Election Plank: Household Income

One of my favorite topics to discuss with anyone political is: why is it that the Canadian Tax system seems to be skewed against the single income family?

Most of the time the response I get back is a lot of “baffle gab” about supporting families through social programs, etc., however that is not what I am saying.

If you gave a couple (be they married or not) an ability to pool their income and income split (as they currently can with pension income after age 55), you might be surprised at what comes of this. If I was able to income split with my spouse (when I was employed at least) the amount of tax I would have paid would have been staggeringly less than I did as a single income earner, even with the paltry tax credit for the “Married tax credit”.

I have done numerous articles on this one (and have caused some interesting discussions in the comments as well), so I won’t rehash the numbers, but I think if the government gave families or couples the capability to income split or income balance (if that made sense) and had the concept of the Household Income, I tihnk they might see:

  • More single income families, since it would make more sense for a spouse to stay home instead of taking a lower paying job.
  • Higher employment numbers, since there would be many people who would stop looking for work, as they are more of a family asset as a tax shelter.

Haven’t had any politicos appear on my doorstep yet, but given I am home all day long, I feel sorry for the first one to show up on my doorstep.

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Best of: I should Divorce My Wife?

I have been cleaning up my directories and looking over the 900+ postings I have been doing over these past few years and I came across this gem, I Should Divorce My Wife? which points out how strangely set up the tax system is. The concept is purely a “what if” scenario.

I should divorce my wife?

I read that one on the Alan Baggett news site, and scratched my head but it is actually how the tax system is set up currently. If I divorce my wife and pay her Alimony (not child support, remember that case a while back, where that is taxed in the payers hands) I can effectively split my income.

I remember having this argument that in the Government’s eyes the following scenario would be ideal:

  1. Divorce my wife, and pay her half my salary as Alimony (thus sharing my income)
  2. Have my children live with me, so I might be able to claim the Child Tax Credit and Ontario Tax Credit
  3. Rent my wife an apartment in the basement of my house (with it’s own entrance).
  4. Have my wife take care of the kids (as daycare) and write off the money I pay her on my income as well (and she does it in my home, so I write that off too).

OK, ok, this is a ridiculous scenario (and I’m sure some might even claim illegal, although I’d love to see that taken to court), but this is how messed up {sic} the entire Canadian Tax System is! I checked this with Quicktax and it was quite happy to show me the obscene amount of tax I’d save.

Alan’s tax bible is an interesting read, as are his stories (they are a little “he said, she said” which at times I am not fond of), but still interesting to read how some people are persecuted by the Tax system, while others get off “scott free”.

Please let me repeat, I do not condone the above tax sharing concept (but if you get away with it drop me a line, I’d be curious to hear).

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What is RICH in Canada?

Stats Canada has published an interesting article outlining what your income level in Canada needs to be, to think of yourself as RICH (for 2004 at least):

An annual income of $89,000 was enough to put an individual among the 1.2 million Canadians who made up the top 5% of the country’s taxfiler population in 2004, according to a new study.

Similarly, an income of $181,000 was sufficient to put someone among the 237,000 people in the top 1% of the taxfiler population.

But to be part of the richest one-hundredth of a percent (0.01%) of taxfilers, Canadians had to have income of more than $2.8 million, the study found.

Interesting striation of the data, now this is individual income too, not sure how they would measure dual income families and such, are you Rich? Really Rich? Super Rich?

September continues on, and with the beginning of Autumn, do you need to start thinking about fall financial things?

  • RESP top ups for the end of the year?
  • RRSP top ups as well?
  • Insurance coming due soon?
  • Property tax assessments coming?
  • Preparation for the holiday season, by planning what you are going to spend and maybe figuring out “who gets what” early on?

Just some of the ideas to think about instead of raking leaves!

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Cheaper Day Care Alternatives

So after my posting about the cost of raising kids a while back a lot of folks pointed out the costs of daycare and how this is prohibitive for dual income families. To those who were so vociferous in your commentary about how I had missed the point, please watch the following video which I think puts forth a viable alternative to the high costs of daycare.

 


Report: Many U.S. Parents Outsourcing Child Care Overseas

Many thanks to John Chow for pointing this one out.

Related Links:

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Median Family Income

This is another blast from the past note the date of posting (2007)

Thanks to everyone who commented on my dual income vs. single income family income discussions. That was interesting stuff, I have one more post on that, but I have to do some number crunching first, so I will hold off on that for a little while.

Stats Canada did have a very topical post last week entitled. Family Income which discusses the typical family incomes across Canada. Evidently the Median (remember we talked about what Median means in “Who Lives on the Median Income” , it is the mid-point in a list of numbers) income for a family is highest in Ottawa-Gatineau (should I be proud about that?), which is $86,100, which is far higher than double the median income mentioned before (remember that Median was about $26000 ). For all families in Canada the median is $60,600 which is up 2.1% year over year.

Remember that this is a smaller data set than the generic median income data from last week (it only includes “families”, and not single folks, etc.,).

So what would happen if we gave the Publics from last week the Median income for Canada?

If there was a single income earner and her gross income was $60,600.00the family would owe:$11,914.32 in provincial and federal taxes and $2640.00 in CPP and EI payments.

If the income was split equally across the two of them they would owe a combined: $8475.42 and $3786.42 and in CPP and EI payments.

In that instance a difference in taxes of about 15.7% (not including things like daycare and such). The dual income model they are more likely to get Ontario Tax Credits as well.

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