Harper’s family tax plan misses the mark

Stephen Harper wasted no time unveiling his first big campaign promise, a proposal to let families with children split their incomes to reduce their tax bills.

It’s likely a political winner. But it’s bad public policy, especially if the aim is to strengthen families.

The big beneficiaries are the rich – people who least need help with the cost of raising children.

It’s also a distant prospect. Harper says the change won’t come until the budget is balanced, which isn’t supposed to happen until 2015.

The theory is that some two-parent families with children under 18 should pay less tax.

Harper proposes that they be allowed to shift up to $50,000 in income from the highest paid spouse to the one who earns less, or stays at home. The high earner then drops into a lower tax bracket and pays less.

The Conservative news release offered examples. Someone earning $70,000 with a stay-a-home spouse could shift half the income. Each parent would pay taxes on $35,000. Because they would be in lower tax brackets, they would save almost $2,000.

But the release didn’t set out other scenarios.

For example, someone being paid $200,000 a year could transfer $50,000 to a stay-at-home spouse. That family would pay $7,000 less in taxes.

And a large number of families would get nothing out of the change. Two people both earning $40,000, for example, would see no change in their tax bill.

Neither would any family getting by on a modest income, because they are already paying minimal taxes. And single parents – most in need of assistance – would be left out entirely.

In short, the people who really need help raising their children would get little benefit; the people who didn’t would get the biggest tax cut.

Providing this tax break is expensive. The Conservatives estimate it will cost $2.5 billion a year.

That leaves two options. Other taxes will have to go up to cover the lost revenue, which could mean other taxpayers will pay more to subsidize people already well off.

Or the government will have to cut $2.5 billion worth of services.

Politically, it’s not a bad campaign promise. Supporting families always sounds good. People with families vote – especially affluent people with families.

And social conservatives see the tax change as a way of making it easier for families to get by on one income, so moms can stay home and look after the children.

That’s not a goal that should be dismissed. There are benefits to having a parent in the home with children, to the family and society. Stay-at-home moms – and a relative handful of dads – also make a big contribution in volunteer roles.

But the tax change won’t really do much to achieve that goal. The Conservatives say the average tax reduction would be $1,300. That isn’t going to let most families give up a second income.

What was also missing was a consideration of what else a prudent government could do with that $2.5 billion a year. Based on population, that’s about $330 million a year for British Columbia.

That much money, targeted to the children and families who really need help, could make a huge difference. Early childhood education, longer parental leave, nurse support for new moms, more affordable day care – there are many options that could improve life – now and for generations – for children starting out in tough circumstances.

That kind of approach would pay a lot greater return than a tax cut that delivered the greatest benefits to people who were being paid two or three times the average wage of British Columbians.

But Conservatives calculated the tax change would play well, or believe affluent families should pay much less in taxes.

That’s a legitimate position, of course. But voters assessing the party platforms should be clear about what Harper offered in his first major commitment.

And about who would win, and who would be left behind.

Footnote: Why a promise that won’t take effect for four years? The Conservatives said they couldn’t agree to NDP demands for more support for seniors, a move which might have averted the non-confidence vote and election, because there is no money. That makes it hard to offer any promises not already in the defeated budget.

Willcocks@gmail.com