Summer Reprise: Canadian Government Hates Single Income Families (Final Analysis)
Given it is the summer and my mind is not on the world of finances today, I will reprise one of my more controversial statements which was one of the first postings I did in 2005. Hopefully my mind will swing back to the world of personal finance in a while.
Canadian Government Hates Single Income Families (Final Analysis)
So what have we learned?
- In our specific scenario (read all of my disclaimers in my previous posts) a Single Income Family as compared to a Dual Income Family, pays:
$7424.00
Approximately MORE in taxes (that is Provincial and Federal taxes combined). - This means that the Single income family to NET the same would have to make over $12,000.00 GROSS more to bring home the same amount (that is just unfair). Remember the single income earner at that level is taxed at the HIGHEST level on that extra income.
- The Dual Income family is MORE likely to be eligible for:
- Family allowance cheques
- Provincial tax credits
- Pay less for the Ontario OHIP TAX
- The Dual income family gets to write off a great deal on Daycare including:
- Daycare costs
- Summer Day Camps costs
If this doesn’t convince you that the Taxman HATES Single Income families, I don’t know what would.
If you agree or disagree comment on this, I am willing to dialogue with folks on this, but if you agree that this is UNFAIR, contact your member of Parliament. Remember an election is just around the corner, and they MOST LIKELY will return your calls (as opposed to afterwards when they kind of forget you exist (IMHO)).
What can we do to fix this?
- Introduce a FAMILY or HOUSEHOLD income concept, where spouses or live-in folk can split the income (or even level the taxes) of the house and NOT get taxed at such a high level.
- Might promote more folks to stay at home with kids (thus not as much daycare)?
- Overhaul the whole tax system, so that everyone pays the same thing. Here I should be careful, because they’ll just end up making dual income folks pay as much as Single income folks!
- National Daycare moneys should go directly to the families, (ALL OF THEM) and let THEM figure out what to do with the money (ok, now I sound like Ralph Klein).
The previous points are MY Opinion only, but maybe it’s time to get more than just crazy crackpots like ME thinking about this?
If you want to compare this and have Quicktax
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July 15th, 2009 at 10:11 AM
The trouble is that you are comparing a luxury of being able to live with one spouse taking care of the house, with a struggle of trying to compete to provide similar situations for their family while sacrificing quality of life.
You also forget to take in to account that the dual income family will have to pay well over 8000 in child care in order for the second working spouse to work.
Lets take two families that make 70K, a single income and dual income with 2 kids in Ontario. They will pay the max they can claim for child care, one toddler getting the CCTB/UUCB, and one in elementary who needs after school care.
Scenario 1, 70K single income.
Income Tax: -13146
CPP: -2119
EI: -732
CCTB: 1509
UUCB: 1200
Total Take Home = $56712
They can go to the library after school, worker spouse comes home to fresh meals because home spouse can comparison shop and buy fresh stuff every couple of days, and their kids grow up with a stable household because they aren’t feeling like they are dragging the family down all the time being shuttled from babysitters to day cares to family members all the time.
Scenario 2, 70K dual income Split 40600/29400 (42% of income by lower spouse, the last average I can recall reading).
Child Care: -11000 (7000 full time, 4000 after school/summer).
Income Tax: -7172
CPP: -3188
EI: -1211
CCTB: 1949
UUCB: 1200
Take Home Pay = $50578
Plus, depending on the circumstances, they may need to run two cars, sacrifice better accomadations, the working people may have to miss more time and concentrate less on work in the future because they are both too tired to give work 100%, they possibly eat much more instant and convenience food making their health suffer and possibly causing more sick time to be used. . . Plus their kids feel like they are an inconvenience rather than a valuable part of their family. The kids mom and dad won’t be at the Christmas/Holiday pageant, because they have to work.
Which would you rather be in?
The only argument I can see is that the spousal credit should always equal the personal credit. It makes no sense to have the credit less just because you are a couple.
I’m not sure if you can tell, but I just went from a dual income to a single income house due to a job loss and life suddenly got a LOT easier. My spouse wants to go back to work, but I set a salary limit to be above for it to make any sense. I would be willing to bet there would be far more single income households if people would sit down and go over their finances to figure out if working is really worth it for the lower income spouse.
July 16th, 2009 at 7:30 AM
When we went for dual income to single things were very tight. My husband made $64k, we lived in BC at the time, had one car, had a little baby (so believe me, I wasn’t comparison shopping – you get and get out as fast as you can!). Most of the moms I met at the time who were staying at home had all made similar sacrifices. We had also sacrificed my ENTIRE income of $33k (these comparisons never take that into account).
Never the less, I don’t regret it. I think it was best for my family and my kids (now 10 & 7) are very happy, well adjusted, and doing great in school, in spite of moving 4 times in 3 provinces. My husband thought it looked so good he quit his job to start his own business, and now he gets to do all kinds of stuff with the kids too!
July 16th, 2009 at 12:15 PM
Keep in mind the article was about taxes, and only taxes. What one family considers a luxury, another may consider a necesity for their circumstances.
Equating having a stay-at-home parent as a luxury is an argument that can go on all day with no clear winner.
Until the government offers tax credits for “luxury” things will never be fair.
July 18th, 2009 at 8:49 AM
I’m curious, those of you who said that one income is better have you thought about what happens when the second spouse does go back to work? In many careers, taking time off to raise kids is akin to career suicide or very major setbacks in advancement and earning power at the very least.
The fact that women stay home with kids and lead longer lives leads to a higher percentage of women living in poverty in their senior years.
I’m trying to structure my career so that I can have a part-time business while my kids are small just so I can “stay in the game”. I know I’ll be spending a lot on childcare even if it’s just part time, but to me I think it will be worth it to not have to start from scratch career wise once my kids are in school.
July 18th, 2009 at 10:04 AM
Why do you assume that you must stay home with your child? Can’t your spouse stay home? More men are staying home on paternity leave in Canada, and there is less stigma these days associated with it. Just another idea, if you think your career is that important then plan accordingly.
July 18th, 2009 at 5:07 PM
Bigcajunman, I totally agree. I know a few couples where the fathers stayed home with the kids until they reached school age. They took on freelance work or teaching to stay active in their fields. That’s what I’m aiming for too
I don’t have a spouse yet, so all I do is plan my own career so that I’ll that flexibility. (Besides, I have to plan for the physical toll pregnancy and childbirth is going to have on my body). I’d love it if my future husband wants to stay home with the kids, and I hope he’s thinking about that too.