Canadian Personal Finance Blog

So the Publics (Jane and her spouse John Q.) have a good life and an above average household income of $100,000.00 per year.

Single Income model:

• Income tax paid would be $27,661.98
• They would pay a total of $2640.00 in CPP and EI payments
• Final score around $30K in taxes and payments.

Dual Income model:

• Income tax paid would be $20,561.46 (paid by both)
• They would together pay $5280 in CPP and EI payments
• Final score around $26K in taxes and payments

Interesting so the gap for this family as laid out is about $4000.00 or so. Now this is after tax money, so the single income earner model would need to may about $7000 more gross income to be the same net income.Now I have had some very good comments from various readers (I am impressed that this has caused such discussion), commenting that I am not taking into consideration the high costs of day care and such. Those are good points, but remember that the dual income family also gets to write $7000 worth of that from their income, and no I am not saying it is a “wash” but that needs to be considered. There are other points as well that can be made, but it makes the argument quite complicated.My conclusions and final comments on this topic will be posted tomorrow.For those of you who agree or disagree, I open my forum to you, if you wish to write a rebuttal or supportive article, I am willing to post it (after reviewing it myself, it is my blog, after all). Leave a comment, I will contact you.

So far we have looked at what John and Jane Q. Public’s taxes were like if they both had equal paying jobs, but today we look at what if one of them had a job that paid as much as the two combined in the previous scenario.

Being the father of 3 daughters, I naturally have chosen that Jane is a high flying executive at Generic Co. and her husband John stays home with the kids (remembering that Mary their daughter is now much younger, thanks to the correction we did yesterday). Do the Publics pay more in tax now, or less than if they both worked?

Have a look at Quicktax version of this scenario:

So the final total in this scenario is $27,661.98 owing in Federal and Provincial taxes.

Note that John got to write off the UCCB grant since he had no other income.

Tomorrow, let’s discuss what we have seen the past two days, shall we?

The past couple of years, I have used my Quicktax program as a financial forecasting tool (as well as an excellent, if somewhat expensive, tax preparation program). Every year I wonder what is the difference if both my wife and I worked and earned the same Gross Family Income, as compared to our current situation where I am the sole bread winner (by choice)? (a note for American readers, there is no concept of income splitting in Canada, until you retire, and even then…)

I have pointed out on this web site (and to my members of Provincial and Federal Government) that the Canadian Tax code is slanted toward dual income families and actually penalizes the “traditional” single income family.

Before I get posts about how I am against women in the workplace, or the same kind of arguments, I am the father of 3 daughters, and I am not against women in the workplace (I prefer female bosses, if you were asking my opinion), what I am saying is that single income families do not get the advantages that dual income families have.

Some of these advantages are:

• Writing off day care costs. Now yes, this is legitimate costs of going to work, so I am not saying this is bad, however, they get to write off summer camps as well, however, I do not because my wife stays at home.
• The “equivalent to married” non-refundable tax credit I get for my wife adds up to not very much (I’ll have that as part of my calculations in later postings).
• A benefit of having two medical programs (which not all dual income families have) is that a lot of expensive medical procedures typically only covered as 1/2 on most medical plans, end up being covered completely by both insurance companies (e.g. Braces, Crown replacements, etc.,)
• What happens with CPP? Both in a dual income family would get CPP payments, but does my wife get one, in a single income family? Don’t know, need to go find that one out.

There are other tax advantages as well. Now, a single income family like mine has other advantages as well (I am not complaining about the single income concept, I think it is good), so let’s not get into discussions like that I am looking solely at the Canadian Tax system. My family gets the “Beer and Popcorn” money and doesn’t get it clawed back!

Coming next, what do the numbers say?

Related Links:

• The Disappearing Middle Class in Canada
• Spousal RRSP: Income Splitting
• My Spouse is Worth How Much?
• High Price of Parenting