Busting income splitting myths

IMFC 25 June 2014
Who knew tax policy could be so … exciting? Partisan politics have pulled income splitting into the stratosphere of political bickering.

The Conservatives had made income splitting an election plank in 2011, to be implemented when the budget was balanced. With balanced budgets purportedly upon us, many eagerly welcomed the prospect. Then, at the beginning of 2014, this hope was called into question when the late Finance Minister, the Honourable Jim Flaherty, voiced doubts. What followed was a smear campaign of the policy, led by a rather odd alliance of political and interest groups.

Income splitting isn’t new, neither is it a partisan issue. In fact, it is tax policy  the Liberals subscribed to under the Carter Commission back in the late 1960s. When the Conservatives raised it in 2011, the main Liberal complaint was about the delay in implementation.1 Across the globe, countries like France, Czech Republic, Poland, Germany, Ireland, Luxembourg, Switzerland and the United States have all adopted it.

We acknowledge there are other ways to achieve the goal of substantive tax relief for families. These are typically more expensive and difficult in the short term, but also worth considering. But first of all, let’s debunk the many fictions about income splitting.

In this paper, various respected Canadian authors and thinkers of differing backgrounds and viewpoints confront common myths around income splitting.