Income Trust investors were given the bums rush last fall when Finance Minister Jim Flaherty announced that the Conservatives were breaking their promise and taxing this lucrative tax loophole. But wait it was just an announcement they still haven't come up with a policy yet. Canada's income trust bill not ready yet
And so the reason for the rush to judgement on Income Trusts? Why they booted Garth Turner out of caucus only the week before. And then they adopted his policy on Income Splitting which they had denied was a priority prior to October 31. It is all political optics.
In an attempt to appease upset investors, the government said it will increase the seniors tax credit and allow income splitting. “Pension income splitting is a major positive change in tax policy for pensioners and seniors,” Flaherty told the committee.
Because so far Flaherty has not come up with any more evidence of Income Trust impacts on the tax system than what his Liberal predecesors had found. Suspicious that. Of course the rush by big Canadian corporations to become income trusts and avoid corporate taxes caught the Tories off guard.
The boys on Bay Street gave them the bums rush so they returned it in kind. Caught off guard they rushed to judgement and gave Bay Street a Halloween trick while promising retirees and seniors a special treat; income splitting.
This is the key element of the Conservatives tax fairness plan; Garth Turners idea of Income Splitting. Which is neither fair nor good policy, but like the GST cut it is good political optics. However like the Income Trust policy it is still only speculative. Income Splitting is not a reality, yet.
Lobbyists suggest the signals are strong that the minority government could muster enough support for pension-splitting plan. But getting it passed may be complicated because it is likely to be treated as part of a package of measures that includes its controversial plan to phase out tax breaks for income trusts.
Those advocating for income splitting are the same right wing lobbyists like REAL Women, who lobbied for the Tories Child Tax Bonus and opposed daycare funding. They want tax credits for living at home moms with kids. That is they want taxpayer to pay for wealthy folks who can afford not to work two jobs. They do not want to pay for other folks daycare being the greedy parasites they are.
Sara Landriault, national coordinator of Care of the Child Coalition, says spouses who care for children at home, the vast majority being women, should be paid through the tax system for their work.
She acknowledges a sobering fact a sobering fact Turner himself discovered in a research paper he commissioned from the Library of Parliament. Though he calls the income-splitting scheme a tax reform for the middle class, the library document shows it is actually the upper - maybe upper-upper - classes that would benefit most.
"Sure, they pay more taxes, they're going to get more of it back," says Landriault.
And that doesn't even take into account lone-parent families, the majority of whom are headed by a woman and many of whom live below the poverty line, says Martha Friendly, one of Landriault's staunchest opponents and co-ordinator of the Childcare Resource and Research Unit at the University of Toronto.
"Low-income single mothers, they don't get anything out of this," says Friendly, noting with apprehension that Turner's own research shows the move would take $5 billion out of federal revenues when it's combined with income-splitting for pensioners. "It's cutting taxes for people who have more money."
But John Williamson of the Canadian Taxpayers Federation stresses that higher-income couples shoulder a disproportionate share of the tax burden.The weight is especially heavy for single-earner families.
Well duh they earn more they should pay more taxes. But of course that's the right wings definition of class warfare, taxing the rich. Because only those who are wealthy can afford to have an unemployed spouse living at home.
You may have heard the recent news from the Census Bureau that as of 2005, and for the first time in recorded history, more than half of all adult women are living without a spouse. There are plenty of implications that arise from this latest finding, but as the New York Times points out, contrary to popular perception, this so-called “marriage gap” isn’t about gender, but instead, it’s about education and social class -- women with lower socioeconomic attainment are less likely to marry than women with higher socioeconomic attainment.
And to add insult to injury the folks who will benefit the most from income splitting of pensions will not be widows, the largest group of single pensioners in Canada and the poorest, or the average working class family but those who can afford to retire early or retire and continue working.
Income-splitting is a vote-getter that would save middle-class families billions of dollars a year in taxes, but experts say that doesn't make it sound fiscal policy. MPs inside and outside the Conservative party are urging Prime Minister Stephen Harper to lower taxes in his upcoming budget by allowing couples to combine their incomes and divide the tax load. Some experts are saying the cost of income-splitting -- anywhere from $3 billion to $5 billion a year -- could blow a hole in the nation's finances.
Tax fairness is rhetoric for tax breaks for the rich and wealthy in Canada.