Income Splitting Doesn’t Just Help taxpayers — It Helps Kids
“Children are our future.” Politicians of all stripes use this cliché (or some variation of it) to justify an endless range of policies, from anti-pornography laws to anti-poverty crusades. Sometimes, the sentiment even rings true. So it was in 2011, when the federal Conservatives promised to bring in income splitting for families … once they balanced the budget.
Income splitting is the name for a tax policy that allows household income to be pooled, such that some income earned by the higher-earning spouse is attributed, for tax purposes, to the lower-earning spouse. In a system of progressively increasing marginal tax rates (such as ours), income splitting serves to reduce a household’s total tax burden.
Income splitting isn’t just about lowering families’ tax burden. It is about enabling a family to get by on one full-time income, or one full-time and one part-time income. Income splitting is also not, as its critics charge, an incentive to send women “back to the kitchen.” It is a policy that would allow women — or men — who want to spend more time at home with their kids to do so, a choice surveys consistently show most parents of small children would make if it were financially viable.
Ah, but what about the labour market? In backing away from income splitting this month, Finance Minister Jim Flaherty referenced studies that warn such a policy could deprive industry of female worker bees. We have skills shortages, mom; leave your babe at home and get back to being “productive.”
I could understand if the NDP’s Marxist-feminist cadres cited these studies, but the allegedly family-value Tories? Sorry, my conservative friends, but what is more important? That small children who need their mother’s care get to stay at home with her? Or that the labour force is plentifully supplied with the harried parents of toddlers?
Some children thrive in a daycare environment. But many do not. Ask any parent about the “transition” phase to institutional care and it can involve a month of separation anxiety and daily tantrums. At one preschool my daughter attended, I saw a little girl crying, lying face-down on a concrete playground while the teachers stepped around her. Such scenes repeated themselves for weeks. She simply wasn’t ready, even at the age of three, to leave the nest.
Since every child is different, parenting choices must be customized according to each child’s needs. If the Tories really believe in freedom of choice and the well-being of children, they should heed that mantra – and allow parents to select different options based on their particular circumstance.
First option: Income splitting à la française. In France, the government divides income between parents and children on a points system, by allocating one point for each parent, half a point for the first two children, and one point for each child after that. This increases the savings for lower-income families, especially larger ones, who under simple spousal income splitting would not realize significant gains. It would benefit single parents, who have no spouse with whom to split their income. It would encourage couples to have more children; it is no accident that the French have the highest fertility rate in Europe.
Second option: increased child-care tax credits or a family allowance boost for kids under four. This would help parents who believe that working full time is the best choice for their family. If external care is the right option for their child, then enable them to afford the best there is.
At tax time, families would select whichever option works best for them. They would be free to change their choice annually, as their circumstances evolve.
I can already hear taxpayers without children howling that this type of specialized treatment is unfair. I would encourage you to think differently – 25 years into the future, to be precise.
My kid is your future healthcare. Your sister’s kid is your future pension. Your neighbour’s kid is the man who gives you his seat on the streetcar when you’re old. These children may all have different needs, but your interest is the same. You require them to turn into well-adjusted, productive members of society. And if the best environment for them is to be at home with a parent full or part-time when they are young, you want their parents to be able to give them that care, because it is the foundation for all that comes after in their long journey to adulthood.
“Children are our future”? You bet they are. It’s time politicians stopped paying lip service to that idea, and actually do something that makes a difference.