4 problems with the family tax cut

The federal government’s spousal income-splitting plan has already come under criticism for disproportionately benefiting high-income families, but there are other problems with the tax break, says Maclean’s guest columnist Kevin Milligan.

The first problem is the credit is complex, says Milligan, a professor at the University of British Columbia’s School of Economics. It takes 85 steps and a new tax form to calculate the credit. That “might bring joy to hourly-compensated accountants, but adds complexity and obfuscation for the rest of us,” he writes.

Read: Details on Ottawa’s new income-splitting breaks

The way the tax credit values paid and unpaid work is also an issue, he says. With this credit, the government is arguing that a couple where one spouse earns $100,000 and the other earns nothing should be taxed the same as a couple in which both partners earn $50,000. But that’s simplistic, says Milligan.

Income-splitting’s effect on the workforce also undermines some of the government’s other policies. Read more here.

Also read:

Will income splitting reduce the workforce?

6 tax filing tips for 2015

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.