velvetpage: (cat in teacup)
[personal profile] velvetpage
A friend posted earlier today about the need to leave the city where she and her family make their home, because it is not possible to live on one income there. She pointed out that if the Conservative government comes through with their plan to allow income splitting, it might mean they could stay put.

I knew almost nothing about this, so I did a bit of research. http://www.cbc.ca/money/story/2006/11/21/incomesplitting.html

Basically, income splitting means couples would file one tax return between the two of them, rather than filing separately as individuals. For couples where both parties earn around the same amount, this wouldn't make a difference, but for couples (like me and Piet) where our incomes differ by quite a wide margin, it would substantially reduce our tax load by taking one into a higher tax bracket but the other into a much lower one.

The research I did suggests that for this to benefit a couple, the difference in their incomes has to span at least two tax brackets. So, the difference between my income and Piet's isn't quite big enough; if it were added together and split in half, we'd be paying slightly more than if we each pay separately. However, if my income went up by another couple thousand dollars, it would benefit us to the tune of several thousand dollars' savings.

The main argument against it is a feminist one: it would make it harder for women to leave when their income was that much more closely tied to their husband's, when he presumably makes more. (That's a pretty big presumption, actually.) I don't really see the benefit of this argument, actually; it seems that this tax measure reflects the way most couples actually live - that is, pooling a great deal of their income, if not all of it, and paying the bills out of the common account. If that's the way couples are handling their finances already, then changing the tax system to reflect that shouldn't have much effect on her ability to dissolve the arrangement. As a safeguard, the joint return should include the amounts that are actually being pooled, so that, if there is a need to split them later, it is known how much came from each party.

Edit: a good argument against, here: http://qnc.queensu.ca/story_loader.php?id=45648d153a937

So, everyone, putting aside the party aspect for a moment (because "I don't trust this government to do anything worthwhile" is rather counter-productive to this debate) is this a good idea? Why or why not?

Re: I don't get it.

Date: 2006-12-12 10:25 pm (UTC)
From: [identity profile] velvetpage.livejournal.com
In major cities, it's quite possible that the lower income would be outweighed by, in particular, daycare costs. If you're paying a thousand dollars a month per child, have two children, and your after-tax income is below $25 000, you're working to pay the sitter.

I should point out that this doesn't have to be limited to traditional (i.e. nuclear) families. Gay couples would qualify, common-law couples would probably qualify, and there was one suggestion that single parents of kids old enough to file their own tax return could also benefit.

Re: I don't get it.

Date: 2006-12-13 02:30 pm (UTC)
From: [identity profile] neosis.livejournal.com
I suspect this program will, eventually, lower the demand for day-care spots and potentially lower the cost of daycare spots. Though, I'm not sure if daycare prices are cost-driven or demand-driven.

Re: I don't get it.

Date: 2006-12-13 04:33 pm (UTC)
From: [identity profile] velvetpage.livejournal.com
Both, but cost more, because many daycares are non-profit or very-slim profit. Still, when cost includes expensive real estate in major cities and the employee expenses to get the right ratio of kids to caregivers (seven to one, for kids eighteen months to three years) not to mention all the toys, food, and safety equipment - yeah, it's expensive to run a daycare.

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