Frances Woolley is a professor of economics at Carleton University
Conservative leader Stephen Harper is expected to announce some family friendly tax proposals today.
Let's consider two families:
In one family, Ruth has a full-time job that pays $110,000 a year, and Phillip is a home maker. The family has no child care expenses, and doesn’t go out for dinner – mostly because they don’t want to, because the meals that Phillip makes are better and healthier than restaurant food. When work needs to be done on the home -- painting or carpentry -- Phillip takes care of it. On the weekends, Ruth and Phillip have time for family and friends and doing things they want to do.
In another family, Sebastian has a full-time job that pays $60,000 a year, while Dominique earns $50,000 a year, also working full-time. Sebastian and Dominique have a lower standard of living than Ruth and Philip for two reasons. The first is that they have more expenses: child care, as well as two people’s employment expenses - clothes, transportation, and so on.
The second reason is that Sebastian and Dominique have less time for household work. There are only so many hours in a day. A person who is spending more time in paid work has less time for other things. That means less time for work in the home, including taking care of children, or less leisure, or both.
Because work in the home produces things of value, families like Ruth and Phillip have a higher standard of living, all else being equal, than families like Sebastian and Dominique.
The basic principle of our tax system is that people pay taxes on their income. Earning $100 of value cleaning your own house generates income. Even though that income is in-kind, non-measurable, and non-taxable, it’s worth just as much as $100 earned by cleaning someone’s home.
If we accept the basic principle that people with more income should pay more taxes, then one-earner families should pay more taxes than two-earner families with the same amount of money. The one-earner family’s income -- once we include the value of work done around the home -- is higher than the two-earner family’s.
That’s the way our tax system works at present. Because Canada’s tax system is progressive, higher income earners like Ruth pay a higher average tax rate than more moderate income earners like Sebastian and Dominique.
But what if families with children were allowed to split their income? If Ruth could say “I’m giving some of my income to Phillip for tax purposes,” Ruth and Phillip would be taxed just like Dominique and Sebastian. At 2010 tax rates, that would save them $3,989 per year.
People sometimes think “the work done by parents who stay home looking after their children is valuable, therefore those people deserve a tax break.” They’re already getting an enormous tax break. They’re getting thousands of dollars worth of in-kind income – the value of the work that is being in the home – and not being taxed on it.
Mommy Wars that pit at-home mothers against working mothers and women against women are bitter and destructive. If we want to support families with children, then we can just introduce tax measures that support families with children, for example, an enhanced child tax amount. It’s that simple.
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