The Conservative government’s plan to extend income splitting to families is skewed heavily in favour of the wealthiest, with the vast majority of families receiving no benefit at all, a new study has found. The Canadian Centre for Policy Alternatives analysed the Conservative plan to allow parents with children under 18 to split up to […]
The Conservative government’s plan to extend income splitting to families is skewed heavily in favour of the wealthiest, with the vast majority of families receiving no benefit at all, a new study has found.
The Canadian Centre for Policy Alternatives analysed the Conservative plan to allow parents with children under 18 to split up to $50,000 of income with their partner.
Senior economist David Macdonald found that 86 per cent all families would gain no benefit at all from the tax loophole, expected to be the centrepiece of the Conservative Party’s re-election campaign in 2015, after the federal budget is balanced.
Other key findings include:
“The bottom 60% of families (those making $56,000 or less) would receive, on average, $50. Most families in this group would receive no benefit whatsoever.
In contrast, the richest 5% of Canadian families — those making over $147,000 — would see an average benefit of $1,100, with one in 10 of this elite group gaining more than $5,000 from this loophole.
The top 5% of families would see more benefit than the bottom 60% of families.
In fact, none of the bottom six deciles would receive anywhere near 10%, its equal share; whereas each of the top four deciles receives far more than 10% of the total benefit, or far more than their equal share….
4% of families would gain less than $500.
1% of all families would get more than $6,500. Most of those $6,500 gainers are already among Canada’s richest.”
“Income splitting creates a tax loophole big enough to drive a Rolls Royce through. It’s pitched as a program for the middle class but in reality it’s an expensive tax gift for the rich,” said Macdonald.
He added: “Income splitting is a policy choice that would purposely exacerbate already high income inequality in Canada. This is inequality by design, not by accident.”
The program would cost the federal government $3 billion in lost revenue to implement, the study found. This does not include an additional $1.9 billion in lost revenue provincially.
Macdonald analysed the pension income splitting program already in place, and found a similar pattern. Seven out of 10 families get no benefit at all from pension income splitting while the richest 10% of senior families receive more than the bottom 70% combined.
By 2015, the cost of the pension income splitting program is expected to reach $1.2 billion federally and $500 million provincially. “In contrast, it would cost $1.5 billion a year to lift all Canadian seniors out of poverty,” the study states.
Photo: merelyrachel. Used under a Creative Commons BY 2.0 licence.