Jury still out on income splitting as new minister splits hairs on issue

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OTTAWA – The Harper government has a new finance minister, but not necessarily new clarity on fulfilling its 2011 campaign promise on income splitting.

Since taking over the finance portfolio last Wednesday, Joe Oliver hasn’t repeated his predecessor’s concerns about an expensive tax cut that critics say will benefit only a minority of families, and favour those at the top of the income scale.

But he hasn’t been unequivocal either, as Prime Minister Stephen Harper appeared to be last month when he said “income splitting has been a good policy for seniors in Canada, and it will also be a good policy for Canadian families.”

Asked about it on his first day at his new post last week, Oliver appeared closer to Harper’s apparent position than he was to Jim Flaherty’s, although he did give a nod to his predecessor’s call for a closer examination by stating that he was “going to be looking at the details.”

Asked Tuesday whether he shares Flaherty’s concerns that the pledge to allow families with dependent children to transfer up to $50,000 from the highest income earner to the lowest for tax purposes, Oliver was less than crystal clear.

“How the benefit will be distributed is obviously one of the issues that we look at, we look at the issue of fairness,” he said.

“The point is we intend to lower taxes for families and when the next budget is announced we’ll have the specific provisions. That’s a decision for the next budget but the prime minister was very clear that income splitting can be a good policy for families.”

Income splitting is a popular policy for the Conservative base because it is most helpful for traditional one-income families, where one spouse, usually the mother, stays home to take care of the children.

Employment Minister Jason Kenney is a strong proponent of keeping the promise and enacting a policy that he says “supports families who are investing in their kids.”

He has also said that income splitting “doesn’t benefit any particular family model; what it does is eliminate a form of unfairness.”

But economists who have analyzed the Conservative plan says it will give the most benefit to families who need it the least, and no benefit at all to 85 per cent of Canadian households. And the program is costly at $2.7 billion a year.

An often-quoted C.D. Howe Institute analysis concluded that 40 per cent of the benefits will go to households with income of over $125,000. Meanwhile, single-parent families who tend to need it the most will be shut out. The program also does nothing for dual-income families where the couple have similar earnings.

Experts have said there are better ways of delivering tax relief to families, including increasing benefits under the Universal Child Care Benefit.

However, some have also noted that there are ways to tweak the income splitting proposal so that the benefits are more broadly distributed.

That would allow the Conservatives to say they have indeed brought in income splitting, just not the one they unveiled in the 2011 election campaign.

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