Prime Minister Stephen Harper will announce Thursday an income-splitting tax break for families with children under the age of 18,
The move will allow a higher-income spouse to transfer up to $50,000 of taxable income to a spouse who is in a lower income bracket. The measure will provide eligible families with up to $2,000 per year in tax relief and cost the federal treasury $2.4 billion next year.
Harper will also announce other tax breaks for lower- and middle-income families, sources
Income splitting was a key Conservative campaign plank during the 2011 federal election. The upcoming announcement is another way for the Conservatives to firm up their core support before next year鈥檚 vote, pollster Nik Nanos said.
鈥淧ocketbook issues drive vote behaviour,鈥� . 鈥淭he Conservatives understand this very well.鈥�
Thursday鈥檚 announcement will come on the heels of a revised federal deficit projection. Earlier this month, Harper announced that Canada鈥檚 2013-14 deficit was forecast at $5.2 billion, much lower than the 16.6-billion shortfall previously projected.
The idea of income splitting has always appealed to many Canadians, but it has also been a contentious issue within the Conservative caucus.
The late Jim Flaherty, who died in April shortly after stepping down as federal finance minister, helped develop the income splitting idea, but later seemed to back away from it, saying it benefits 鈥渟ome parts of the Canadian population a lot and other parts of the Canadian population virtually not at all.鈥�
But other Conservative MPs and cabinet ministers, including Employment Minister Jason Kenney, urged the prime minister to push ahead with the income splitting tax break, despite the high cost.
Many economists have said that income splitting isn鈥檛 fair because it mainly benefits higher-income families and stay-at-home parents who have high-earning spouses.
鈥淚f 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,鈥� said Fred O鈥橰iordan, a national tax services advisor at Ernst & Young.
