Feds introduce new tax measures

Photo: Contributed - Nathan Denette / THE CANADIAN PRESS

Prime Minister Stephen Harper announces an income-splitting tax break for families with children under the age of 18 in Vaughan, Ont. on Thursday, Oct. 30, 2014.

The federal government has introduced a new income-splitting benefit for couples with children under the age of 18 as part of a series of proposed new tax measures designed to appeal to young families.

The proposal consists of three new measures, including the Family Tax Cut, which will allow a higher earning spouse to transfer up to $50,000 of taxable income to a spouse in a lower income bracket. The measure will provide eligible families with a maximum of $2,000 a year in tax relief.

The Universal Child Care Benefit for children under the age of 6 will also be increased from $100 to $160. As well, a new benefit of $60 per month is being created for children aged six to 17, and will come into effect on Jan 1.

The third new measure will see a $1,000 increase in the maximum amount that can be claimed under the Child Care Expense Deduction.

Prime Minister Stephen Harper announced the new measures Thursday afternoon at a community centre in Vaughan, Ont., just north of Toronto.

The government says the Family Tax Cut will benefit 1.7 million families.

Prior to Harper’s announcement, the opposition ripped into the income-splitting plan, saying it will cost the federal and provincial governments billions of dollars and would only benefit 14 per cent of Canadian families.

The government estimates that the Family Tax Cut will cost the federal government about $2.4 billion in 2014-15 and $1.9 billion in 2015-16.

The Liberals and the NDP also pointed out that former finance minister Jim Flaherty appeared to back-track on support for the policy not long before he died. Income splitting was a key plank in the Conservatives’ election platform in the 2011 campaign.

“A tax plan that does nothing for nine out of 10 Canadian families,” NDP Leader Thomas Mulcair said during Thursday’s question period. “As Jim Flaherty asked, how does that benefit our society?”

Minister of State for Finance Kevin Sorenson replied that Canadian seniors have saved thousands of dollars due to pension income splitting, and that benefit should be extended to more Canadians.

“Income splitting is good policy for Canadians, it’s good policy for Canadian seniors, it will be good policy for Canadian families,” Sorenson said.

Sorenson added that further tax breaks for families will be coming, including the doubling of the children’s fitness tax credit to $1,000. That tax credit will also be made refundable, he said.

Liberal finance critic Scott Brison said income splitting does nothing for 1.5 million single parents who are struggling financially.

Sorenson responded by accusing the Liberals of wanting to repeal the Conservatives’ tax breaks.

Many economists have said that income splitting mainly benefits higher-income families and stay-at-home parents who have high-earning spouses.

“If you have higher-income people, maybe with one child at a high marginal tax rate, they will get considerably more benefit than two spouses (who are) both working with four younger children,” said Fred O’Riordan, a national tax services advisor at Ernst & Young.