Income splitting under attack

A recent article from the Toronto Star discusses the use of Canada’s anticipated 2015 budget surplus. It could be around the $6-billion mark.

Apparently, the Federal Government plans to use the surplus funds to cut the tax rates of several groups of Canadians, including middle-class Canadians and certain businesses.

One method of tax cutting will apparently be through income-splitting.

In families with one wage earner, for example, the income would be divided between the spouses, leaving each spouse with a modest income, which in Canada is taxed at a lower rate.

Various groups across the country worry about the cost of income splitting ($2.6 billion), and how the benefit will likely prove to be minor for the typical household.

They argue that a better use of the funds would be to enhance the child tax benefit. Enhancing the base benefits under the child tax credit could help poor and middle-income Canadians with children far more.

In my opinion, the government should re-examine the issue and consider carefully whether there is any significant benefit to continuing the income-splitting benefit under the Tax Act, or instead focus on helping children and the poor to a larger degree through the child tax benefit.

This ad ran in the Richmond Review on October 8, 2014.