There is an irony in the Conservatives fetish for income splitting. It of course favours the rich, and it denies individual responsibility in taxation. While the right wants to see aboriginal peoples accept indvidual property rights rather than their traditional familal collective rights, for white rich people they want collective familal rights for tax purposes.
A libertarian feminist critique of the income spliting is available online I am publishing an excerpt from this presentation to the Law Reform Commision in 2001.
WHAT’S SEX GOT TO DO WITH IT? TAX AND THE “FAMILY”Professor Claire Young
Faculty of Law
University of British Columbia
pgs 209-212
Conclusion
Perhaps the most persuasive reason for moving away from rules that take spousal and
familial relationships into account is that these rules complicate the tax system. If
simplicity really is an underlying goal of the income tax system, then repeal of many of
these rules would enhance that objective considerably. The integrity of the individual as
the unit would be ensured and there would be other benefits. Writing about the rules that
treat spouses as one unit, Jack London notes that they:
[e]xacerbate the schizophrenic and incoherent focus of the tax system on who
should comprise the appropriate human tax units. The federal income tax
system, more than ever before, lacks an intellectually or rationally defensible
perspective on whether married persons are, or ought to be, considered tax
units… In the result, the system is less equitable, both horizontally and vertically,
than it could be, or than it would be, under an ideal tax system, when only tax
equities are considered.
Jack London,
“The Impact of Changing Perceptions of Social Equity on Tax Policy:
The MaritalTax Unit”, (1988) 26 Osgoode Hall Law Journal 287 at 288-289.
But repeal of all the rules that refer to “spouse” or “child” is not recommended. Some of
the rules have an important objective and are effective in accomplishing that objective. In
other instances it is difficult to determine if a rule is achieving its intended objective.
Therefore, in some cases the report recommends the collection of more empirical data in
order to reach a conclusion about the effectiveness (or lack thereof) of a particular rule.
Some of the major issues raised by the report include the following. While the attribution
rules are intended to stop income splitting between spouses and between adults and
minor children, there is a dearth of information about whether, in the absence of the
rules, there would be a proliferation of income splitting transactions with a consequent
tax leakage. Repeal of the rules would be a positive move to the extent that it results in a
removal of the disincentive for high-income taxpayers (primarily men) to transfer
property to their low-income spouses (primarily women). The problem is that repeal of
the attribution rules would only benefit those who have high incomes and who own
income-producing property. The report recommends more empirical research on the
issue of the cost in terms of tax dollars lost through income splitting in the absence of the
rules before a decision is made about retention or repeal of the rules.
The report recommends the repeal of rules that are based on dependency. These rules
include the spousal tax credit and the ability to transfer unused tax credits to a spouse.
The primary reasons for this recommendation are that these rules undermine women’s
autonomy, they act as a disincentive to women’s participation in the paid labour force
and the tax subsidy is delivered to the economically dominant person in the relationship
and not the person who needs it. Provisions based on economies of scale are subject to
the critique that it is not only spouses who benefit from economies of scale. Any two or
more persons living together benefit, but they are not penalized by the tax system. In this
context the child-care expense deduction, the GST Tax Credit and the Canada Child Tax
Benefit are discussed in detail and recommendations for improvement made.
The provisions that are based on economic mutuality are discussed in some detail.
These provisions are subdivided into those that are of advantage to the taxpayer
because they result in less tax payable and those that disadvantage the taxpayer
because they increase the amount of taxes payable. These two main classifications are
further subdivided into other classifications that look to the nature of the provision. The
problem with rules that are based on an assumption of economic mutuality is that in
many spousal relationships, this economic mutuality is not a reality. There is little or no
sharing or pooling of income. Therefore, unless the provision has an underlying other
rationale, it is difficult to argue that it should form part of the tax system. The conclusion
is that some of the rules that advantage the taxpayer should be retained because they
do have valid other objectives. But rules such as the inclusion/deduction system with
respect to spousal support cannot be defended on any basis.
In summary, there are many reasons why tax rules that take spousal and familial
relationships into account should be rethought. Perhaps the most compelling reason is
that the nature of spousal and familial relationships has changed dramatically over the
years. The percentage of Canadians who are married or living in heterosexual commonlaw
relationships is declining. Within those relationships, the role of spouses is changing.
Other non-spousal relationships, such as mother and daughter or two or more good
friends, share many characteristics with spousal relationships. Yet it is spousal
relationships that the tax system treats differently. It is time that this policy was
reconsidered and this report is intended to facilitate that reconsideration.
See
Not Real Tax Fairness
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