Doing the splits
Three families weigh in on Tory income tax break
The federal Conservatives’ income-splitting plan came into effect this year. It allows the shifting of income, for tax purposes, from a spouse paying a higher tax rate to a spouse in the same household paying a lower rate.
Spouses with children under 18 years old can transfer up to $50,000 to the lowerearning spouse, to obtain a tax credit of up to $2,000.
The Star asked three Canadian families with children to tell us what effect incomesplitting is having on them. Daren and Linda Hancott Burnaby, B.C., parents of two Occupation: Daren owns a consulting company; Linda has a finance-related job at a local college Annual family income: About $90,000
One of the key reasons Daren Hancott supports income splitting can be boiled down to a simple notion: “If you make a promise you should keep it,” he said.
Hancott, 49, of Burnaby, B.C., and wife Linda, 51, expect to receive about $600 in tax savings under the Conservative government plan, because their youngest son Garrett is 15. Dyllan, their eldest, is 18 and doesn’t qualify.
Hancott has heard the argument that income splitting only benefits about 15 per cent of households in Canada — but that doesn’t faze him.
“Fifteen per cent is better than no benefit (for anyone),” he said. “It was a promise that was made, and when you make public promises, you should keep them, regardless of the percentage of the population.”
Hancott and Linda are middle-income, with yearly household earnings of about $90,000. So income splitting works for them. (Darren makes the larger amount).
They’ve owned their comfortable four-bedroom, detached home for about 14 years, and pay “manageable but high” property tax. Their boys take part in sports that include swimming and martial arts.
Linda was a stay-at-home mom for 15 years, looking after the boys and running the household. She recently returned to the workforce.
Daren argues that given “we’re still paying way too much tax as a society,” income splitting is welcome relief. “You’re taxed on everything from gas to ... vehicles you buy, people mowing your lawn, PST, GST.” Andy and Mary Pedersen Ottawa, parents of two Occupation: Andy is a spokesman for the National Union of Public and General Employees; Mary writes for television programs Annual family income: $170,000 When Andy and his wife, Mary, filed their taxes this year they realized they qualified for the new federal income splitting benefit — but they refused it.
That decision meant they had to pay about $1,600 more in taxes, but they stuck by their choice because they find the income-splitting plan “irksome” and unfair.
The couple believes taxes are a good thing because they pay for important services that benefit all Canadians.
Andy, 43, made more than $120,000 last year. Mary, also 43, made $50,000 last year. They have two children, Matilda, 7, and Max, 8.
Filing their taxes on their home computer using a Canada Revenue certified program this year, the couple were surprised to discover they qualify for income splitting.
“We inputted our information. (The tax filing program) asked us if we wanted to claim income splitting. We typed in the answer ‘yes’ to see what would happen. It showed us owing $900,” Andy said.
“Then I typed in ‘no’ to see what would happen, and it said we owed $2,500 in taxes for 2014.
“We pay less tax than the generation before did. Still we have taxes. When Mary and I realized we were eligible for another tax break — we claim child care expenses and other tax breaks — but this we thought sounded so incredibly irksome because it benefitted so few people.
“You have to be making serious coin to take advantage of this (benefit) and we didn’t feel good about it. We didn’t want to reinforce the notion that paying less taxes is always good. That was easy for us to decide.”
Andy reached out via Facebook to encourage other Canadians to follow what he and his wife did, but so far there have been no takers. They plan to turn down income splitting for as long as it’s around. Jesse Cullen and Savanah Watters Oshawa, parents of one Occupation: Jesse is president of his college student association; Savanah works part time at a restaurant Annual family income: About $48,000
Parents Jesse Cullen and Savanah Watters earn too little to see a major benefit from income splitting.
Jesse makes $33,000 a year and Savanah, his partner, makes about $10,000 to $15,000.
“We’re relatively in the same tax bracket, so there’s no benefit for either one of us to shift their income to the other one,” Cullen, 30, said.
Because they’re students, they can’t apply for income splitting even if they wanted to — but the policy still bothers Cullen.
Cullen said the forgone revenue from income splitting “would be better directed at increased health care spending, more money for social transfers to provinces, or developing a national child care program.”
He and Savanah share $90,000 in student debt. Their daughter Raelyn, 3, is in a subsidized daycare spot.
“Basically what they (the federal government) have done is masquerade their tax policy as social policy.”
He calls income splitting a throwback to a certain type of nuclear family.
“It encourages or incentivizes the type of traditional 1950s family, which is the Tory base at the end of the day.
“The spouse — typically a woman — who stays at home with the kids. That’s (the type of family) that disproportionately benefits from this.”