Time to End Tax Unfairness for Families

Apr 29, 2013, 17:07 ET from The School of Public Policy - University of Calgary

Jack Mintz argues case for income splitting in Canada

OTTAWA, April 29, 2013 /CNW/ - Nearly six decades after a royal commission recommended that the income tax system be changed to recognize total family household income, instead of each individual's income, the federal Conservative government has at last suggested that it wants to level the playing field - a move considered long overdue by Jack Mintz, a noted economist and Director of The School of Public Policy.  In a media conference held today where he released a ground-breaking report co-authored with Matt Krzepkowski , Mintz outlined the unfairness of the current tax regime and suggested practical changes to create tax fairness for families where one parent stays at home.

According to Krzepkowski and Mintz, the Canadian personal income tax system ignores whether the amount of money an individual brings home is supplemented by the income of a spouse or not. That means that families where one spouse earns more than the other get taxed at a higher rate than families where two working partners earn the same total income split evenly between two paycheques. In fact, a family with just a single earner making $70,000 a year pays 30 per cent more in taxes every year than a family with two partners making $35,000 a year. A single-earner family taking in $120,000 a year pays the same income tax as a dual-earning couple making $141,000.

"Since Canada's income tax system purports to treat people in similar circumstances as equally as possible, it is time to let couples split their income so they do not face a penalty in higher tax rates than those faced by couples bringing home the same amount of total pay," Mintz said today.

Mintz called for cutting the transferability of the unused portion of the basic personal tax exemption for couples splitting income.  There may be other mechanisms the government might consider. But the bottom line is that there are ways to account for non-labour-market-related differences between single-earner families and dual-earner families. "Allowing families to split income is already available for income other than wage earnings… (Wages) Income splitting would level the tax burden between differently earning family types, allowing for other tax instruments to adjust for differences in implicit income from unpaid home production," Mintz said.

The report by Jack Mintz can be found online at The School of Public Policy website.

SOURCE The School of Public Policy - University of Calgary

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