Daniel Miller is a Physiatrist (Physical Medicine and Rehabilitation) in Lethbridge, Alberta
Income splitting has come under attack by the current Federal Liberal Government as an unfair tax advantage for certain individuals and several proposals put forward to eliminate certain “tax loop holes” may have a further reaching impact that revenue generation and impact our charter rights. We shouldn’t be discussing tax loop holes, but rather the effects of income splitting being a charter right for all Canadians. While I use the term marriage specifically, I would also include civil union and common-law partners to whom the same legal rights apply.
I recently met with my accountant to review the financial details of my medical practice. He told me and my wife that we would no longer be able to income split due to the proposed changes in Federal taxation legislation. My wife is my business partner, my office manager, fill-in receptionist, in addition to being my wife and mother of our 6 children. We are connected in everything. We have been married for more than 16 years, and she has been with me through all my training, which was all of our marriage to date. She has been raising our children, supporting me in my training, and is now my support as I practice medicine. I was told, she could be paid a “reasonable salary”. I asked myself what is a reasonable salary for this person? What is she worth? The small sum recommended did not seem sufficient . So, what is my wife worth if she is my partner in life? The only salary I think reasonable is the same as my own.
The Civil Marriage Act (2005) defines marriage as “the lawful union of two persons to the exclusion of all others.” I would suggest that this should further extend to all aspects of their life including taxation. That is the nature of the relationship. If one spouse has property the other spouse has the same legal rights to said property. Consider the statutes and regulations regarding marital property. Matrimonial property laws try to divide assets, properties, income or liabilities attributed to the union equally while maintaining the financial viability of both parties and their individual self sufficiency (according to The Divorce Act, Property Division and Debts, accessed September 10, 2017). If one spouse was a stay at home parent, that individual is entitled to 50% of the income of the other spouse, less child support. In divorce settlements where spousal support is to be paid by one spouse to the other, current taxation rules have spousal support deducted from the payor’s taxable income, while being declared as income by the payee. If you look at this for what it is, I believe it’s clear that fundamentally this is income splitting. And so, if you are required to split your income formally after a marriage is dissolved, why are you not allowed to split your income while you are married? Isn’t this a discriminatory application of taxation law against all married individuals and therefore a violation of our Charter rights?
As a specialist in Physical Medicine and Rehabilitation, I often see patients faced with the financial consequences of disability and witness the impact of disabilities on families. I am also keenly aware of the severe dichotomy between care of individuals dependent on general governmental supports where available compared with those with private insurance. I recently had a lovely woman in my clinic with a diagnosed condition that leads to progressive disability. She is ineligible to obtain disability insurance because she is a stay at home mom with no definable income. One of my preceptors would often ask “What is the most important factor in someone going home after a stroke?” His answer, “Whether they had a wife – not a husband, but a wife”. I can not emphasize enough how true this is. The primary income provider may have disability insurance to provide an income for the family while recovery is ongoing and if needed indefinitely. If the primary domestic care provider is affected, however, there is no way for any family to augment their current situation with additional in-house care supports for the children of the family because without the person has no definable income and therefore no disability insurance. Too often the disabled spouse will have to leave the family home to reside in an assisted care facility. I have seen the fear in the faces of mothers who have suffered a stroke during pregnancy as their husbands go back to work and they are left struggling to care for their young infant alone with limited supports. I think you will see that the opportunity to obtain disability insurance is essential in maintaining the security of the person guaranteed in our Charter of Rights and Freedoms.
How many domestic partners, mainly women, have foregone working or are only working part time and have foregone contributing directly to the Canadian Pension Plan in favour of raising children, yet volunteer substantially in the community and benefit society in many other valuable ways? Income splitting places a real and meaningful valuation of their efforts.
I can’t help but think about the impact income splitting would have for dependent partners in an abusive relationship, who stay because they feel they lack the financial resources to leave? How many women have been made to feel subservient to men because they lack a definable income? Income splitting negates this attitude, places real and meaningful value on the role women or primary domestic partners in the family society. Having years of defined income also allows women/domestic partners opportunity to obtain financial support immediately if they do need to leave the relationship for whatever reason. I think that universal income splitting may be the biggest policy change towards the equalization of the genders since the Suffrage movement and finally place men and women at equal positions financially.
Income splitting is not just about one individual paying more tax than another, it’s about equal rights for all who contribute to society. It’s about marriage rights and equality. It’s about empowering women and domestic partners to protect themselves from the very real dangers of disability and victimization. Income splitting shouldn’t be eliminated. Rather it should be extended to all Canadians.
And so, I ask the Honourable Prime Minister, Leader of the Liberal Party of Canada, a party reported to champion civil rights and equality, why are you eliminating a policy which advances equality, could mitigate the costs of severe disability and financial discrimination, and benefit all Canadian families? Why would you not extend this to all Canadians? Why do you support policies that discriminate against us?
A well-written and well-thought out article! My family raised me to be financially independent, but that is not a luxury everyone else has. Income splitting should not be eliminated. Canada needs to keep its civil rights and equality.
Hi Angela, Hi Ian,
Angela : I would like to stress that the original argument concerns fairness between people living in relationships under different circumstances. To bring in those who not in a relationship completely re-frames the debate.
That is a whole n’other thing, I will however say the following : Production requires labor, plant (invested capital) and raw materials. All three come at a cost.
Raw materials, must be purchased, or as in mining, royalties have to paid on their extraction to whoever owns the rights. Plant (buildings and machines) also have to be paid for. You can’t just come along and benefit from a fully functioning site without buying it (retroactively paying construction costs).
With labor however this is different. Workers start out as children. Children are brought to adulthood at great cost by parents. When an employer hires a worker, they are getting something enormously valuable for free, paying only the value of work done. This is like getting a fleet of vehicles, for free, and paying only the operating costs of same.
Now, as the capitalist benefits from the free arrival of adult workers (whereas slave economies require the employer to pay the price of the slave, which is nothing other than the cost of producing said slave from infancy to adulthood), so do consumers.
Everything that you buy is less expensive than it would be if someone were calculating the price of producing the worker. And all of that slack is being voluntarily taken up by the parents.
So whereas I would not like to speculate on who is better off in the final analysis (I am happy with the child-rearing role I have chosen), I can definitely affirm that non-child-rearing people are getting something (enormously valuable) for nothing, in the free arrival of labor.
And this brings me to Ian’s points (all entirely accurate by the way) :
It IS easier for a married couple to live on one large salary.
But if the aim is to have one stay-at-home-parent, then people are, by definition sacrificing that second salary no matter what their income level. And this is where we hit the borderline: There will be people who are just barely willing (and able) to choose the home-parent route, and there will be those, at the very borderline, who will forgo that possibility on the basis of those few thousands of dollars that income splitting would represent. that is : govt policy is to dissuade people from, on the borderline, from forming traditional two-parent families.
There is no way to escape this fact. Canadian political theory does not like child-bearing couples (they actually reduce a woman’s welfare when there is a visible boyfriend instead of encouraging the presence of a father), and they (especially) do not like child-bearing couples where one spouse is working and one spouse devotes themselves to parenting. It is as simple as that.
Income splitting is far from the only area where such regressive thinking applies. Consider home ownership and taxation. Bigger houses are taxed more because they are worth more. And the interest payments are higher on that higher capital.
So your two parent family, with one working parent (or two working parents for that matter), has decided to buy a more expensive (bigger child-friendly) house (with less money) because they intend to breed above the current standard. And their reward for this intense sacrifice and ultra-strict budgeting is to have municipal government charge them multiples of what one-child or no-child families pay for their condos.
And for society the result is free workers.
So no. This is not just about income splitting. Income splitting is only the cherry on top of the sundae. This is, as I pointed out in 2017, about killing the two parent nuclear family.
And for those who have read the literature, this assault is a basic tenet of Marxist ideology going all the way back to the nineteenth century. It is deliberate conscious policy.
Our leaders do not point this out, of course. They are, in fact, hoping that normal people will be just too dumb to figure it out.
Gordon Friesen, Montreal
I’ll admit I don’t have my mind made up on the merits of income splitting. I do see unfairness in who gets it and who doesn’t. As for your comparison of the family that makes 100K from one spouse vs the family making 50K from each spouse, there is a serious flaw in the logic. I say this from a place of understanding, having been in both positions. The 100k family comes from a place of relative luxury where one spouse can make the decision to stay home and live comfortably.
I have been there and enjoyed the benefits of one working parent with a 100K income and not putting my kids in childcare. I no longer have the luxury of that position, my wife and I have to both have to work, to bring in that same amount of money, which barely covers our costs of our modest lifestyle (we own a 65-year-old home and only one car). One of the considerations in having us both work is the idea that we now pay roughly 13,000 per year in childcare costs (and that is for only 1 child). When we had the decision to have one spouse working we weren’t burdened with this cost, now we pay a ‘tax’ of over 10% just because we both “choose to” work.
When I hear complaints about losing income splitting from a place of luxury (aka having the choice of a stay-at-home parent), it is difficult for me to empathize. We were better off (regardless of income splitting) when we made slightly less with only one spouse working.
On another note, with the analogy of divorce and the splitting of income. This is also incongruent unless the breadwinner is not allowing the spouse access to money earned. When we were a single earning family, all money was shared. It seems to me that the only reason for income splitting is for tax purposes. Otherwise, it looks like a personal issue of family finance and budgeting.
I will reiterate. I am not against income splitting, but some of the arguments I keep hearing for it seem to be built on some unstable logic.
For two years we had income splitting between spouses.
Thanks to Mr Harper.
And then Mr Trudeau took it away.
Two married (or not married) people making each 50 K will pay less tax than the same two people if only one is working and making 100 K.
There are no two ways around this. It is a deliberate swipe at spouses who believe their children’s education is important enough to take time off.
Stay at home Moms are also like Kulaks. The same mom on welfare would cost us an arm and a leg. And don’t even try to say anything disparaging about her. But if a person voluntarily leaves the workforce for the same reason and the initiative is fully funded by her spouse, the Canadian government sees fit to make them pay an extra penalty (above and beyond the sacrifice already implied in foregoing one salary).
As I said: really stupid antiquated ideology which, I might add, is being taught our children in public school as we speak.
Fell the Love
Gordon from Montreal
I realize that I’m coming to this conversation late, but I think it’s interesting that the term right has been used. I see income splitting as inherently discriminatory because it is a tax benefit that benefits only those in a relationship. This really hit home to me when I attended my first pension seminar and a gentleman next to me began to ask questions about how he could split his retirement income with his wife, who had a significantly smaller pension, lessening his tax load. It seemed wrong to me that he could pay less in taxes, from the same pension as me. His household, which consists of the same basic costs my household does, had two incomes contributing to it. Mine has one. I am single, no children. I have been paying taxes for 40 years, without any additional credits (other than my time in University), or ability to lessen my tax bill for having dependants, etc. I happily support my taxes going to programs like the canada child care benefit. I happily pay school taxes, although I have no children to benefit from them, and I happily accept that my taxes will go to health care for all, and safety nets through social assistance and Employment Insurance, even though I have never personally had to make use of them. We want a healthy, educated, productive society.
What I don’t accept is the notion that, when all else is equal (no dependant children) someone pay less taxes on their retirement simply because he/she is in a marriage or common-law relationship. I recognize what the initial intent in introducing this probably was, but believe that income-splitting unjustly favours those in relationships, for no good reason, or for reasons that don’t really apply anymore.
Income sprinkling is under attack as is income splitting. The new proposals to the tax regulations are trying to take that away. Income splitting between retirees is under attack. Income splitting for small businesses is also under attack. My thought is that income splitting should be available to all Canadians in a legally defined relationship. The CRA site is describing things as they currently are. Taking these tax breaks away is what Trudeau is trying to do.
You’re using the wrong term. Income sprinkling is what the law is about. This involves paying money to people who aren’t directly involved with the business. Income splitting is not being changed. People like seniors and those who make limited income can spilt their income. Up to 50 000.00. This Is all easily found on the CRA website. You need a new accountant.
Income splitting is not just about one individual paying more tax than another, it’s about equal rights for all who contribute to society. It’s about marriage rights
It is indeed about marriage rights. Specifically : it is about the right of people to be married and still be treated fairly by society. But that would be anathema to mainstream Canadian social planning. In short, you are forgetting the War on the Family.
Or to be more precise, you are forgetting the War on the Two-parent Nuclear Family.
Of course, this anti-family policy has shown itself (over the last half century) to be an economic and social disaster. The late Conservative regime actually made some tentative steps towards repairing the damage (including income splitting between spouses) but with a truly vengeful fury, our current government immediately reverted to the old orthodox anti-family dogma.
Just a few quick facts :
From a social perspective, the number one indicator of success, for children, lies in the presence of a stable, two parent (married) family. And the number one indicator for poverty is the absence of same.
From an economic view, the most dynamic part of our economy is made up of the kind of mom-and-pop businesses epitomized by your medical practice, but also represented by family farms, corner stores, mechanics’ garages, and so forth. These businesses produce citizens who are relatively well off, without being part of the economic elite. They are what was once called the “Middle Class”.
The War on the Family, is thus, also a War on the Middle class. Or perhaps, the war on the middle class is also a war on the family. The two have a chicken-and-egg relationship. Middle-class people produce stable marriages. Stable marriages produce middle-class status.
But classic Marxist dogma, as well as its’ modern victim-identity offspring, has no place for a middle-class. Marxist class warfare is between the Proletarian and the Capitalist. The moderately successful independent tradesman, merchant, or professional –the backbone of society– is simply ignored in this model. And real socialist regimes, true to that theory, actually have no middle-class. They only have room for a merit-based elite managing the labor of a huge working mass.
You my friend, are part of an embarrassing social phenomenon which has been theoretically and practically identified for extinction. Income-splitting would encourage more people to succeed as you have succeeded. And that must stop.
Instead of two married people running a business together and producing four, five or (in your case) six well educated kids, the tax code is deliberately set up to encourage the existence of, at best, two independent workers, who may or may not produce one or no kids, and at worst, only one worker and one (perhaps state-supported and desperately poor) single parent family, or even, no workers or families at all. In any case, there will be no significant private capital accumulation, and therefore no creation of small business, no middle-class. and thus, no challenge to the two-class state model.
Of course, in our strange, hybrid, half-Marxist system, the deliberate slow bleed-out of the middle class is not so obvious. For one thing, many of us recognize the benefits in dignity and self-worth which come from our middle-class family status and we are actively transmitting those values to our children. Absent actual laws against marriage and small business, we will obstinately continue on our course. And for another thing, government relies on our taxes. In the meantime, then, we are grudgingly permitted to exist, on condition of being willing to pay a significant penalty and jump through many other hoops.
But never forget : Marxist theory does not like you, Daniel. Your kind can not be encouraged. A more prosperous middle-class always equals less revolutionary pressure. Every non-victim makes a mockery of victim ideology. Like the Kulak small farmer class, wiped out in the Ukraine by Joseph Stalin, you are an enemy of the people, Daniel.
Sounds stupid, right ? Well, unfortunately, Canadian politics is based upon some really stupid ideology pickled away in the 1860’s and still being served up as gospel today.
Hope this helps.
Feel the Love,
Gordon from Montreal