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PM says income splitting 'good policy' despite his finance minister's misgivings

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OTTAWA - Prime Minister Stephen Harper is hinting that the key Conservative campaign plank from the 2011 federal election that earned him a majority may not be pitched overboard after all.

Income-splitting for couples with children under 18 was a multibillion-dollar pledge during the last election — a Conservative promise that would kick in as soon as the government balanced the federal budget.

But Finance Minister Jim Flaherty began publicly questioning the policy even before his Feb. 11 budget that effectively balanced the books this year and projected a surplus for 2015.

"I think income-splitting needs a long, hard analytical look ... to see who it affects and to what degree, because I'm not sure that overall, it benefits our society," Flaherty told the Ottawa Chamber of Commerce during a televised post-budget interview.

Under questioning in the House of Commons, Harper refused to repeat his 2011 income-splitting pledge after budget day. Government sources, meanwhile, spread word that the prime minister and his finance minister were of one mind on the matter.

However, following a week-long break in the Commons schedule, Harper rose in the House on Tuesday to strike another note.

"Income splitting has been a good policy for seniors in Canada, and it will also be a good policy for Canadian families," the prime minister said in French in response to Liberal goading about broken election promises.

Harper did not repeat the statement in English.

His comment came the same day Flaherty told a Reuters news service interviewer in Australia that he has not decided whether he'll run again in 2015.

The Prime Minister's Office repeated the emphatic defence of income splitting.

"It is a good policy," Jason Macdonald, Harper's director of communications, said in an email.

"It has been good for seniors and it would be good for families but, as the prime minister has said, we aren't in a position to talk about additional tax relief until we have the fiscal room to do so. That means balancing the budget and creating a surplus before we talk about additional relief."

Seniors have been allowed to split pension income to reduce their tax burden since 2007.

Studies by respected think-tanks such as the C.D. Howe Institute have found that family income-splitting would benefit only about 15 per cent of Canadian families and the benefits would disproportionately go to the wealthiest, single-income households.

Nonetheless, a number of Conservative MPs — including some high-profile cabinet ministers — appeared to be caught flat-footed when Flaherty questioned the soundness of income-splitting as a policy, and there was some grumbling about how Conservative voters would react to any policy shift.

The Conservative party in 2011 made several tax relief promises, including a $2.5-billion pledge to allow two-parent households with children under age 18 to split up to $50,000 in income for tax purposes to the lower-income partner.

"This measure will be implemented when the federal budget is balanced within our next full term of office," stated the party platform.

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