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May 01, 2006
Taxes and families
In my previous post 15% I argued that tax system in Canada is biased against families with one earner. Except families with a filthy rich husband and socialite (former model) wife or a filthy rich wife and playboy husband, all others are average families: one spouse works and another is either a full-time student, or tenders young kids, or is infirm, or often works as a volunteer. However such families pay much more in taxes than the families with the same total income equally distributed among spouses.
Clearly this fits Liberal agenda: both spouses should work and young kids should attend subsidized day-care. But it does not fit Conservative agenda to provide a choice.
The best way would be to go the French model: first the number of family-parts is calculated:
husband=wife=1, child=1/2, so family of two with two kids has 3 parts (some adjacements for a single-parent family should be made with a first child counted as 1). Then income per-part is calculated and the tax rate is defined according to it.
However, if this is too sharp turn, the first approximation would be: convergence of tax rates in all brackets (so the reduction in the lower tax bracket is bad), making spouse tax exemption equal to one of the husband and introducing per-child tax exemption, increasing the limit of education/tuition amount which can be transferred from the child/spouse.
We need not forget about the poorest members of society, but they should be served not by decrease of the lower bracket tax rate but by increase of the personal exemption. The person who earns 15,000 per year gains very little from the former and much more from the latter.
Posted by Victor at May 1, 2006 05:07 AM