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I don't buy a car or house every year. I do earn income every year. That's why I prefer an income tax cut over almost any other tax cut.

I agree that income tax reductions are more imprortant right now, but just saying the GST at 5% would be a good thing too.

Especially in provinces with sales taxes of their own on top of the GST. it's just too high.

Otherwise I prefer consumption taxes to income taxes.

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At present in Canada, we have the CTB (which pays around $120/month/kid) and starts to be clawed back at family income around $40,000 and then we have the NCB that pays about $160/month/kid that is all clawed back by family income of around $20,000. Lastly, there's the Tories' UCC which gives a taxable $100/month/kid to the parent with the lowest income. (I hope that I have this right.)

First of all, all these schemes make a mess of the tax system. Depending on family structure, different people face wildly different marginal tax rates.

Pat C, you make the legitimate point that for two of our three federal child support schemes, the feds treat the family as the taxable unit, not the individual. (Incidentally, Quebecers don't get the first two child subsidy schemes since we have a day care system.)

One consequence is that often, it makes more sense for a couple to remain separate and file separately.

Often, not practical.

My feeling about household income taxes (or income splitting if you prefer) is that we already subsidize a stay-at-home spouse because her work/efforts are now tax-exempt. We would be compounding this error if we allowed two individuals to split one person's labour market income.

It's a mistake to think that this is a SIF problem only. If the wife works outside the home and cleans toilets for $12,000/year, and the husband drives a truck for $90,000/year, they are also penalized thousands more in taxes than a family in which each spouse earns $56,000/year.

The working and stay-at-home spouses both do housework, so this "untaxed labour" argument is a false one, IMHO.

Here's a suggestion: provide the same personal exemption for each person in the household - say, $10,000/adult and $5,000/kid. Then, file a single income tax statement for the household and deduct the exemptions. We could even throw in a, say, $2000 marriage exemption. The household (and each member) would then have a single marginal tax rate.

Does that make any sense?

The DIFs would have a problem with the above. You've combined their incomes without creating additional tax brackets, so they'd pretty much be treated like single-filers. Don't forget, we have credits, not deductions, for spouses, at the lowest tax rate (25%).

Our (idiotic) system removes any deductions/credits for upper middle-class families and targets all benefits to lower income families. Therefore, if you are supporting a wife and 3-4 kids on a $100K income, your tax burden is going to be almost the same as a single person with no dependents, give or take $200/month. So much for a tax system that's supposed to be based on ability to pay...unless you feel that the single person and the guy supporting a family of 5-6 have the same ability to pay.

I prefer the US approach, which has different tax brackets for couples vs single-filers. All families pay the same taxes on the same combined income, and there are actual deductions for kids (not like the CTB payments which can be clawed back).

Now that retirees can split their income, there will be enormous pressure to do something similar for other families.

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Not when you take onto consideration that families that have children are worth more to society than young single males like yourself. The tax system should reflect this reality. Grooming the next generation of tax payers is not an easy accomplishment. The tax system needs to reflect this.

You want the government manipulating and controlling and advocating people's family and sexual behavoir?

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You want the government manipulating and controlling and advocating people's family and sexual behavoir?

When it comes to creating a tax environment which promotes more than 1.7 kids per family, you may wish that they did.

Over the next 5-10 years, something like 40% of the workforce will retire. We have an economy that EXPECTS 2-3% price inflation each year. This is what keeps the housing market going. When huge numbers of people retire - and no follow-up generation to replace them - there is going to be a severe downturn in the economy.

You'll probably see the government come up with tax changes that encourage families to have more kids then, but it will be too late (hint: it already is).

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It's a mistake to think that this is a SIF problem only. If the wife works outside the home and cleans toilets for $12,000/year, and the husband drives a truck for $90,000/year, they are also penalized thousands more in taxes than a family in which each spouse earns $56,000/year.
Pat C, your example cuts to the chase.

If we had a flat tax (or more accurately stated, a single marginal tax rate), the whole question would be moot - with a slight bias to marriage if the personal exemption were not refundable. If we based the tax on households or individuals, the marginal rate would be the same and exemptions the same.

Unfortunately, we have a "progressive" tax system where the tax percentage rates are higher for people with higher incomes. Should we assess individuals or households at a higher tax rate? IOW, should an individual who earns $100,000 pay a higher marginal tax than an individual who earns $50,000? Pat C, that's your question. You argue that if the person is married to a toilet cleaner, then the marginal tax rate should change. Why?

It seems to me that on an individual basis, we should tax the rich (smart, beautiful, blue-eyed) and give to the poor. If the rich (beautiful, smart) decide to distribute their wealth privately through their own choice of partner, that's their affair. Presumably, they gain privately in the exchange.

I still think that an individual who earns a higher income should pay a higher marginal tax rate, regardless of family income.

Edited by August1991
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Pat C, your example cuts to the chase.

If we had a flat tax (or more accurately stated, a single marginal tax rate), the whole question would be moot - with a slight bias to marriage if the personal exemption were not refundable. If we based the tax on households or individuals, the marginal rate would be the same and exemptions the same.

Here's my answer. The framers of the US constitution wanted to avoid the concentration of wealth in the hands of just a few, having come from such a system in Britain. Initially, they tried to solve the problem with just an estate tax (very high rate, I believe). Lobbyists fought hard recently and almost managed to repeal the estate tax. The ultra rich want to keep all their money.

We in Canada also need to avoid the concentration of all wealth in the hands of just a few. To a better extent, we have succeeded. Moving to a flat tax would encourage more wealth concentration. This is my main problem with a flat tax. I don't believe that someone earning $60K should be taxed at the same rate as a Bell Canada VP earning $750K/year. When you speak of a flat tax, you aren't giving enough thought to the really big income earners.

I think you might accept what I've long advocated, namely, that we have just TWO tax brackets for each family class. All income up to the first threshold represents money needed to live on, pay for kids' braces etc., would be taxed at rate A (e.g. 20%). All income above that threshold would be taxed at rate B (e.g. 40%). Rate B might kick in for a single person at incomes above $70K, while rate B would kick in only at $120K or so for a family of 6.

Unfortunately, we have a "progressive" tax system where the tax percentage rates are higher for people with higher incomes. Should we assess individuals or households at a higher tax rate? IOW, should an individual who earns $100,000 pay a higher marginal tax than an individual who earns $50,000? Pat C, that's your question. You argue that if the person is married to a toilet cleaner, then the marginal tax rate should change. Why?

We need a progressive system for the reasons I gave above. The problem is we have too many tax brackets and they're only applied to singles, not families (we have defacto brackets for benefits though, based on family income).

To answer your question, if the $100K income earner is supporting a family of 5 then it may make sense for him to pay the same rate as a single person earning $50K. If they are both singles, then the $100K earner should pay a higher rate on the portion of his/her income over the first threshold for the single family class, e.g. $70K.

It seems to me that on an individual basis, we should tax the rich (smart, beautiful, blue-eyed) and give to the poor. If the rich (beautiful, smart) decide to distribute their wealth privately through their own choice of partner, that's their affair. Presumably, they gain privately in the exchange.

I still think that an individual who earns a higher income should pay a higher marginal tax rate, regardless of family income.

IOW, you don't think the incomes of both spouses should be tied together for tax purposes.

Okay, then if my wife has zero income, can she apply for 50% of the child tax credits that a single parent with the same number of children is entitled to? Or, do you want to have your cake and eat it too?

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How absurd can it be, given that this is how the tax system works in the US. There, every family with the same income pays the same taxes. How absurd is that???

The tax break is not currently given to all DIFs (dual-income families). Those which have one spouse earning most or all of the income are, in fact, treated pretty much like a single person. THAT is absurd.

One thing that you and I agree on, is the second income, especially when taxed in the lower tax brackets, represents a HUGE increase in disposable income for many families. This is what has pushed the price of houses up to the $300K-$400K range, and beyond.

Question for you: If you are in favour of taxing ONLY individuals based on their income, then, if my wife stays at home and has zero income, should the government treat her like an individual with zero income, and allow her to apply for 50% of all available benefits on her own? For example, each child is eligible for a maximum of $1,500 per year in CTB payments, which starts to get clawed back after $40K of income. We have 5 kids. Should she be allowed to received half the total ($3,750), while most of my share is clawed back?

Or, are you in favour of looking at family income when it benefits the government (use it to claw back family benefits) but not when it might benefit the individual (allowing a spouse to disassociate his/herself from the other spouse's income).

I can't agree with you more.

The income tax is based on individual income, not family income; while benefit is based on Family income, not individual income. THAT is ABSURD AND SUTPID.

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You want the government manipulating and controlling and advocating people's family and sexual behavoir?

well, not their sexual behaivior, only their procreational goals.......hell, they could do it standing up if it meant more children.

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I suggest everyone needs to take a step back and listen to the complete Declaration of Independence of the United States. The voice used is an excellent rendition of the time period and gives it a more realistic feel. I haven't listened to it in quite some time and it has opened up some previously closed doors of understanding. You Tube has a copy of it here:

http://www.youtube.com/watch?v=HWNTucZ-5Dg

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