Social engineering isn’t restricted to socialists. It’s back to the future and back to the kitchen for Canadian women in the Conservatives’ latest attack on tax fairness and gender equality otherwise known as income splitting.
As the budgets of federal programs and responsibilities – from environmental protection to crumbling infrastructure to deliberate indifference to rising social and economic inequality – fall to the deficit elimination axe, the Conservatives are pursuing their aggressive tax-cutting agenda right up to the 2015 federal election.
The federal government introduced pension income splitting in 2007. But pivotal to their ongoing restructuring of Canadian society to reward corporations and the wealthiest families is their goal to offer income splitting to all Canadian families with children under 18. It will be the central plank of their 2015 election platform.
Be suspect of the phrase “all families.” Were he alive today, the late Senator Eugene Forsey would almost certainly describe income splitting as he once described neo-conservatism and privatization: as “just a fancy name for the biggest….romp ever mounted by the rich for skinning the poor.”
Recall Prime Minister Stephen Harper’s famous – or infamous – remark to The Globe and Mail’s Robert Reguly in 2009: “You know, there’s two schools in economics on this. One is that there are some good taxes and the other is that there are no good taxes. I’m in the latter category. I don’t believe that any taxes are good taxes.”
Fully 86 per cent of all Canadian families will gain no benefit from the Conservatives’ proposed income-splitting plan, warns David Macdonald, senior economist for the Canadian Centre for Policy Alternatives in his new study titled Income Splitting in Canada: Inequality by Design.
“Income splitting creates a tax loophole big enough to drive a Rolls Royce through,” he says. “It’s pitched as a program for the middle class but in reality it’s an expensive tax gift for the rich,” he continues. “The upper third of Canada’s richest families would receive $3 of every $4 spent on income splitting.”
Macdonald investigated the impact of the Conservatives’ 2007 decision to allow pension splitting between spouses. He found that seven out of 10 senior families get no benefit at all and the richest 10 per cent of senior families receive more than the bottom 70 per cent combined.
Yet, the cost to Canadians as a whole of pension splitting for senior couples in 2015 is estimated at $1.7 billion ($1.2 billion federally and $500 million provincially.)
The unfairness becomes even more egregious when income splitting is extended to all families with children under18. Macdonald ticks off the myriad inequalities:
– 86 per cent of all families gain no benefit whatsoever.
-The richest five per cent of families would see more benefit than the bottom 60 per cent of families combined.
– The bottom 60 per cent of families would receive, on average, $50. The richest five per cent of families, those making over $147,000, would see an average benefit of $1,100.
– This loophole by itself would cost the federal government $3 billion in lost revenue and the provinces, an additional $1.9 billion, for a total loss of $4.9 billion in 2015 alone.
Concludes Macdonald: “There are real consequences of creating a $5 billion a year loophole that gives tax breaks to Canada’s richest families who don’t need them. If Canadian governments are concerned about supporting families with children, they could provide a universal child care program similar to the Quebec $10 a day model for roughly the same cost as income splitting.”
However, income splitting – a.k.a. lower taxes – as an election goodie could still work wonders for the Conservatives’ electoral prospects. Macdonald is concerned that many Canadians will embrace it because they’ll be happy to see a few hundred dollars more in their pockets and won’t bother to do the math and find out just how puny their share will be compared to the $5,000 or $6,000 in annual tax savings (the basic technical maximum) that will go to the very top wealthiest families.
Macdonald is highly critical of the Harper government’s fiscal management. “The Conservatives cut down revenues in an upswing and then when the downswing comes, they have fewer revenues to deal with the downswing. We are now less prepared for the next recession than we are now because of cutting back on revenues.
“We don’t have to spend $1.7 billion on cheques to the wealthiest senior households,” he continues.“ “We could spend that on eliminating seniors’ poverty in Canada. That’s worth about the same amount. That’s what’s incredible about this. These are expensive, big, tax breaks. Giving it to people who need it the least is perverse.”
Until the 1980s, the single-earner family was much more common. And Canada, compared to other OECD countries, was about average in terms of female workforce participation rates.
“But now in Canada in particular, we have one of the higher participation rates among women in the developed world, so there are a lot more women working in Canada than in the US, or Japan or other developed countries.”
The choice of who will get access to the Conservatives’ income splitting plan is itself interesting, Macdonald continues. “Why don’t all sole earner families get access to it, not just families with children under 18?” he wonders.
“This implies that you’re supporting a particular type of family, which in itself is a bit of an anachronism going back to the 50s and 60s and the popular U.S. TV show Leave It To Beaver where Mrs. Cleaver stays home and looks after Mr. Cleaver, the children and the home,” he continues.
“But this isn’t the kind of family we have any more. It’s actually quite rare to find families where you have one person who stays home for more than say a year, when children are pre-school, “Macdonald says.
Income splitting for families with children “will almost certainly encourage a lower female participation rate in the workforce. It’s designed to do that,” he warns. “And to encourage a certain type of family – the father as ‘breadwinner’ and the mother at home in the kitchen with the children.”
This is the bone the Conservatives intend to throw to their large social conservative family values REAL Women base. But it ends up creating decidedly few ‘mom and apple pie’ outcomes.
“If a husband dies or divorce happens, all of a sudden this (income-splitting) tax break is withdrawn, “MacDonald continues.
Neither of these two “tax breaks” do anything to address the biggest poverty problem – older women whose husbands have passed away. “Once that happens you don’t have access to the pension splitting income at all, so in large part you’re left benefitting wealthy senior families where you’ve got both a man and a woman still alive,” he says.
Macdonald notes that poverty among seniors is almost entirely restricted to single or widowed women living alone, often never having had a job or a pension, probably never having paid into the Canada Pension Plan and therefore often solely reliant Old Age Security and the Guaranteed Income Supplement.
The Harper government’s income splitting plans leave them completely out in the cold.
Another study by economist Andrew Jackson and researcher Jonathan Sas for the Broadbent Institute, published in the online newspaper iPolitics.ca last October, echoes Macdonald’s findings.
The maximum income-splitting benefit of about $6,500 per year would go to the top income families, those in which one partner has an income of $50,000 over and above the 29 per cent top tax rate threshold of $135,054 (that is, more than $185,054) and the other partner has no, or very low, income.
This family would be able to transfer the full $50,000 of income from the higher to the lower income spouse, who would then pay tax on it at a rate of 15 per cent instead of the top 29 per cent rate.
The authors note that the target for this very significant tax loophole is “blatantly narrow: two-parent, single-earner families with children. They are now very uncommon in Canada; less than one in five (18.4 per cent of families) with children have just one earner.
A detailed analysis for the C.D. Howe Institute found that 40 per cent of the benefits of family income splitting would go to families earning more than $125,000, while the CCPA’s David Robinson calculates that 61 per cent of the benefits would go to families earning more than $100,000.
The C.D. Howe Institute’s Alexandre Laurin and Jonathan Rhys Kesselman estimate the 2011 cost of income splitting to the federal government at $2.7 billion. If the provinces are included, the cost rises by at least 30 per cent.
$2.7 billion amounts to 10 per cent of the annual $30 billion cost of the Canada Health Transfer and almost 25 per cent of the annual $12.2 billion price tag for the Canada Social Transfer.
At root, the Conservatives’ brand of income splitting is simply grossly unfair and unjust. The vast majority of Canadian families with children earn less than $43,561 and would see no benefit at all.
Of even greater importance, income splitting rolls back the clock on gender equity, deliberately increasing the inequality of economic opportunity between men and women.
Frances Russell was born in Winnipeg and graduated from the University of Manitoba with a Bachelor of Arts degree in history and political science. A journalist since 1962, she has covered and commented on politics in Manitoba, Ontario, B.C. and Ottawa, working for The Winnipeg Tribune, United Press International, The Globe and Mail, The Vancouver Sun and The Winnipeg Free Press as well as freelanced for The Toronto Star, The Edmonton Journal, CBC Radio and TV and Time Magazine.
She is the author of two award-winning books on Manitoba history: Mistehay Sakahegan – The Great Lake: The Beauty and the Treachery of Lake Winnipeg and The Canadian Crucible – Manitoba’s Role in Canada’s Great Divide. Both won the Manitoba Historical Society Award for popular history.
She is married with one son and two grandsons and lives in Winnipeg.