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August1991

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Canadian Finance Minister Jim Flaherty hinted on Tuesday that his next budget is unlikely to contain plans to allow retired couples to split their pension income to save on taxes, but said it was a worthy cause.

Flaherty said income-splitting, whereby a high-income spouse moves some or all of his earnings to the spouse who earns less to benefit from a lower tax rate, is not at the top of the tax-cutting agenda for the Conservative government's second budget, due next spring.

Reuters
Consider two couples with identical total incomes. One has a working spouse earning $80,000 a year and one stay-at-home spouse. The other has two working spouses earning $40,000 each. Even ignoring the presence of children, the one-earner family will pay $3,000 more in taxes. Put a few children in the mix and the gap can grow to as much as $5,000, depending on day care and other expenses. This is clearly unfair. Families with identical incomes should face identical tax bills.

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Conservative MP Garth Turner is pushing the federal government to allow seniors to split pensions — what might be considered the beachhead for the bigger issue of income-splitting for families. According to Library of Parliament calculations prepared for Turner, allowing families with children under 18 to split their incomes would cost the treasury $1.6 billion annually — a fraction of the roughly $5 billion that cutting the GST cost. Significantly, two-thirds of the benefits from income-splitting will go to two-income families, with the biggest gains delivered to the $60,000 to $80,000 family-income bracket.

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I have my own opinion about all of this, economic, political and even ethical.

But I'm curious to know what others think. (Hint of my first opinion: If you're single, and couples can split income, you'll bear a greater burden of Canada's collective expenses. But then, if you're single and you want a love match - regardless of sex or even gender - tax splitting might be fair.)

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How can I resist?

On the surface, income splitting seems kind and fair but it is not nor is it objective. It excludes the household of two old spinster sisters who spent their entire lives taking care of their parents who are now dead and their younger orphan siblings who are now grown up and married and left the house. Discriminating based on marital status makes no sense -- unless you want to be unfair or you want to buy votes.

Therefore, it is more objective for the "government" to tax individuals. Period.

If taxes are too high and we want to reduce them in an objectively fair manner, it makes more sense to raise the tax exemption on individuals. People whose income is below the exemption are able to sell or transfer their exemption credit difference to whoever they want. Period. You decide what that exemption amount will be based on the violent socialist philosophy of your choice.

The above is conditional on our collective delusion that taxation is right and that we need someone else to change our diapers or to pick up after ourselves.

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The above is conditional on our collective delusion that taxation is right and that we need someone else to change our diapers or to pick up after ourselves.
Have you ever worked at a place with a benefit package or a pension plan? Chances are participation in this plan was mandatory because the plan would be not economical if it was optional. In fact, private for profit insurance companies will often deny coverage to most people who wants to join an 'optional' plan because they assume that anyone choosing to join a plan must be expecting to claim or they would not join. Taxation is like a group benefit plan.
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How can I resist?

On the surface, income splitting seems kind and fair but it is not nor is it objective. It excludes the household of two old spinster sisters who spent their entire lives taking care of their parents who are now dead and their younger orphan siblings who are now grown up and married and left the house.

Income splitting does not harm the spinster sisters in your example, it just doesn't benefit them. You discrimination argument could be applied to our current tax system as well. Doesn't it discriminate against single income families?

We pay too much tax, period. Income splitting would benefit a large portion of the country without burdening singles. Obviously single people will not benefit but they will not be hurt either.

I don't see income splitting as the final solution but as a stepping stone to it. First step is to allow seniors to split all pension income. Second step is to allow income splitting for all families. The third step is to implement the graduated flat tax system. Doesn't "graduated flat tax" sound like an oxymoron? Anyway, I think it's a great fit for Canada as it is a compromise between a pure flat tax system and our current progressive tax system.

Sorry to bring up Garth in another thread but income splitting is a huge issue for his constituents and one he promised he would push. Now that he is no longer a Conservative he was finally able to ask a question about it in the House. I find it funny that Garth has more power to push the views of his constituents as an independent than as part of the government. As a part of the Conservative party questions and private members bills of non-cabinet MPs have to be approved by ministers...very few are approved.

The essence of democracy is discussion, and today in the House of Commons I was delghted to hear the minister of finance tell me he will give "serious consideration" to letting retired people share their pension income for tax purposes. This has been a big issue with me, and - if implemented - puts us on the fast track to having income-splitting for all working families. It's something my voters have told me repeatedly they want, and that I promised I would push.

The irony, of course, is that I had to become an Independent MP to get this bit of progress during QP. Isn't life interesting?

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Taxation is like a group benefit plan.
Not enough.

Taxation is like a group benefit plan for which you have no choice and if you do not accept it you will be sent to jail.

If you want to force people to pay for something they do not want, my proposal of raising the tax exemption on individuals still stands.

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Obviously single people will not benefit but they will not be hurt either.
This is false logic - the taxes have to come from somewhere. The gov't would have to forgo tax decreases on single people to recover the revenue lost by allowing income splitting. This means that single people pay more tax that they would have to pay if the gov't did not allow income splitting.

I believe that the gov't should allow income splitting for different reasons: the gov't does not allow married people to act as single people in many situations. For example, the gov't forces couples to use their combined income when applying for the GST tax credit. The two sisters mentioned above would be allowed to apply for the GST tax credit on their own.

If the gov't wants to argue that it should be fair to single people then it should eliminate all rules that require married people to report their income together. If the gov't is not willing to do that then it is reasonable to allow income splitting to make up for the discrimination elsewhere.

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Income splitting does not harm the spinster sisters in your example, it just doesn't benefit them. You discrimination argument could be applied to our current tax system as well. Doesn't it discriminate against single income families?

We pay too much tax, period. Income splitting would benefit a large portion of the country without burdening singles. Obviously single people will not benefit but they will not be hurt either.

That is simplistic in the extreme.

If we all go to the restaurant together and you invent a scheme whereby married couples have a smaller share of the final bill, somebody has to pick up the shortfall. And I'm guessing it'll be the singles sitting around the table.

I'm not surprised that Garth Turner is advocating this idea and he wants to introduce it first for retired married couples. What percentage of his constituents are retired married couples?

Somebody has to pay the government's bill: if you pay less, I must pay more.

----

Sorry. I just noted that Riverwind made the same argument above.

Edited by August1991
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But, August, your logic only stands with the assumption that government has to maintain the same amount of tax revenue. If that revenue level must remain constant, then yes, the taxes must go up for another segment of society. The same must then apply to upper income earners if the tax exempt levels rise.

Don't get me wrong, I do not support income-splitting for tax purposes. It's BS. However, I do believe that income tas should be chopped back drastically to allow the federal government to only collect a net-zero amount of finances, allowing additional taxation to pay debt and unfunded liabilities (we made the mess, so it's ours to clean up). Provinces should collect the lion's share of tax money, and if I feel it is too high, I move.

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If we all go to the restaurant together and you invent a scheme whereby married couples have a smaller share of the final bill, somebody has to pick up the shortfall. And I'm guessing it'll be the singles sitting around the table.

As Hydraboss pointed out this is assuming that that tax revenue has to be fully replaced. Are you implying that the tax revenue stream is currently at the appropriate level and any tax cut must be offset by a tax gain somewhere else?

According to the Library of Parliament full pension splitting for seniors would be about $300 million per year. A 1% point drop in GST costs about $5 billion. How did we make up the $5 billion dollar shortfall created by the GST cut?

Second it is far more common for seniors to have 1 income earner or a very large imbalance in their pensions. Why should a couple bringing in 1 pension worth 90 grand be taxed harder than a couple with two 45 grand pensions?

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If we all go to the restaurant together and you invent a scheme whereby married couples have a smaller share of the final bill, somebody has to pick up the shortfall. And I'm guessing it'll be the singles sitting around the table.

---SNIP---

Somebody has to pay the government's bill: if you pay less, I must pay more.

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Sorry. I just noted that Riverwind made the same argument above.

Both of you are still being too simplistic and missing one thing: "the shortfall" can be shared between the married couples and the singles if the government debases its currency.

The government can tax but it can also borrow or alter the money supply.

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If you want to force people to pay for something they do not want, my proposal of raising the tax exemption on individuals still stands.

No one is forcing you to pay taxes, you have 100% the right to leave Canada. You being here is upon the condition of you paying taxes.

I see a point in taxation for many things... but where we will agree is that taxation should never have the motive of distribution of wealth.

Being said, on the issue at hand... I think if we recognize a family as a cohesive unit with shared expenses, I don't see why one shouldn't be able to share income too... the money is split 50/50 at divorce time, why not at tax time too?

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I think if we recognize a family as a cohesive unit with shared expenses, I don't see why one shouldn't be able to share income too...
Under what basis does that make it fair?

Do you RECEIVE services from your government based on your marital status?

Imagine the emergency hospital ward treating you differently when they find out your marital status.

Imagine the police officer asking your marital status before writing you a traffic ticket for speeding through a stop sign on your bicycle.

Imagine (I am struggling to think of a federal government service which is of any use....... Nope!) anything you want.

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I think if we recognize a family as a cohesive unit with shared expenses, I don't see why one shouldn't be able to share income too...
Under what basis does that make it fair?

Do you RECEIVE services from your government based on your marital status?

Imagine the emergency hospital ward treating you differently when they find out your marital status.

Imagine the police officer asking your marital status before writing you a traffic ticket for speeding through a stop sign on your bicycle.

Imagine (I am struggling to think of a federal government service which is of any use....... Nope!) anything you want.

I'm guessing that you would not benefit from tax splitting Charles, am I right?

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I'm guessing that you would not benefit from tax splitting Charles, am I right?
Maybe I would and maybe I would not. What difference does it make?

Regardless, my recommendation is more honorable than tax-splitting.

Please guys! forget my smart-aleck commentary about the righteousness of taxation! My policy recommendation is still better regardless of how comfortable you guys are stealing from your neighbor. I challenge anybody to contest my recommendation.

The clarity and honesty of anarchist thought will come to your rescue.

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Under what basis does that make it fair? Do you RECEIVE services from your government based on your marital status?
Almost every gov't program from OAS to the GST credit are calculated based on your family income. Even income tax deductions for childcare expenses have special rules (to penalize) married people. Eliminate discrimination against families in those situations and you may have a point.
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Eliminate discrimination against families in those situations and you may have a point.
Two wrongs do not make a right. I would advocate eliminating discrimination for everything.

let me turn your statement around: the discrimination in all of those instances that you enumerated are not fair. My policy recommendation can be applied to them as well to make them fair.

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let me turn your statement around: the discrimination in all of those instances that you enumerated are not fair. My policy recommendation can be applied to them as well to make them fair.
Your proposal is logically consistent. however it still has flaws. Eliminating discrimination against families would increase the cost of many of the benefit programs and would also allow people to collect benefits who do not really need them (imagine the spouse of corporate CEO qualifying for welfare benefits). It is quite possible that the cost of eliminating discrimination in benefit programs would far exceed the cost of allowing income splitting.
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Flat tax. The only way.

An evenly applied flat tax with a non-taxable base is the only fair way to administer the system. 100% collected by the provinces, and then the feds basically send an invoice to them for the negotiated amount that is to be transferred for federal jurisdiction items. Get rid of all loopholes and tax breaks.

Just because someone makes more money, they should not have to subsidize anyone.

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How can I resist?

On the surface, income splitting seems kind and fair but it is not nor is it objective. It excludes the household of two old spinster sisters who spent their entire lives taking care of their parents who are now dead and their younger orphan siblings who are now grown up and married and left the house.

Income splitting does not harm the spinster sisters in your example, it just doesn't benefit them. You discrimination argument could be applied to our current tax system as well. Doesn't it discriminate against single income families?

We pay too much tax, period. Income splitting would benefit a large portion of the country without burdening singles. Obviously single people will not benefit but they will not be hurt either.

I don't see income splitting as the final solution but as a stepping stone to it. First step is to allow seniors to split all pension income. Second step is to allow income splitting for all families. The third step is to implement the graduated flat tax system. Doesn't "graduated flat tax" sound like an oxymoron? Anyway, I think it's a great fit for Canada as it is a compromise between a pure flat tax system and our current progressive tax system.

Sorry to bring up Garth in another thread but income splitting is a huge issue for his constituents and one he promised he would push. Now that he is no longer a Conservative he was finally able to ask a question about it in the House. I find it funny that Garth has more power to push the views of his constituents as an independent than as part of the government. As a part of the Conservative party questions and private members bills of non-cabinet MPs have to be approved by ministers...very few are approved.

The essence of democracy is discussion, and today in the House of Commons I was delghted to hear the minister of finance tell me he will give "serious consideration" to letting retired people share their pension income for tax purposes. This has been a big issue with me, and - if implemented - puts us on the fast track to having income-splitting for all working families. It's something my voters have told me repeatedly they want, and that I promised I would push.

The irony, of course, is that I had to become an Independent MP to get this bit of progress during QP. Isn't life interesting?

I would say it is the other way around. With the present tax system claiming married allows the government to determine eligibility for the GST credit based on total household income, while those living in unreported common-law relationships, both are treated as single people and most often qualify for the quarterly credit. As soo as they report to government that they are in a common-law relationship they are immediately treated as a married couple and both lose the quarterly credit, based on combined household income. The couple does not spend any less but now they no longer qualify for the credit. Doesn't make any sense to me, and sounds like discrimination of married couples.

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Eliminating discrimination against families would increase the cost of many of the benefit programs
No. That is not a flaw of my policy. You can correct that by adjusting the %tax rate and the brackets to balance out the accounting.
and would also allow people to collect benefits who do not really need them (imagine the spouse of corporate CEO qualifying for welfare benefits)
So what? Welfare is not luxury.

Furthermore, these credits will not be sold at par. The different tax brackets will make them sell for more than their value. Poor people will get more than the face value of the credit. Rich people will be willing to pay more than the face value to get to bring them to a lower tax bracket.

It is quite possible that the cost of eliminating discrimination in benefit programs would far exceed the cost of allowing income splitting.
No different than any other administration. Again, you can correct that by adjusting the %tax rate to balance out the accounting.
Flat tax. The only way.
Uh.... you have not addressed the issue of splitting income with dependents.
The couple does not spend any less but now they no longer qualify for the credit. Doesn't make any sense to me, and sounds like discrimination of married couples.
How about just eliminating the GST credit altogether so that nobody gets it.
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Actually, I did address the tax-splitting issue. The answer is no splitting for anyone. Flat tax of say (insert your own number here) percent. 20%? 30%? 45%? Fine.

Make $30,000 and the first, say, $15,000 is tax-exempt. The remainder is taxed at 45%.

Result: $6,750 tax paid.

Make $80,000. Same scenario.

Result: $29,250 tax paid.

Make $13,750.

Result: $0.00 tax paid.

Make $1,200,000.

Result: $533,250 tax paid.

No loopholes, no tax breaks, no shelters. No more taxes to be paid (this includes federal and provincial only). Governments must work out the details of who gets how much and for what, including social safety net crap and welfare. No more GST credit BS. No 33% tax-exempt status for politicians. No reduction for RRSP's. Save or starve.

Paying too much tax? Tell your politician with your vote.

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This morning while channel surfing I came upon C-pac and there people were debating some sort of financial debate. The Conservative said they had a surplus of money just sitting around doing nothing so they put it towards the debt. That's good and fine but I think its time to cut more taxes for Canadians if money is" just sitting around '!! The NDP Martin asked the government if it has closed the last of "offshore tax" write off that mainly used by the rich in the country. His reply was that there was so much to do and they would get to it sometime in the future!!! Yeah, how many years will go by until its gone. The taxes aren't fair and its the rich who are in government that abuse the system! Its the "middle-income" tax payers that pays for this country and they should demand more of a tax break, no matter if they are single or married!!

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Actually, I did address the tax-splitting issue. The answer is no splitting for anyone. Flat tax of say (insert your own number here) percent. 20%? 30%? 45%? Fine.
I understand.
No loopholes, no tax breaks, no shelters. No more taxes to be paid (this includes federal and provincial only). Governments must work out the details of who gets how much and for what, including social safety net crap and welfare. No more GST credit BS. No 33% tax-exempt status for politicians. No reduction for RRSP's. Save or starve.
Now, you are talking my kind of language. I think the simplification and elimination of red tape will make everybody save money -- tax-man included!
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Of course, you and I both know this will never happen. Government makes up 36% (I believe this is right, correct me if I'm not) of Canada's employment numbers. How many people would be out of their cushy government tax and tax-related jobs if the system basically could be handled by a Pentium II with a shit-load of memory.

How many accountants would be out of work if the federal/provincial tax form read as follows:

Line 150 Enter your gross earnings from all employers during the tax year 2006

Line 151 Deduct $17,185 from line 150

Line 152 Calculate 36% of the result of line 151 [(Gross earnings - $17,185) X .36]

Line 153 Send a cheque for the amount of line 152 to us and have a nice year. See you in 2007.

Schedule 4 If you have any RRSP's, good for you!

Schedule 5 If you are a Treaty Indian under the Indian Act of Canada, good for you. Now file your taxes.

Schedule 6a If you are requesting a portion of paid GST be returned, tough luck.

It would be nice, though.

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Flat tax is a great idea. Imagine a one page tax return that anyone can do in 10 minutes. Imagine the savings...we could axe tones of civil servants and at least one minister.

It will never happen though...a flat tax system will eliminate that government's ability to offer complex tax cuts that translate into zero actual savings.

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