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With a balanced budget on the horizon, Stephen Harper announced plans Thursday afternoon to let parents with children split their income and save on taxes. It’s getting a lot of headlines. But the question is — will it help a lot of Canadians?
As expected Prime Minister Harper announced an income splitting tax break for families with kids under 18.
How it works is, it will allow a higher inclined earning spouse to transfer up to $50,000 year to a spouse in a lower tax bracket.
This splitting will save families up to $2000 a year starting this year. This so called family tax credit is a 2011 election promise. Many have criticized it, saying it will only benefit people who are already well off and won’t help single parents at all.
But today the Prime Minister announced two other measures he says will help every family with kids under 18. That’s 4 million households!: “Our government is replacing the current child tax credit with an expanded Universal Child Care Benefit. Families will now receive $160 a month, almost $2,000 a year for each child under the age of 6. Effective this year 2014, couples with children under 18 yers of age will, for the purposes of calculating federal taxes, be able to transfer up to $50,000 of income from the higher earning spouse to the lower earning spouse and thereby save up to a maximum of $2,000 a year in federal taxes.”
All three measures will save the average family of 4 with one child under 6, $1,100 a year according to the Prime Minister.
The tax cuts will cost about 2.4 billion dollars. Harper says they are still on track to balance budget.
Some say the tax cut could spur economy.
Richard Rizzo, SB Partners: “I think the idea behind it is less — it will end up with less money initially in the government’s pocket but giving more spending money to the families which may encourage them to spend more money which can create more business and get more economy.”
One other promise the Prime Minister made in 2011 was to increase the contributions to tax free savings accounts to $10,000, that’s almost double. It would really help seniors.
We asked about that promise today. The Prime Minister said he was aware he made that promise and has a good track record of fulfilling them. He said to stay tuned for the 2015 budget in the spring.
