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Harper gets cold feet, looks for compromise on campaign tax promise

Prime Minister Stephen Harper speaks to media and guests about infrastructure funding at the Whitchurch-Stouffville Museum & Community Centre in Gormley, Ont., Thursday, February 13, 2014. THE CANADIAN PRESS/Galit Rodan

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Prime Minister Stephen Harper speaks to media and guests about infrastructure funding at the Whitchurch-Stouffville Museum & Community Centre in Gormley, Ont., Thursday, February 13, 2014. THE CANADIAN PRESS/Galit Rodan

OTTAWA - Prime Minister Stephen Harper has developed cold feet on a major campaign promise, and is working on a compromise that will both attract voters and keep the Conservative caucus and voter base happy.

Senior Conservative sources said Finance Minister Jim Flaherty was simply reflecting internal discussions when he suddenly raised doubts this week about the feasibility of expanding income splitting to Canadian families.

Under the 2011 campaign promise, parents would be able to pool up to $50,000 of income when filing taxes to reduce their overall hit. But the measure would benefit only certain types of families, particularly those with one parent who does not work.

The sources say there is new uncertainty about both the political and policy wisdom of the measure.

Work is being done to see if there is a better option for helping reduce the tax burden on families and attract a wider swath of voters. Increasing the Universal Child Care Benefit that gives parents $100 per month per child under six was one point of speculation.

"Of course everything is set for the next budget, the 2014 budget is the set-up for 2015, so I think it's impossible for anyone to think that income splitting was not discussed at that time or that Jim would be freelancing or going on his own on something like this," said one senior Conservative.

Harper himself has taken pains not to specifically commit to income splitting when asked about it directly, referring instead to general tax relief for families.

"Once we get a balanced budget and once we get a surplus we can have obviously the discussion about what we do next," Harper told reporters at an infrastructure announcement in Gormley, Ont., on Thursday.

"But we're very clear, we've made some commitments and reducing taxes for Canadian families will be among our highest priorities as we move forward."

This is not the first time that Flaherty has had to break the news of a policy reversal. In 2006, he backtracked on a promise not to tax income trusts, when more and more companies were taking advantage of the lucrative structure.

But things are much more complicated this time. When Employment Minister Jason Kenney emerged from a Wednesday caucus meeting to say he stood behind the campaign promise, he was reflecting a widely held feeling among MPs.

"The promise is there, we all ran on that promise, that's the expectation that is out there," said one longtime Conservative MP who spoke on condition of anonymity.

Some MPs feel income splitting for families might not necessarily be dead, but could be altered from the format proposed in the campaign.

"A lot of my colleagues ran on that plank in the policy platform, and they would expect reasonable discussion and input before anything's finalized," said another veteran MP.

Liberal Leader Justin Trudeau said the income-splitting issue is evidence the Tories care more about good politics than good policy.

"The way that I'm building the platform for the Liberal party over the coming year-and-a-half, we're very much thinking about how we implement (policies) and not just whether or not they're saleable politically," said Trudeau.

The other dynamic at play, that Conservatives find hard to ignore, is Kenney's propensity for speaking his mind — even when it appears at odds with Harper's. For some it's a sign the potential leadership contender is showing what he stands for.

He stirred the pot last October, when he came out publicly to defend Nigel Wright, Harper's former chief of staff who is facing an RCMP investigation. Wright, who secretly paid off $90,000 of contested expenses for Sen. Mike Duffy, had been alienated by Harper.

Flaherty's future was another subject of heavy speculation this week. Some wondered whether he might be speaking out of school because he is preparing to leave.

Not so, says Flaherty friend Regan Watts.

"Jim has given no indication he is ready to leave Ottawa and his role as Minister of Finance," said Watts, a former senior aide who remains close to Flaherty.

"He still loves his job and his singular focus remains on reducing the deficit."

The exact wording of the platform promise, unveiled outside a family home on Vancouver Island, was the following:

"We will establish the Family Tax Cut: income sharing for couples with dependent children under 18 years of age. This will give spouses the choice to share up to $50,000 of their household income, for federal income-tax purposes. This important new measure will be implemented when the federal budget is balanced within our next full term in office."

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