Most families lose out in Harper's new tax plan

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Photo: flickr/Tax Credits

Heading into the 2015 election season, the Harper government recently unveiled a bundle of what have been referred to as "family-focused" tax cuts. However, with several figures and complex lingo to sift through, many families across Canada are wondering what types of families these policies are going to benefit and how.

The plans are worth approximately $4.6 billion annually and incorporate income-splitting for families with children under 18. Firstly, the Universal Child Care Benefit will increase from $60 per month to $160 per month for youth under six years old. If your child is aged 7-17 your benefit will be $60.

There is also a $1,000 increase in the Child Care Expense Deduction, growing from $7,000 to $8,000 for children under seven years old, and for children between the ages of 7-16, it will be raised from $4,000 to $5,000.

Furthermore, benefits will also increase for the families of youth eligible for the Disability Tax Credit; their benefits will increase from $10,000 annually to $11,000.

In the beginning of the 2014 tax cycle, income-splitting will make it possible for couples with children under 18 to transfer money for tax purposes. The higher earner can transfer up to $50,000 in income to the lower earner. The tax benefit will be capped at $2,000.

Prime Minister Harper is quoted as saying that these polices really "add up to real dollars in the pockets of Canadian families." But which families?

Upfront these economic policies seem relatively benign. However, upon closer inspection it is questionable how many families are going to benefit from these policies -- especially factoring in what the definition of a "family" is in this case. The effects of income-splitting have already been studied and the results are a bit more sombre than perhaps the public had originally anticipated.

About 86 per cent of all families including single parents would gain nothing from income splitting. Being heavily circulated due to its sudden relevance, a research paper titled, "Why income splitting for two parent families does more harm than good" published by the C.D. Howe Institute outlines that 40 per cent of total benefits would go to families with an annual income above $125,000 a year.

When we account for the large revenue cost of these new policies, it is the families that see a modest gain or no gain at all that will ultimately be paying the price through means such as public service cuts.

These policies are not subtle in favouring a higher tax bracket. Not progressive in nature, if the working partner makes between $32,001-$45,000 the return would be a modest $38.

However, if the working partner makes over $182,000 he or she could see a return of $1,730 or more. Back in February of this year, even the then-Finance Minister Jim Flaherty said that he, "[wasn't] sure that [income splitting] overall […] benefits our society."

Moreover, in partnerships where one partner does not work, the majority of the working half of the relationship is male. Therefore, a significant amount of high-income earners are in fact male. This means women will only account for a meagre 12.3 per cent of those who benefit from income-splitting.

To stay within a higher tax bracket, the partner who isn't working (who is overwhelmingly likely to be a woman) is discouraged from going to work, lest she wants to pay more taxes. It seems as though the Harper government is using these policies as a means of subtly favouring wealthy nuclear families.

This has members of the public questioning: If the Conservative government wanted to shed light on issues affecting families, why not increase access to universal child care?

We don't need to look far to find access to affordable child care. Quebec invests $2.2 billion dollars annually into its child care plan. Therefore, a family in Quebec may pay $140 monthly for childcare, yet in Ontario that same family could be paying $900.

Nationally, Canada only has regulated spots for approximately 22 per cent of youth under five years old. Quebec houses half of these spots. Child care costs nationally account for about 30 per cent of the average wage.

The Child Care Advocacy Association of Canada (CCAAC) conducted a study in 2009 which found that affordable child care was not only essential to long-term poverty reduction, but by improving access to affordable child care, it supports stable labour force participation, which is vital for an increase in economic independence -- especially for women. It also found that supporting quality affordable child care would positively support a child's development, leading to improved educational outcomes.

Countering the Harper government's newly established "Family Tax Cut" bundle, the New Democrats have proposed a plan they say is sure to help more Canadian families. A part of the NDP proposal will allocate billions in funds for affordable child care.

Just ahead of the 2015 election, the fight for economic policies that help more Canadian families continues.

Ashley Splawinski is a political science student at the University of Toronto. Previously, Ashley worked as a producer and host of News Now on CHRY 105.5 FM covering Canadian social, political, and environmental issues. She has also filled several production roles at Rogers Television. Currently, she is a regular contributor to the American publication Young Progressive Voices and is now working on her own documentary concerning unpaid internships and precarious work. You can visit her personal blog and follow her on twitter @asplawinski. 

Photo: flickr/Tax Credits

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