The income splitting shell game has nothing to do with child care
October 17th, 2014 - 11:04am
My initial thought when I heard about the new-look income splitting proposal being floated by the government in a trial balloon style was that a lot of seniors are going to be miffed. Let’s face it that is the generation that has been most invested in the concept. When they learn what has happened to the idea and what it is now meant to address there is no doubt there will be a lot of disappointment.
The newest take on income splitting idea is that it will be made available for couples with children under 18 years old and not for seniors who have been promised this for years. By limiting the tool to couples with children under 18 the government can somehow consider this a child care policy, but are aiming it at people who for the most part can already afford to have a stay-at-home parent. In other words it is aimed at couples that are young and well-off.
The whole concept of income splitting is contentious to begin with and has critics on all sides of the political spectrum. We know that the late Jim Flaherty voiced serious concerns over the fairness of income splitting which would mostly benefit the wealthy. It seems the Prime Minister is not giving up that easily and will make sure that at least the wealthiest Canadians with kids under 18 are being thrown a bone on this front.
Although there will be some couples who legitimately benefit from the proposed option, those will be much fewer than a universal national child care plan would assist. While the Conservative backrooms were burning with ways to maintain the advantage held by Canada’s wealthiest, New Democrats were proposing a concrete plan to make child care more affordable. The difference between the visions couldn’t be broader and the outcomes of each couldn’t be more different.
The Conservative income splitting scheme will cost Canada $3 billion a year in foregone tax that will benefit only a few and mostly rich families. It is estimated the plan will pass over a full 86% of Canadian families. The New Democrat plan to provide $15 a day child care will be available for all families. In addition to that, this Canada-wide child care plan will grow the tax-base as more women participate in the workforce which will increase our GDP and economic activity across the board. This isn’t just a guess, it is a fact. Quebec’s child care plan has shown to create $1.78 in revenues for every dollar the province invests.
While the New Democrat plan will offer the same options to the wealthiest and the poorest, the Conservative plan will only apply to a narrow band of the economy. Critics who suggest that a national child care plan will only subsidize wealthy Canadians are being less than honest if they aren’t applying the same logic to the Prime Minister’s income splitting proposal. When compared in the clear light of day it is obvious that only one of these plans has any potential to grow the economy. In addition to that the wealthier Canadians are already paying more in income tax – why ding them twice?
The former Finance Minister had it right about income splitting while the Prime Minister is engaging in dog whistle politics and praying that most seniors aren’t really paying attention – at least until after the next election. It is a cynical approach that leaves most families in the lurch with significant child care costs, while it leads older Canadians down the garden path.