There are some pretty big ‘ifs’ attached to the announcement made by the Conservative Party today that they are planning on allowing families with children split up to $50,000 of income for federal income tax purposes. First, the Conservatives will have to get re-elected with a majority because they are proposing to implement the promise in their “next full term of office”. Second, the Family Tax Cut will be implemented when the budget is balanced, which according to the Government’s own projection in the latest budget won’t be any time before 2015-16.
The backgrounder accompanying the announcement provides two examples of families bringing in the same total household income facing significantly different tax burdens. A family with two parents earning $60,000 and $20,000 will pay $1,292 more in taxes than a family with two parents earning $40,000 each. A single-income household with an annual income of $70,000 will pay $1,992 more in taxes than a family with two parents earning $35,000 each. The Family Tax Cut proposes to eliminate the disparity in tax burdens by allowing couples with dependent children under 18 years of age to share up to $50,000 of their household income for federal income-tax purposes.
The Conservatives say that tax cut will save 1.8 million Canadian families an average of $1,300 per year. The biggest winners will be families with a stay-at-home spouse with a household incomes exceeding $100,000. For instance, a single-income family with a stay-at-home spouse and a household income of $200,000 can save roughly $7,000 in federal income taxes by splitting $50,000 of income. Of course, before they can bank these savings, the Conservatives have to win a majority and balance the budget. Both these conditions may never be fulfilled and in any case, 2016 is another five years away.