On Oct. 30, the Conservative government announced a bouquet of tax relief and other benefits for families with children, including the fulfilment of 2011 election promise to implement income splitting.
Most significantly, Prime Minister Stephen Harper announced that the Universal Child Care Benefit would be expanded. The benefit would be boosted from $100 to $160 per month for children under seven, and a new benefit of $60 per month would be introduced for children seven to 17. The enhanced benefits take effect Jan. 1, 2015, but parents will not receive cheques until July.
The government will also increase the annual childcare-expense deduction limits by $1,000 – also beginning January 1 – to assist working parents with the cost of childcare. Earlier in the Fall, Harper announced a doubling of the existing child’s fitness tax-credit to $150 – and making it fully refundable so that low income families who do not pay much tax will get a portion of their children’s sports costs back.
Harper also announced the government would indeed introduce income-splitting for families beginning in 2015. Earlier this year, the late finance minister Jim Flaherty cast doubt on the government’s plan to follow through with its 2011 campaign promise. Under the plan, couples with children under 18 will be allowed to transfer up to $50,000 from the higher earning spouse to the lower earning spouse to lessen the tax burden of families in which one partner – usually the mother – stays home to watch the children or works fewer hours or is employed in a lower paying job. The effect of income splitting is that it puts the higher income earner in a lower tax bracket. Harper announced that a cap of $2,000 savings will be implemented.
The tax relief plan was unveiled weeks after the NDP announced they would implement a national daycare scheme in which parents would pay a maximum of $15-a-day and the week before Finance Minister Joe Oliver announced that the federal government would be in surplus with the next budget.
NDP leader Thomas Mulcair and Liberal leader Justin Trudeau both complained that income splitting disproportionately benefits high income earners, ignoring most of the other benefits and tax relief the Conservatives presented. Trudeau has promised to scrap the income splitting measure if the Liberals are elected in the next federal election, schedule for October 2015. The Liberal leader has not offered his own plan for daycare or other benefits for families with children, saying he will wait until nearer the actual election campaign.
During the campaign-style announcement in Vaughan, Ont., Harper said, “our goal as a government has always been to make sure that Canada is the best country in the world in which to raise a family. That’s why we work hard to support families in so many ways.”
Harper said, “our government is utterly convinced of one thing: when it comes to cost of raising a family, Canada’s moms and dads deserve all the help they can get.”
The Finance Department estimates that the average Canadian family will save about $1,100 in taxes, which does not include the UCCB benefits.
Harper said, “we have always been clear as a government –this is a difference between our philosophy and the others – we have always been clear: money and support to help families raise children should not go into more bureaucracy, it should go to the real experts on childcare, that’s mom and dad. And that is what we are doing.”
Andrea Mrozek, executive director of the Institute of Marriage and Family Canada, wrote in the Globe and Mail that income splitting is “good public policy” because it respects the decisions that parents make, as opposed to the “one-size-fits-all” universal daycare approach. Mrozek said Canadian families need tax relief, because many of “those same families looking after small children are very often also looking after aging parents and we have more cause to allow families to keep more of their own money.”