Garth Turner wants to see full income-splitting

[Pat Coghlan]

Adding incomes and taxing one spouse would ensure the other spouse never worked outside the home.

And is that good or bad? Is the aim to encourage a parent to stay with the kids? What is the aim?

I mean it has a snowball's chance in hell of happening.

There is a surplus now and the change could be implemented simply by avoiding spending it all!

If there is a surplus now, the question is why a portion of that surplus should be directed at a small subset of the taxpaying base. There are many other options other than making any change. For example it could be directed at a general rate cut, or debt reduction.

30% of families have a stay-at-home spouse looking after the kids.

Probably another 30% of families have two spouses earning incomes which are quite dissimilar.

When you add the two categories together, you have 60% of the population that would benefit from income splitting. Hardly a small subset.

[Renegade]

I mean it has a snowball's chance in hell of happening.

You're probably right. People tend to only support proposals which benefit them, and justfy them after the fact for "equity" and "fairness" reasons. This one, despite satisifiying the "equity" and "fairness" concerns raised, would not be suppored because couple don't benefit.

30% of families have a stay-at-home spouse looking after the kids.

Probably another 30% of families have two spouses earning incomes which are quite dissimilar.

When you add the two categories together, you have 60% of the population that would benefit from income splitting. Hardly a small subset.

1. Can you cite sources for your numbers?

2. Is it 30% of families or 30% of the population in each of your examples. Further is it 30% of the tax-paying population? This is why I ask for a cite fo your numbers.

3. Even if I accept your numbers as is, that 60% benefit, it doesn't really matter. The proposal as is, is nothing but a tax-shift from that 60% to the 40% rest of the tax-base. Why is that worthy of support?

I mean that, the relationship between family members (for tax/support purposes) doesn't change when they are no longer living under the same roof. I am still responsible for my kids if my wife and I split up. Ditto for paying her alimony etc.

If you want to extend the current definition of a family, these are the kids of support obligations that must be entrenched in law.

If you're not on the hook to support someone, you can't expect to jointly file your tax return with that person.

You are making a leap in logic I don't follow. Why is the support relationship between people when they split up or no longer live under the same roof, relevant justification to give people a tax break? If two people have no support obligations toward each other (eg via a pre-marital agreement) does that mean they should not qualify for the tax break. Help me understand your logic as I'm not seeing it.

You have not even shown that this definition is universal as you have previously claimed.

[hiti]

Better solution would be lowering the tax rate back to Paul Martin time and go lower, raising the GST 1%, and raising the personal exemption back to Martin time or even higher.

Too many families only have one person to rely on for support.

[M.Dancer]

I would like to see a $25000 deduction for every child under 18.....

[Renegade]

Better solution would be lowering the tax rate back to Paul Martin time and go lower, raising the GST 1%, and raising the personal exemption back to Martin time or even higher.

I would like to see a $25000 deduction for every child under 18.....

As you can see Pat, everyone has their own pet proposal on how to spend the surplus. It is not clear that this income-splitting proposal from Garth is anything more than his personal pet proposal.

[Pat Coghlan]

30% of families have a stay-at-home spouse looking after the kids.

Probably another 30% of families have two spouses earning incomes which are quite dissimilar.

When you add the two categories together, you have 60% of the population that would benefit from income splitting. Hardly a small subset.

1. Can you cite sources for your numbers?

2. Is it 30% of families or 30% of the population in each of your examples. Further is it 30% of the tax-paying population? This is why I ask for a cite fo your numbers.

3. Even if I accept your numbers as is, that 60% benefit, it doesn't really matter. The proposal as is, is nothing but a tax-shift from that 60% to the 40% rest of the tax-base. Why is that worthy of support?

Most of the information you need can be found in this Senate report: http://www.parl.gc.ca/information/library/...s/prb0636-e.pdf

Note that in almost 50% of families, one spouse earns less than 40% of the family income, so potentially all of this group would benefit.

I mean that, the relationship between family members (for tax/support purposes) doesn't change when they are no longer living under the same roof. I am still responsible for my kids if my wife and I split up. Ditto for paying her alimony etc.

If you want to extend the current definition of a family, these are the kids of support obligations that must be entrenched in law.

If you're not on the hook to support someone, you can't expect to jointly file your tax return with that person.

You are making a leap in logic I don't follow. Why is the support relationship between people when they split up or no longer live under the same roof, relevant justification to give people a tax break? If two people have no support obligations toward each other (eg via a pre-marital agreement) does that mean they should not qualify for the tax break. Help me understand your logic as I'm not seeing it.

You have not even shown that this definition is universal as you have previously claimed.

The definition of a family includes spouses and dependent children. For the purpose of filing a joint tax return, it is only these relationships that are considered re: income-splitting, and the reason is that legal financial obligations extend from a spouse to his/her children and the other spouse.

I guess another way you could look at it is from the perspective of family property/assets. Your spouse has a direct claim on any family property. There is no such thing as family property between siblings, grandparents etc.

You're asking the question, "why can't a family include...", while I'm simply pointing out what definition is currently acceptable by CRA. IMHO, only those who meet this definition should be able to split income for tax purposes.

I don't see much chance of getting this definition changed.

[BubberMiley]

I don't see why married couples should get a tax break just because one chooses not to work or because one makes more money than the other. I'm all for providing incentives for one parent to stay home (by boosting the child tax credit, for example), but I don't think married people need special tax status over single people.

[Pat Coghlan]

I don't see why married couples should get a tax break just because one chooses not to work or because one makes more money than the other. I'm all for providing incentives for one parent to stay home (by boosting the child tax credit, for example), but I don't think married people need special tax status over single people.

The main reason is that, if the government is going to force couples to combine their income when applying for benefits (i.e. eligibility always based on the aggregate total), then all families with the same aggregate income should have the same tax liability. Eligibility for benefits and ability to pay taxes are two sides of the same coin. It is the family that earns/spends the income, not the income earner.

Alternatively, each spouse should be able to apply on his/her own for 50% of all available benefits. If my wife has zero income, then she should receive 50% of the benefits available to a family headed by non-married person. While I might not receive my 50% share of benefits because of my income, she might receive her full 50% share because she has no income. When you use our family income to determine benefit eligibility for our family, we might end up with nothing. If we are to receive nothing because our income is too high, then it makes sense that out tax liability should be the same as other families - who also receive no benefits because of their income level - when the total income is the same. Today, there can be a difference of up to $16,000 - except for pensioners, as of 2007.

You will find that the government has no problem with the concept of family income, but the problem is that it only wants to use this amount in calculations for benefit eligibility (because it's a bigger number which can be used to claw back benefits).

Either use the total for both taxes and benefits, else let each spouse pay taxes AND receive a share of benefits based solely on his/her income. Don't just use family income when it suits the government.

[Renegade]

Most of the information you need can be found in this Senate report: http://www.parl.gc.ca/information/library/...s/prb0636-e.pdf

Note that in almost 50% of families, one spouse earns less than 40% of the family income, so potentially all of this group would benefit.

This report, while informative only presents a partial picture. It only looks at the percentage of families which would benefit. Individuals are not considered "families". Ask the question another way. What percentage of taxpayers would benefit? I expect the answer is substantially less than those quoted. It is also not clear if the report includes the effect of existing income-splitting providions (eg equivalent-to-spouse deductions, spousal RRSP contributions)

From the article quoted in the report:

In reality only a minority of Canadians could obtain any benefits at all from income splitting. The biggest beneficiaries would be the three per cent of individuals who are fortunate enough to be in the top tax bracket.

Whether real or fictional, income splitting is only worthwhile if one spouse is in a higher tax bracket than the other. A couple can only get into the income splitting game if one member earns over $35,000, roughly the point at which the tax rate increases from 15.25 per cent to 22 per cent.

Income statistics from 2004 show that only 40 per cent of tax payers earned over $35,000. In reality, then, income splitting will benefit even fewer people than this 40 per cent. This is because it is worthless to spouses in the same tax bracket (such as two $40,000 earners, or two $80,000 earners), and also to those without a spouse.

link

Whatever source you want to use, only a subset of taxpayers benefit. Why is that better than a general tax reduction where 100% of taxpayers benefit?

The definition of a family includes spouses and dependent children. For the purpose of filing a joint tax return, it is only these relationships that are considered re: income-splitting, and the reason is that legal financial obligations extend from a spouse to his/her children and the other spouse.

I guess another way you could look at it is from the perspective of family property/assets. Your spouse has a direct claim on any family property. There is no such thing as family property between siblings, grandparents etc.

You're asking the question, "why can't a family include...", while I'm simply pointing out what definition is currently acceptable by CRA. IMHO, only those who meet this definition should be able to split income for tax purposes.

I don't see much chance of getting this definition changed.

You quote at length what the current definition of family is and that it won't be changed. I don't dispute that at all, but that is exactly why I am against this proposal. It only benefits those within the subset the govenment considers a "family" and doesn't provide the same benefits for people in alternative arrangments. For example an individual for example is not considered a family of one and accorded the same tax reduction benefit.

The justification for this proposal seems to be that all families regardless of distribution of income between members should pay the same tax. What I am saying is that all families regardless of distribution of income and regardless of the make-up of the family should pay the same tax. IOW, an individual making $60,000 should be considered a income-unit, the same as two spouses each earning $30,000 are an income unit, and each should pay the same amount of tax. That would be the logical conclusion of the justification provided. Anything else is a half-measure and shouldn't be supported.

[Renegade]

Either use the total for both taxes and benefits, else let each spouse pay taxes AND receive a share of benefits based solely on his/her income. Don't just use family income when it suits the government.

Pat, I agree with you 100% on this. The government should either use family income as the measure for both benefits and tax, or individual income. It is not a credible to use them inconsistantly.

[Pat Coghlan]

Either use the total for both taxes and benefits, else let each spouse pay taxes AND receive a share of benefits based solely on his/her income. Don't just use family income when it suits the government.

Pat, I agree with you 100% on this. The government should either use family income as the measure for both benefits and tax, or individual income. It is not a credible to use them inconsistantly.

They should do this as a minimum.

Liberals and NDP constant argue for treating everyone as individuals. Okay, then treat my wife as an individual and stop tying her to my income for taxes AND benefits. Let her apply for 50% of benefits based entirely on her income.

We would benefit less from such a scheme, but at least we'd be much more on par with all other families with similar incomes.

[Pat Coghlan]

This report, while informative only presents a partial picture. It only looks at the percentage of families which would benefit. Individuals are not considered "families". Ask the question another way. What percentage of taxpayers would benefit? I expect the answer is substantially less than those quoted. It is also not clear if the report includes the effect of existing income-splitting providions (eg equivalent-to-spouse deductions, spousal RRSP contributions)

From the article quoted in the report:

In reality only a minority of Canadians could obtain any benefits at all from income splitting. The biggest beneficiaries would be the three per cent of individuals who are fortunate enough to be in the top tax bracket.

Whether real or fictional, income splitting is only worthwhile if one spouse is in a higher tax bracket than the other. A couple can only get into the income splitting game if one member earns over $35,000, roughly the point at which the tax rate increases from 15.25 per cent to 22 per cent.

Income statistics from 2004 show that only 40 per cent of tax payers earned over $35,000. In reality, then, income splitting will benefit even fewer people than this 40 per cent. This is because it is worthless to spouses in the same tax bracket (such as two $40,000 earners, or two $80,000 earners), and also to those without a spouse.

link

Whatever source you want to use, only a subset of taxpayers benefit. Why is that better than a general tax reduction where 100% of taxpayers benefit?

Let's say that there is going to be a $3B tax cut. That might put about $300 in each taxpayer's pocket (approx). That same tax cut could wipe out the $8,000 in additional taxes a family with a stay-at-home spouse over and above what their neighbour pays, in spite of the fact that their combined incomes are the same.

Is it better to give everyone $300, and allow some families to pay up to $16,000 more in taxes than their equivalent-income neighours? If we don't fix this now with the surpluses we are running, when will this ever be addressed?

The definition of a family includes spouses and dependent children. For the purpose of filing a joint tax return, it is only these relationships that are considered re: income-splitting, and the reason is that legal financial obligations extend from a spouse to his/her children and the other spouse.

I guess another way you could look at it is from the perspective of family property/assets. Your spouse has a direct claim on any family property. There is no such thing as family property between siblings, grandparents etc.

You're asking the question, "why can't a family include...", while I'm simply pointing out what definition is currently acceptable by CRA. IMHO, only those who meet this definition should be able to split income for tax purposes.

I don't see much chance of getting this definition changed.

You quote at length what the current definition of family is and that it won't be changed. I don't dispute that at all, but that is exactly why I am against this proposal. It only benefits those within the subset the govenment considers a "family" and doesn't provide the same benefits for people in alternative arrangments. For example an individual for example is not considered a family of one and accorded the same tax reduction benefit.

The justification for this proposal seems to be that all families regardless of distribution of income between members should pay the same tax. What I am saying is that all families regardless of distribution of income and regardless of the make-up of the family should pay the same tax. IOW, an individual making $60,000 should be considered a income-unit, the same as two spouses each earning $30,000 are an income unit, and each should pay the same amount of tax. That would be the logical conclusion of the justification provided. Anything else is a half-measure and shouldn't be supported.

Well, you'll be happy to know that this is sorta how the current system works because of the way we currently target benefits towards only lower-income families. If you compare a single person making $100,000 with the head of a family of 4-5 kids who also makes $100,000 (stay-at-home spouse in this case), you will find that the tax liability of the single person and the head of the household are almost the same, within a couple of thousand dollars.

Now, if you compare either of the above with a family that has 4-5 kids and two $50,000 incomes, you will find that this family's tax liability is about $8,000 less (perhaps a bit lower, given recent tax changes).

What you want to see is the single person paying the same taxes as either of the above...but what about the fact that each supports 4-5 kids? They've had their benefits all clawed back because of their $100,000 income, but should their tax liability be the same as yours or lower? IMHO, it is the latter, for obvious reasons.

[Renegade]

Let's say that there is going to be a $3B tax cut. That might put about $300 in each taxpayer's pocket (approx). That same tax cut could wipe out the $8,000 in additional taxes a family with a stay-at-home spouse over and above what their neighbour pays, in spite of the fact that their combined incomes are the same.

Is it better to give everyone $300, and allow some families to pay up to $16,000 more in taxes than their equivalent-income neighours? If we don't fix this now with the surpluses we are running, when will this ever be addressed?

The answer to the question "is it better..." is a matter of perspective. Certainly from the perspective of those who benefit, it is better, from those who don't get any tax cut,it is worse. As to your question as to when will this ever be addressed, it may never be addressed, but IMV the proper way to address it is by introducing a flat-rate income tax.

What you want to see is the single person paying the same taxes as either of the above...but what about the fact that each supports 4-5 kids? They've had their benefits all clawed back because of their $100,000 income, but should their tax liability be the same as yours or lower? IMHO, it is the latter, for obvious reasons.

Actually the number of kids don't factor in into the income-splitting proposal. It is primarily for splitting income between spouses so to have an apples to apples comparison, you should be comparing an individual (say with a $100K income) to a couple where one earner earns all the income (say $100K) to a couple where each earns $50K. In each case the total family income is $100K.

Should they have the same tax liability? IMV, yes. Afterall each family faces large fixed costs for housing, food, transportation. In my experience, the incremental costs for a couple are very small over that of an individual.

If you are going to argue that kids are the reason for distributing the tax benefits, then it would be more effective to give a deduction for each child, rather than splitting income between spouses.

[Pat Coghlan]

Is it better to give everyone $300, and allow some families to pay up to $16,000 more in taxes than their equivalent-income neighours? If we don't fix this now with the surpluses we are running, when will this ever be addressed?

The answer to the question "is it better..." is a matter of perspective. Certainly from the perspective of those who benefit, it is better, from those who don't get any tax cut,it is worse. As to your question as to when will this ever be addressed, it may never be addressed, but IMV the proper way to address it is by introducing a flat-rate income tax.

A flat income tax would be most welcomed by Canada's ultra-rich.

No, I don't agree with a flat tax because, over time, it would ensure that wealth and power becomes concentrated in the hands of just a few. This is what the fathers of the American constitution wanted to avoid with things like hefty estate taxes (which the ultra rich almost managed to get rid of in 2006).

The problem is that we have too many tax brackets. There should be just two. One for all (family) income - after some basic deductions - that is needed to live on, and a second one for all income above this threshold. Tax income we use for food/shelter/clothing at the lower rate, and income we use for luxuries (e.g. that 60" plasma TV) at a higher rate.

If you are going to argue that kids are the reason for distributing the tax benefits, then it would be more effective to give a deduction for each child, rather than splitting income between spouses.

Well, you can thank Mulroney for effectively taking kids out of the tax system. Mulroney decided that "rich" families with incomes above $80K or so don't need to receive tax-delivered benefits like CTB. That was an asinine policy change. The result is that it treats the heads of many middle-class families - who might be supporting a spouse and several children - like singles with no dependents. I know. I was supporting a wife and 5 kids and receiving $20/month in CTB support payments. The net result was that I was being taxed like a single person with the same income. And they wonder why there is a revolt going on over the single income penalty.

There are many things that can be done to address the tax penalty paid by families with children where one spouse earns most or all of the income. We need to fix this problem. That said, the government has just introduced pension-splitting for pensioners. Perhaps this will just be extened to families, as per the original impetus for this thread.

[Remiel]

That same tax cut could wipe out the $8,000 in additional taxes a family with a stay-at-home spouse over and above what their neighbour pays, in spite of the fact that their combined incomes are the same.

And yet, those same two neighbours have to work for a living, and the stay-at-home spouse does not. Real fair, that.

I think this is one of the points where, if geoffrey were participating in this debate, he would point out that there is no reason that an able bodied and able minded person should be not working.

As for the definition of a family... I think that you will find, when in the course of a conversation a person uses the word family, he is referring to multiple people. Thus, a husband and wife are not really a family. Of course, perhaps Pat really meant stay-at-home parent...

Anyway...

family n. parents and their children; a person's children; set of relatives; group of related plants or animals, or of things that are alike.

[Pat Coghlan]

That same tax cut could wipe out the $8,000 in additional taxes a family with a stay-at-home spouse over and above what their neighbour pays, in spite of the fact that their combined incomes are the same.

And yet, those same two neighbours have to work for a living, and the stay-at-home spouse does not. Real fair, that.

Are these the same 2 neighbours that get a full tax deduction for their daycare or nanny expenses, courtesy of the $8,000 in additional taxes that *their* neighbours pay?

Are they the same 2 neighbours that, when there's a teachers' strike, who ask the stay-at-home-mom if Johnny can be cared for in their home until the strike is over?

Are they the same 2 neighbours who get a full deduction for their kids' daycamp (even if one parent is a teacher and at *home* for the summer), while the other family gets none?

If I'm not getting through, then let me point out that the same problem exists in families in which BOTH spouses work, but one spouse earns, say a multiple of the lower-income spouse.

Plus, at the end of the day, if both families have the same total income, they are eligible for exactly the same benefit payments.

I think this is one of the points where, if geoffrey were participating in this debate, he would point out that there is no reason that an able bodied and able minded person should be not working.

Even if there are pre-schoolage children? Is it your opinion that they should all be in daycare?

As for the definition of a family... I think that you will find, when in the course of a conversation a person uses the word family, he is referring to multiple people. Thus, a husband and wife are not really a family. Of course, perhaps Pat really meant stay-at-home parent...

For tax purposes, you will find that the definition that I use is the one accepted by the Department of Finance.

Get it changed, and I'll accept the new definition. For now, mine is the only one that works on a tax return.

[Remiel]

Taking care of children can be defined as work. That particular comment was directed towards the non-stay-at-home parent stay-at-home spouses.

[Renegade]

A flat income tax would be most welcomed by Canada's ultra-rich.

A flat-tax would need to mean more than simply reducing the number of tiers to 1. It would also mean the elimination of deductions. The ultra-rich can sheild much of their income through structures designed to minimize or avoid tax, so while they see some beneift they would also lose many deductions.

No, I don't agree with a flat tax because, over time, it would ensure that wealth and power becomes concentrated in the hands of just a few. This is what the fathers of the American constitution wanted to avoid with things like hefty estate taxes (which the ultra rich almost managed to get rid of in 2006).

I'm not an expert on the American constitution but I don't recall that it says anything about ensuring that wealth would not be concentrated, nor do I think it addressed the issue of estate taxes. That is left for elected governments to decide and change if they so choose.

The problem is that we have too many tax brackets. There should be just two. One for all (family) income - after some basic deductions - that is needed to live on, and a second one for all income above this threshold. Tax income we use for food/shelter/clothing at the lower rate, and income we use for luxuries (e.g. that 60" plasma TV) at a higher rate.

While I agree with reducing the number of tax tiers, personally I disagree that the tax rate should be based upon a division of income for "necessities" and "luxuries". Such a determination is fraught with problems. The cost of "necessities" such as housing varies greatly and so it would be impossible to draw such a uniform line.

Well, you can thank Mulroney for effectively taking kids out of the tax system. Mulroney decided that "rich" families with incomes above $80K or so don't need to receive tax-delivered benefits like CTB. That was an asinine policy change. The result is that it treats the heads of many middle-class families - who might be supporting a spouse and several children - like singles with no dependents. I know. I was supporting a wife and 5 kids and receiving $20/month in CTB support payments. The net result was that I was being taxed like a single person with the same income. And they wonder why there is a revolt going on over the single income penalty.

I guess, I don't see why the rest of the taxpayers should have to subsidize your decision to incur additional costs (ie kids). If you wish to do so, and the government gives you any beneifts, it should be considered a bonus.

There are many things that can be done to address the tax penalty paid by families with children where one spouse earns most or all of the income. We need to fix this problem. That said, the government has just introduced pension-splitting for pensioners. Perhaps this will just be extened to families, as per the original impetus for this thread.

It should never have been introduced for pensioners and it shouldn't be introduced generally unless it is part of a substantial tax reform that includes all family types including individuals.

[Renegade]

Are these the same 2 neighbours that get a full tax deduction for their daycare or nanny expenses, courtesy of the $8,000 in additional taxes that *their* neighbours pay?

Are they the same 2 neighbours that, when there's a teachers' strike, who ask the stay-at-home-mom if Johnny can be cared for in their home until the strike is over?

Are they the same 2 neighbours who get a full deduction for their kids' daycamp (even if one parent is a teacher and at *home* for the summer), while the other family gets none?

If I'm not getting through, then let me point out that the same problem exists in families in which BOTH spouses work, but one spouse earns, say a multiple of the lower-income spouse.

Plus, at the end of the day, if both families have the same total income, they are eligible for exactly the same benefit payments.

You are pointing out inequities in the tax system. I agree they are there. Tax-splitting isn't the only way to fix them as it just creates others.

You SHOULD be allowed to pay your wife $8000/child to look after the kids. This would put a parent with a stay-at home spouse on par with an individual.

For tax purposes, you will find that the definition that I use is the one accepted by the Department of Finance.

Get it changed, and I'll accept the new definition. For now, mine is the only one that works on a tax return.

Do they actually define "family" in the context of a tax-return? I've only seen definitions of "dependants" and "spouse" and what constitutes an "arms-length" relationship. Even your proposal doesn't tax based upon family income, even by your definition of family. Let say the child earned the bulk of the income in one particular family. The child's income would be taxed individually and not part of the family pool.

[Pat Coghlan]

For tax purposes, you will find that the definition that I use is the one accepted by the Department of Finance.

Get it changed, and I'll accept the new definition. For now, mine is the only one that works on a tax return.

Do they actually define "family" in the context of a tax-return? I've only seen definitions of "dependants" and "spouse" and what constitutes an "arms-length" relationship. Even your proposal doesn't tax based upon family income, even by your definition of family. Let say the child earned the bulk of the income in one particular family. The child's income would be taxed individually and not part of the family pool.

I've always advocated taxing family income vs individual income, especially since benefit eligibility is calculated based on family income.

I found this on the Dept of Finance website: http://www.fin.gc.ca/gloss/gloss-f_e.html#fam-inc

[Pat Coghlan]

Do they actually define "family" in the context of a tax-return? I've only seen definitions of "dependants" and "spouse" and what constitutes an "arms-length" relationship. Even your proposal doesn't tax based upon family income, even by your definition of family. Let say the child earned the bulk of the income in one particular family. The child's income would be taxed individually and not part of the family pool.

Yes, that's right. But then, unless your child is a movie star or has a $1M trust fund from the grandparents, when is that going to happen?

Even when it does, the child is not obligated to share that income with other family members, the way his/her parents are (with spouse and children).

BTW, the family could still be eligible for benefits even if the child earned $100,000 as an actor etc., but this is the child's money, not the family's.

[Renegade]

I've always advocated taxing family income vs individual income, especially since benefit eligibility is calculated based on family income.

I, on the other hand, have advocated consistancy in how the income-producing unit is determined. It doesn't matter to me if it is "individual" or "family" so long as it is consistant.

I found this on the Dept of Finance website: http://www.fin.gc.ca/gloss/gloss-f_e.html#fam-inc

What I find amusing about the Dept of Finance's definition is they don' t consider children to be part of the family.

Yes, that's right. But then, unless your child is a movie star or has a $1M trust fund from the grandparents, when is that going to happen?

It doesn't matter how often it happens. It is the principle of how it is treated when it happens that it at issue.

Even when it does, the child is not obligated to share that income with other family members, the way his/her parents are (with spouse and children).

You are making a vast generalization. It is up to the individual arrangement between spouses on whether they are obligated to share income. Some couple may pool their income, some may sign prenuptual contracts keeping their income separate. In other families, cultural norms dictate that working children at home are obligated to contribute to the family income and expenses.

BTW, the family could still be eligible for benefits even if the child earned $100,000 as an actor etc., but this is the child's money, not the family's.

Well, I don't see how you can make the generalization that money will be pooled within family members when the spouses earn it, but will not be pooled when the children earn it. Is your position the same as the position of the Finance Dept that essentially children are not part of the family?

[Pat Coghlan]

I found this on the Dept of Finance website: http://www.fin.gc.ca/gloss/gloss-f_e.html#fam-inc

What I find amusing about the Dept of Finance's definition is they don' t consider children to be part of the family.

The above is the definition of family income.

Yes, that's right. But then, unless your child is a movie star or has a $1M trust fund from the grandparents, when is that going to happen?

It doesn't matter how often it happens. It is the principle of how it is treated when it happens that it at issue.

...and regardless of the amount, a child's income is consistently not considered family income.

Even when it does, the child is not obligated to share that income with other family members, the way his/her parents are (with spouse and children).

You are making a vast generalization. It is up to the individual arrangement between spouses on whether they are obligated to share income. Some couple may pool their income, some may sign prenuptual contracts keeping their income separate. In other families, cultural norms dictate that working children at home are obligated to contribute to the family income and expenses.

For tax purposes, they are obligated to share/pool. Try omitting your spouse's income from your tax return some time to see what I mean.

If the marriage breaks down, you will find that the lower-income spouse will have a right to be supported (alimony). Ditto for the children (child support payments).

Clearly, a spouse cannot simply hoard his/her income indefinitely. Sure, I can refuse to put my paycheque in a joint account for my wife to have access and, instead, pile up $100K in an investment account in my own name, but legally my wife will have access to a full 50% of that amount once we legally separate.

I can assure your family is legally entitled to any money that you don't feel has to be shared.

Anyway, the point is that the definition of family is pretty much in line with one's support obligations, namely spouse and dependent children.

BTW, the family could still be eligible for benefits even if the child earned $100,000 as an actor etc., but this is the child's money, not the family's.

Well, I don't see how you can make the generalization that money will be pooled within family members when the spouses earn it, but will not be pooled when the children earn it. Is your position the same as the position of the Finance Dept that essentially children are not part of the family?

See the definition of family income above.

It is in line with the obligations I described above. Children have no legal obligation to pay any kind of support to parents/siblings, so not treating a child's income as family income adhere's to this principle.

Having said that, if a parent puts $1M in an investment account in the child's name, the interest/dividends might be taxed in the hands of the parent because of attribution rules.

[Renegade]

The above is the definition of family income.

...and regardless of the amount, a child's income is consistently not considered family income.

Except of course if you gift your child money and it earns income. Still it is amusing to me that the Finance dept defines family income to exclude a child's income. The implication being that the definition of a family excludes the children.

For tax purposes, they are obligated to share/pool. Try omitting your spouse's income from your tax return some time to see what I mean.

Not exactly. They are only obligated to report spouses income. Not share/pool. It is then used to calculate eligibility for benefits as we have previously discussed.

If the marriage breaks down, you will find that the lower-income spouse will have a right to be supported (alimony). Ditto for the children (child support payments).

Not so. The lower-income spouse is generally only awarded alimony to the extent that the spouse has made decisions within the marriage which negatively impacts the ability to earn income (for example giving up one's career to stay home with the kids). Further, a prenuptual agreement may eliminate alimony a a consideration completely. If a spouse earned a lower income before marriage, and then earned a similarly lower income during and after the marriage, in the absence of kids, that spouse is not entiled to a portion of the higher spouse's income.

Clearly, a spouse cannot simply hoard his/her income indefinitely. Sure, I can refuse to put my paycheque in a joint account for my wife to have access and, instead, pile up $100K in an investment account in my own name, but legally my wife will have access to a full 50% of that amount once we legally separate.

Depends upon your prenup doesn't it? If you agree to keep your financial incomes and assets separate as part of your agreement, there is no reason why your wife is entitled to 50%.

I can assure your family is legally entitled to any money that you don't feel has to be shared.

How can you assure me that? Are you in the legal profession? Do you have cases to cite?

See the definition of family income above.

Yes, you keep saying that The fact is you want the law to change from the status quo. That means that what is included in pooled income is also up for debate. Refering to the current definition to support your position when you are proposing changes is meaningless.

It is in line with the obligations I described above. Children have no legal obligation to pay any kind of support to parents/siblings, so not treating a child's income as family income adhere's to this principle.

I'd like to understand from where you have derived this principle that support obligations = pooled income. Is this something you have deduced yourself or are you citing this as a legal principle?

[Pat Coghlan]

<lots of stuff deleted from Renegade>

Can you not just accept the fact that Finance's definition of a family mirrors the financial obligations that I explained exist between spouses and dependent children?

Way back, you started arguing that perhaps co-habitating siblings etc. should be treated as a family for tax/benefit purposes, but at the end of the day CRA recognizes spouses and their dependent children as a "family". There is no other definition. You don't agree with it perhaps, but you at least recognize this as the definition, don't you???

While there are some deductions for relatives being cared for, they don't factor into family income whatsoever, nor will you find any Dept of Finance or CRA document describing such relatives as being part of a family.

So, like it or not, any potential changes to income-splitting will only involve spouses. Not their children. Not their relatives being cared for. Nada.