Wednesday, November 5, 2014

Canadian government unveils Re-election Tax Credit

The Canadian government announced a new package of "family" tax cuts/credits last week, with an income splitting scheme and modifications to child care benefits and expense deductions. These are, of course, really just re-election tax credits--announced at what the CBC describes as a "campaign-style event." Earlier this year, at the Tax Justice & Human Rights Symposium I hosted at McGill, Jonathan Rhys Kesselman explained the distributional impacts of the type of cuts announced by the government. He had to embargo his presentation so it's unfortunately not among those now viewable at the McGill Tax channel, but fortunately his paper is now available [pdf here], and the Vancouver Sun has a story: Detailed analysis exposes more income-splitting flaws.

Kesselman's main arguments are:

  • restricting the measure to couples with children is inconsistent with the purported fairness rationale of taxing couples at the same rates as singles
  • families with the greatest need will get no benefits at all
  • families don't have to demonstrate or undertake any actual child care obligations in order to get the benefits
  • the policy will decrease the after-tax value of a family's second earner (because earnings are effectively taxed at the higher-earner's marginal rate) 

He ends by suggesting a number of alternative ways the government could spend money to support families in need without introducing these distortions.

It does feel frustrating that everywhere one looks, politicians just seem have no shame about trying to buy their next elections, and populations seem all too willing to be bought so long as you tell them it's for the "hard working" among us. The question is, whom does the Harper government define as hard-working? With this announcement, the message is: you are only a hard-working family, and therefore deserving of tax cuts, if you
  • have a child under 18;
  • with two parents;
  • one of whom earns a lot;
  • and who earns a lot more than the other.
If this doesn't describe your family, then it seems you are not working hard enough.

No comments:

Post a Comment