How Ottawa should help parents with the cost of raising children is shaping up as a key election issue with the Conservatives setting the stage to announce tax cuts for families this fall.
The government has already announced two tax cuts over the past two months: an employment insurance tax credit for small businesses and confirmation that the government will double the amount that parents can claim for the Children's Fitness Tax Credit.
The biggest remaining tax cut promise from the Conservatives' 2011 election platform is a pledge to allow families with children under 18 to split up to $50,000 in income for tax purposes, but the government's position on the issue has been murky ever since former finance minister Jim Flaherty questioned the merits of the policy in February.
Supporters of the promise say it would benefit families where one parent stays home or works part time. In contrast, NDP Leader Thomas Mulcair unveiled a central plank of the party's election platform Tuesday with a proposal to transfer $1.9-billion a year to the provinces to fund 370,000 childcare spaces at a target price for parents of $15 per day.
Finance Minister Joe Oliver, who is working on his first fall fiscal update and first federal budget, said Tuesday he's planning to cut taxes for Canadian families but declined to say whether that would involve income splitting.
"I can also reaffirm that we will respect an important election commitment we made as Conservatives to lower taxes for Canadian families that work hard. I look forward to sharing more details with you in the fall fiscal update," Mr. Oliver told reporters in Toronto after a meeting with private-sector economists.
When asked directly whether there would be tax measures in the update, Mr. Oliver said: "There will be tax relief."
However, a spokesperson for the minister said later that Mr. Oliver was not intending to say definitively whether tax cuts would be delivered as part of the fall fiscal update. Mr. Oliver also declined to set a date for when he will deliver the fiscal update. He has previously suggested it would be released in late October or early November.
The juxtaposition of Mr. Oliver's tax cut promises and Mr. Mulcair's big spending pledge offers a clear preview of the next election campaign, said David McLaughlin, a former chief of staff to Mr. Flaherty. Mr. McLaughlin said the government is spreading out its tax announcements for maximum exposure. Announcing tax cuts ahead of next year's budget also sets up the possibility of promoting the measures with taxpayer-funded advertising in the run-up to the election, he said.
Conservatives clearly want to run on a platform of tax cuts and good economic management, but Mr. McLaughlin said they will need to deal with the criticism that income splitting will provide big tax breaks to high-income earners.
"I think that it's not as clear a winner politically as may have first been anticipated," he said. "It's the details."
The Conservative income-splitting pledge poses a political challenge for the government in that a recent report by TD Economics estimates it would cost more than $3-billion a year in forgone revenue. That would limit the government's ability to make new promises in the form of tax cuts or new spending. The promise is popular with many in the Conservative caucus, who were encouraged when Prime Minister Stephen Harper told MPs in late February that "income splitting has been a good policy for seniors in Canada, and it will also be a good policy for Canadian families."
Employment Minister Jason Kenney has been among the most vocal supporters of the income splitting pledge. Earlier this month he continued to promote the promise.
"In any tax cut, there's going to be precise design issues and that is for the minister of finance to do in the budget, but we made a commitment to Canadians in 2011," he told reporters. "We keep our commitments."
With a report from Dave Parkinson in Toronto