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Canadian PM Harper unveils family tax breaks ahead of election

Friday, October 31, 2014 - 07:03
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Canadian Prime Minister Stephen Harper unveiled C$26.76 billion (US$23.89 billion) in family tax cuts and benefits over six years on Thursday, which will start flowing to voters over the coming year as the country gears up for an election next October.

[ONTARIO] Canadian Prime Minister Stephen Harper unveiled C$26.76 billion (US$23.89 billion) in family tax cuts and benefits over six years on Thursday, which will start flowing to voters over the coming year as the country gears up for an election next October.

This includes C$3.07 billion in cuts and benefits for the current 2014/15 fiscal year, ending next March, for which the Conservative government's budget had predicted a C$2.9 billion deficit. The measures are projected to cost C$4.62 billion in 2015/16.

Normally, tax measures are only introduced in the government's annual spring budget. But the timing of Harper's decision means that, instead of seeing election promises, voters will start seeing actual government checks and lower taxes ahead of next October's election.

Having the tax measures already in place could also make it more difficult for opposition parties to pledge to revoke them if elected, limiting their room for maneuver in the upcoming election campaign.

The most controversial measure would allow "income-splitting" for parents with children under 18. That would let a parent transfer C$50,000 of income for tax purposes to a lower-earning spouse, where the income would be taxed at a lower rate.

The plan would be of most benefit to families in which one spouse, such as a stay-at-home parent, has substantially less income than the other. The tax break will be capped at C$2,000, which limits its cost to about C$2 billion per year instead of the C$2.5 billion estimated in the Conservatives' 2011 election platform.

The fate of the income-splitting campaign pledge came into question earlier this year when late Finance Minister Jim Flaherty said he was not sure it would benefit society overall.

New Democratic Party leader Thomas Mulcair said the income-splitting plan would "cost billions of dollars and still give absolutely no help to 86 per cent of Canadian families... How does that benefit our society?" Supporters of income splitting say it is fairer to tax parents that have a lower combined income less onerously than those that have two big salaries. Critics say it is unfair because it does nothing for single-parent homes, and Liberal leader Justin Trudeau has pledged to revoke income-splitting if he wins the election.

The concept is loosely analogous to the US tax system, where people can choose "married filing jointly" status with lower tax rates than "married filing separately".

Another provision would enhance the child care benefit, which currently provides C$1,200 (US$1,071) a year per child under six years of age regardless of whether he or she is in day care. The enhancement will add a further C$720 per year for every child up through age 17.

The federal budget is expected to be in surplus by next year, and the Conservative government has long promised to return some of that surplus in tax cuts.

REUTERS

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