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Modern economic theories and CANADA!
Richy
Registered User regular
Registered User regular
Given the relative success of economic threads around here and the lack of Canadian content on the forum, I've decided to start a Canadian economy thread.
The topic at hand is the likely move by the federal government to allow income splitting (Toronto Star article).
What is income splitting: Basically, it means that couples can split their joint income equally between the two of them for tax purposes. Instead of having, say, one family member earning $60k and the other $20k, the tax form will show each one earning $40k. The lower-earning family member will pay more taxes, but the higher-earning one will bay much, much less, so overall the family will save money.
What this means is that families in which one partner earns a lot more than the other will save a lot on taxes. The government will lose an estimated $5B in income taxes, but they can afford it, what with the $13B of surplusses they had last year. Families in which both partners earn the same and single people won't benefit from this move, but they won't be penalised either.
Income splitting is already in use in the USA as well as European countries such as Germany, Switzerland and France.
Of course, any tax move has a social impact too, and social groups are worried about this one. They say that, since women typically earn less than men, this change will be an insentive against women joining the work force.
So... discuss. Do you favour or oppose the move, and why? What do people in income-splitting nations think?
I find myself in favour of the move. I was raised by a stay-at-home mom, and I've seen the amount of work she has to do around the house, while my dad had to take extra work contracts to get money for the family. Come tax time, we were penalised, as we had one high-earner and one family member with $0 income. I never liked that, as I feel this family setup was very beneficial for us kids and should be, if not encouraged, then at least not punished. Income splitting, although it comes too late for my family now, would benefit other families like my own and legitimize the work of stay-at-home parents.
On the question of whether it has a negative impact on women... well, given the high number of women I see studying in important fields such as medicine, engineering, actuariate science, and so on, which will give them high-earning and rewarding carreers in the future, I just can't imagine this being a problem for the upcoming generation.
The topic at hand is the likely move by the federal government to allow income splitting (Toronto Star article).
What is income splitting: Basically, it means that couples can split their joint income equally between the two of them for tax purposes. Instead of having, say, one family member earning $60k and the other $20k, the tax form will show each one earning $40k. The lower-earning family member will pay more taxes, but the higher-earning one will bay much, much less, so overall the family will save money.
What this means is that families in which one partner earns a lot more than the other will save a lot on taxes. The government will lose an estimated $5B in income taxes, but they can afford it, what with the $13B of surplusses they had last year. Families in which both partners earn the same and single people won't benefit from this move, but they won't be penalised either.
Income splitting is already in use in the USA as well as European countries such as Germany, Switzerland and France.
Of course, any tax move has a social impact too, and social groups are worried about this one. They say that, since women typically earn less than men, this change will be an insentive against women joining the work force.
So... discuss. Do you favour or oppose the move, and why? What do people in income-splitting nations think?
I find myself in favour of the move. I was raised by a stay-at-home mom, and I've seen the amount of work she has to do around the house, while my dad had to take extra work contracts to get money for the family. Come tax time, we were penalised, as we had one high-earner and one family member with $0 income. I never liked that, as I feel this family setup was very beneficial for us kids and should be, if not encouraged, then at least not punished. Income splitting, although it comes too late for my family now, would benefit other families like my own and legitimize the work of stay-at-home parents.
On the question of whether it has a negative impact on women... well, given the high number of women I see studying in important fields such as medicine, engineering, actuariate science, and so on, which will give them high-earning and rewarding carreers in the future, I just can't imagine this being a problem for the upcoming generation.
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See, that what bothers me most. When I heard that this tax plan was supported by Focus on the Family and REAL Women and groups like that. I felt like I was approving a plan for superior airplane piloting schools that had the backing of Al Qaeda. That is, the plan itself looks good, but when you realise who backs it you can't help but feel like there's a very nasty ulterior motive you're completely missing.
And I also have no idea which provinces, if any, are community property states.
The ulterior motive is plainly that they want to encourage women to assume traditional roles in childbearing and child-rearing, and remove them from the workforce. Also, probably to encourage marriage in general (income splitting benefits both parties if there's any disparity between paychecks, assuming a progressive tax).
Maybe you consider this a fair treatment, so maybe it's worth supporting regardless of its sponsors or intent.
As for income splitting, I don't really care. If you aren't going to do it, though, you sort of have to allow a stay-at-home mom with a millionaire husband to file for unemployment and welfare since, as an individual, she has no income. But realistically that isn't what you want to do. The flipside is that you also don't want to tax her as an individual, either.
It does seem like a positive change overall, but like Richy said, the backing makes my spidey sense tingle.
Rather the opposite: women will be less likely to take low-paying jobs in order to create a wider gap between them and their husbands.
The argument, or at least the one that I understood and that kinda made sense, is that women enter the workforce at a lower salary than men. So given the choice between a boring low-paying job or tax breaks through income splitting, they'll pick the second. Which means less women in the workplace and is a step back for feminists.
As I said in my OP, this argument kinda breaks down when you realise the quantity of women studying in high-demand fields and who will have high-paying jobs in the future. Given the choice between cool high-paying jobs or tax breaks if they don't work, I doubt that many women will pick the latter. In fact, given that in many such fields the number of women students exceeds the number of male students, it wouldn't surprise me to see the opposite situation arise, with women being the high-income bread earner of the family and men being the stay-at-home parent.
...call me crazy, but I just can't imagine an entire generation of women dropping out of university to become cheery, 1950's-style housewives.
But you can imagine a stay-at-home mom declining to enter the workplace as an admin because financially, it would be a wash.
How do they get ass-raped? I'm under the impression that if two married people earn the same, then each spouse is taxed on their salary and no income splitting occurs. Which is the same as if they weren't married. I don't see where the ass-raping comes in?
In fact, since families already benefit from various family-oriented tax policies and accounting loopholes, I'd say it's the single folks who get ass-raped here.
EDIT: Re-reading my post, I just realised I mention ass-rape once per line while discussing income tax policy. Awesome!
It used to be that married people got lower standard deductions than single people, which resulted in more of their income being taxed, though I'm pretty sure that's been changed. But if you're married, you pay more taxes than if you're single, assuming your incomes are similar. Which is why it's so retarded every time someone mentions the "marriage tax break". For the majority of couples, getting married results in more taxes.
Tying this back in to the income splitting thing, income splitting only makes sense if you're going to tax married folks at a higher effective rate than single folks. Ideally (to me, and all other right thinking people
If I remember correctly, married couples get a lower per-person deduction but the option to employ income-splitting, thus giving a net benefit to couples with a strong income disparity. I think the statistics were that about half of married couples benefitted under the old structure.
Anyhow, I thought they changed the tax code in 2003 to "close" the "marriage penalty". Am I incorrect?
Like I said, the fixed the standard deduction disparity. But if you and your spouse both make $40k a year, you pay a lot more taxes if you get married, because you're taxed as a single $80k person. You can choose to file separately or together, which sometimes makes a small difference, but in the end you pay more.
I don't feel particularly strongly about it, however.
Universal healthcare
Gay marriage
Decriminalized marijuana
And, apparently, a massive budget surplus. That sounds pretty nice.
Anyway, back to the issue at hand. It some ways it's fair - shouldn't a family earning $100,000 a year be taxed the same amount regardless of how it's earned? It could be an 80/20 split or a 50/50 split. Why should the family with the 80/20 split end up paying more taxes?
Am i wrong in believing that this law is gender neutral? A male could stay home as well and have his income split with his high earning female counterpart?
Firstly, it's a tax cut for people who get married; I think, as ElJeffe said, your marital status should not affect your tax status.
Secondly, it's a tax cut which will disproportionately favour the wealthy, since in a ruling class family the pattern is likely to be $100k/$0, while in a working class family where both partners have to work in order to get by, the pattern is more likely to be $15k/$10k or similar. I don't know that much about the Canadian economy so I'm just inventing numbers, but that's what I'd expect here in Oz.
And thirdly I'm against it because it just generally goes against the principle that income tax should be the primary form of taxation because it's progressive. Cutting income tax is always a bad idea as compared with cutting other, non-progressive taxes.
There should be a limit on how much you can split to avoid the wealthy getting a gigantic tax cut. Even still, there are plenty of middle class families where one partner earns significantly more then the other (or the other partner stays home). This would help them a great deal.
took out her barrettes and her hair spilled out like rootbeer
I'm against it for more practical reasons. The government can't treasury can't afford to lose upwards of 5 billion dollars. That money can be used much better elsewhere - paying down the debt, increasing transfer payments to the provinces, social programs, increased military spending, foreign aid...Maybe even on a plan to implement Kyoto. Moreover, I don't know how the Tories will be able to do this, and cut the GST again without cutting more Federal Government spending.
This smacks of vote buying in my opinion. We're headed for another election the moment the Grits elect their new leader, and the Tories need something - anything - to appeal to the suburban Ontario vote they so covet.
To answer the question of why I asked this.
In a community property state it is assumed that all income is a joint effort on the part of the couple and therefor ought to be taxed as if they were two people making equal amounts of money. Their real value income is this number by this number according to law, there is no reason it should not be accounted for in terms of taxation.
But why would you preferentially want to help a family earning 60/20 over a family earning 40/40? Or 30/10 vs 20/20? Unless you want to discourage women from joining the workforce, or encourage people to get married, I guess.
It's not so much helping a family earning 60/20 over one earning 40/40, as it is being fair. There's no real reason two families earning 80k should pay different taxes. There's no reason to punish a family with one hard-working earner at 80k and a stay-at-home parent comparatively to a family earning 40/40.