Winnipeg Free Press - PRINT EDITION

Income splitting could treat different families fairly

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The federal Liberals and Conservatives are joining forces, although in a small way, on an issue advocated in this space before -- income splitting.

Tory MP Stella Ambler and Liberal MP John McKay hope to "take the edge off the wedge" of the controversial issue the federal government hopes to implement once its books are balanced.

Granted, that likely will take years in these tough economic times, but the fact the two MPs highlighted a University of Calgary research paper on Monday shows there's a desire to depoliticize a tax issue that would create a more level playing field for families with kids younger than 18.

The thinking behind income splitting goes like this: A spouse who earns $50,000 a year can split that amount, bringing the income between two parents to $25,000 each, thereby reducing their tax burden.

The U of C research paper argues the current system, which doesn't allow income splitting, is unfair because it penalizes single-earner families.

According to the paper, since Canada's income system aims to treat people in similar circumstances as equally as possible, it makes sense "to let couples split their income so they do not face a penalty in higher tax rates than those faced by couples bringing home the same amount of total pay."

By providing more incentives for a spouse to stay at home, it gives families more options to care for their children in a relaxing, nurturing environment.

Arguments against income splitting include the high cost and that it encourages a spouse to leave the labour force. New measures promoted by the Calgary researchers address this problem. In allowing income splitting, they propose restrictions on the transferability of the basic tax exemption, which would require both spouses to earn income to qualify for the transfer. The researchers argue this will achieve equal taxation of different types of families with children.

Because income splitting has become such a controversial issue, the fact two opposing MPs are joining forces shows there's a chance for common sense and fairness to win out over political rhetoric.

Republished from the Winnipeg Free Press print edition May 7, 2013 0

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