I was surprised to see Finance Minister Jim Flaherty this week stepping out in the unlikely role of Canada’s Erin Brockovich – but there he was, speaking truth to power. The strangest part of it being that the minister was speaking truth to his own power.
Mr. Flaherty has been Prime Minister Stephen Harper’s Minister of Finance as long as such a position has existed and yet, on Wednesday, the day after presenting his 10th budget for the Conservative government, he appeared to go rogue on Mr. Harper’s longstanding promise to implement income-splitting.
He said the plan, heralded by the Conservatives in 2011 as “an historic step forward to achieve greater fairness for families,” needed to be given a “long, hard, analytical look” by experts (the policy apparently having been initially crafted by cursorily glancing fairies). “Because I’m not sure that, over all, it benefits our society.”
Mr. Flaherty said what many experts have already concluded: “Income-splitting for families benefits some parts of the Canadian population a lot and other parts of the Canadian population virtually not at all.”
Any policy that’s essentially a mash-up of babies and lower taxes was going to get a sympathetic hearing. Both are generally counted as blessings. Throw in the word “family,” as in “Family Tax Credit,” the name the Conservatives have given this promised initiative, and normally sensible people can grow weak at the knees.
The policy would allow couples, with at least one child under 18 to shift $50,000 worth of income from one partner to another, thus benefiting from lower tax brackets and lessening the tax burden for the family as a whole. It’s a promise that has been held out to Canadians like a carrot on a stick – something families will receive once the budget has been balanced – but, on close examination, it’s a strange carrot, possibly a lemon.
If indeed this credit aims to help children, it’s a roundabout way to go at it. After all, under this plan, a family with one 15-year-old child benefits as much as the family with three children under six, provided both family units have the same income, divided the same way.
If that family caring for that one 15-year-old were to consist of one parent earning $200,000 a year and one parent earning nothing, that family would benefit to the tune of around $6,500 annually.
Why this family is more in need of relief than one in which both parents earn $50,000 individually and wouldn’t benefit at all, I don’t know. The single parent earning $50,000 would be plumb out of luck.
The family with a $50,000 partner and a partner earning nothing, whether they had one child or four, would benefit to the tune of about $500 – as would, the C.D. Howe Institute concluded, about half the families who even qualified. There’d be no benefit at all to about 85 per cent of Canadian households, and it’s estimated the Family Tax Cut would cost a whopping $2.7-billion or more in lost revenue.
If the concern is helping people to raise children, increasing the existing child tax benefit would be a more equitable way to achieve this end. If, on the other hand, the Family Tax Cut is about the supposed unfairness of taxing single-earner families differently, if it aims to address the fact that a family in which one member earns $100,000 a year pays more in taxes than a family in which two partners earn $50,000 each a year, then whether this couple has any children ought to be irrelevant. I wonder how those seeking to be taxed as a single entity would take to having that entity allowed just a single vote. But then this plan was never about getting fewer votes.
Families, and the care they provide, come in many forms and, if Canada does end up with $2.7-billion to burn, why not just lower taxes for the middle class across the board?
Some have speculated that Mr. Flaherty’s off-message message was in fact calculated to distance Mr. Harper from a now-inconvenient campaign pledge. In this scenario, the public will soon learn that Mr. Flaherty, like Nigel Wright before him, “betrayed” Mr. Harper – who is, after all, but a naive, young country economist all too willing to accept the merits of a Family Tax Cut that doesn’t hold up under scrutiny.
Mr. Harper could then do an about-face on his election promise (a promise we’d be assured was made in good faith) before throwing it on the scrap heap beside those untaxed income trusts, those fixed election dates and the ... oh, what was it called, again? How quickly one forgets ... oh, yeah, the Senate.
The truth, I suspect, is Canadian-style, less House of Cards, more Beachcombers. Nothing planned but perfectly good ministerial wreckage won’t be allowed to go to waste.