct. 30.
“It will only help a very small minority of people at a time when inequality is increasing in our society after years and years of Liberal and Conservative rule,” he said.
“Middle class families should not have to pay more to give families like Mr. Harper’s and mine a $2,000 tax break,” said Liberal Leader Justin Trudeau in a news release.
“It is unfair to ask middle class families to pay for this tax break. The vast majority of Canadian families will receive no benefit from income splitting. Single mothers will receive nothing; families with parents in the same income bracket will receive nothing.”
“Other families that will not benefit from this policy, such as single parents, or those who do not pay any income tax at all, are already looked after by other benefits under the Income Tax Act,” said REAL Women of Canada, which described Harper’s policy as “an acknowledgement of the importance of the family and its children who are the very foundation of Canadian society and its future.”
“Our research shows that families work as a unit, sharing money and resources as needed,” said the IMFC. “This sharing strengthens families, which in turn benefits society and the economy.”