Tories introduce family tax legislation, including income-splitting measure

OTTAWA – The Conservative government has introduced legislation to enact its family tax-and-benefit package — a multibillion-dollar suite of measures that includes the controversial income-splitting plan.

The so-called “family tax cut” is worth as much as $2,000 a year to eligible families with kids under 18 — but several studies have found only small fraction of households can benefit from it.

The government’s bundle of family-friendly measures also contains a bolstered universal child care benefit and higher limits on the existing child-care expense deduction.

These enhancements mean monthly government cheques will start arriving at the homes of qualifying families in July — three months before Canadians are scheduled to go to the polls.

Critics have called the income-splitting plan unfair, while opposition parties have promised to scrap it if they win the election.

When specifically asked about income splitting, the Conservatives typically avoid discussing it. They point out that the overall plan will provide benefits for all families with kids.

Income splitting, projected to reduce federal revenues by about $2 billion per year, was a key 2011 Conservative election promise and was contingent on a balanced budget.

The new legislation will formally “implement” income splitting, even though taxpayers can benefit from the measure when they file their 2014 income taxes.

It allows eligible taxpayers to transfer as much as $50,000 of income to his or her spouse in a lower tax bracket in order to collect a non-refundable tax credit of up to $2,000 per year.

A recent report by the parliamentary budget office found income splitting will encourage a small number of Canadians — particularly women — to work less or stay out of the labour force altogether.

The federal budget watchdog’s study also found what earlier research has shown — that only 15 per cent of households can benefit and higher-income earners will take home the biggest gains.

Taken together, the family tax package announced by the government last fall is projected to reduce federal revenues by more than $4.6 billion in each of the next five years.

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