The Harper government is backing away from its 2011 election promise to provide tax relief for middle-class families through income splitting, which was to be introduced when the budget was balanced.
Now, however, a year before the balance sheet is scheduled to be out of the red, Finance Minister Jim Flaherty is saying income splitting is not such a good idea after all.
He says it would benefit higher-income families, while offering little support for the vast majority of Canadians.
Prime Minister Stephen Harper, who has been dangling the plan in front of Canadians for the last three years, is also having second thoughts. He says the government only ever promised to provide tax relief once the budget was balanced.
Of course, that’s not true, but he clearly wants more flexibility in deciding how to divvy up the surplus.
Since 2011, when income splitting was first announced, a series of reports have explained it wouldn’t help most Canadians, while providing generous tax relief for higher-income Canadians and for families with stay-at-home moms or dads.
Conservatives may have thought income-splitting would appeal to its base — which it undoubtedly does — but it also carries the risk of alienating the large number of voters who would be left out.
Under the plan, married couples with children under 18 would be able to split up to $50,000 of income with their partner, allowing the higher-income partner to lower his or her taxes by shifting income to the lower-paid spouse. The problem is 61 per cent of the benefits would be earned by the richest third of Canadians who make more than $100,000, while the poorest quarter of Canadians would see an average of $20 a year in tax relief.
Whatever the motivation, the Harper government should cancel its income-splitting scheme and develop a new plan on how to spend the anticipated surplus.
» This editorial recently ran in the Winnipeg Free Press.