New federal finance minister Joe Oliver isn’t tipping his hand yet on how the Tories will proceed with a controversial pledge to allow parents to split income for tax relief.
That’s a departure from predecessor Jim Flaherty, who voiced public misgivings about the fairness of a lucrative income splitting tax cut for families that particularly targets households with stay-at-home spouses. “We’re going to be guided by our platform,” Mr. Oliver told The Globe and Mail in an interview.
He suggested that the pledge is still open to adjustments. The March 2011 promise made by the Tories would allow couples with children under 18 to split up to $50,000 of their income each year for tax purposes – reducing what the household would pay Canada Revenue Agency. It was to take effect when the federal budget is balanced, now forecast for 2015.
“This is a complex issue and I’m going to get into the details of it,” Mr. Oliver said.
Mr. Oliver added: “With that basic principle in mind, I’ll be taking a look at this issue in all its complexity.”
An internal debate within the Conservative government has begun over the 2011 election pledge, a niche tax break that’s been official Tory policy for more than eight years.
Mr. Flaherty drew this debate out into the open last month when he questioned the fairnesss of this relatively narrowly cast political pledge. According to the C.D. Howe Institute, 85 per cent of Canadian households would gain nothing from the measure.
Employment Minister Jason Kenney is one of several cabinet ministers, including Treasury Board President Tony Clement, who have made it clear they believe the Conservatives should make good on their promise.
The challenge for the Tories is reaching a consensus on how to proceed without alienating key supporters. Income splitting has tremendous symbolic significance for some Conservatives who are upset about what they consider a bias in Canada’s tax system against stay-at-home spouses. It became party policy in 2005.
Government sources have previously said the pledge could be trimmed to make it less generous a tax break or to modify it in other ways. That’s because, as written, the promise would eat up close to half the projected budget surplus but deliver insufficient political benefits – with an impact felt by less than two million households. Such a rewrite of the promise would mean the Tories would be fulfilling the spirit of the pledge if not the letter of it.
Mr. Harper has already made it clear he hasn’t forgotten the campaign pledge.
“As I said during the election campaign, we think income splitting would be an excellent policy for Canadian families,” the Prime Minister told MPs, noting the government has already enacted the policy for seniors.
The measure was projected to cost $2.5-billion but benefit 1.8 million households – saving these families $1,300 on average, the Tories said. Sources say with the passing of time the cost would now be closer to $2.7-billion.