Work for two - pay taxes for three

Tax policies are preferential. There's no arguing about that. The rich is taxed at higher rate than the poor. We pay no sales tax on bread but cigarettes and alcohol are overtaxed. Students and seniors receive tax breaks that are unavailable to other taxpayers. Most of the tax rules are quite reasonable. But why should single-income families pay more tax than the dual-income families with the same income?

Unfortunately that's how the income tax works. Spousal exemption is 15% less than personal exemption and tax brackets are not doubled just because one of the spouses is working for two. Thus even the low income families with single income end up paying 15-20% more taxes than dual income familes. Middle-class families often end up paying about 50% more in income taxes than dual-income families where income is evenly split between the partners. Because of higher tax rates as well as various high-income surtaxes charged by the provinces, a family member who chooses to work for two, often ends up paying taxes for three.

That's how it's been for decades. It wasn't until last fall when the government finally announced its plans to put an end to the discrimination by allowing income splitting. If implemented, spouses will be allowed to attribute their income to each other, so they could fully benefit from the same lower rates and tax credits that are available to the dual income families. At first, income splitting will only be allowed to seniors but hopefully the program will eventually be extended to benefit the younger generations as well. This will end the decades-old discrimination against single income families.

Unfortunately the opposition doesn't support the proposal. The NDP claims it will be nothing but a tax cut for the rich. Pardon me? Did any of them bother to do the math? Let's take a family with $50,000 income. A dual-income family where both spouses make $25,000 a year pays $2256 x 2 = $4512 in federal taxes. If however one of the spouses decides to stay home while other takes a full-time job which pays $50,000, their household income won't change but their federal taxes will go up to $5604. If the couple lives in New Brunswick, their provincial taxes will increase from $2952 ($1476 x 2) to $3916. Tax cuts to the rich? A family that makes $50,000 can hardly be considered rich. So why should they pay extra $2056, just so one of the parents could stay at home? We've heard more than enough about how expensive it is to send a child to the daycare. But it turns out that staying at home with the kids can also be quite expensive.

When the Conservative party announced its plans to introduce a $100 per month childcare benefit, many argued it's too little to cover the daycare cost and not enough to reward a stay at home parent. Well, we've just seen how income splitting could nearly triple the amount. Instead of mailing a larger check every month the government could simply let the families keep the money in the first place. Isn't that a far more reasonable approach?

As the government prepares the next budget, it seeks public input through the pre-budget consultations. If we want the discrimination against single-income families to end, we better speak up.