Income splitting? On average, forget it

Back in the day as they say, when we were raising children and paying our mortgage, I might have liked Stephen Harper's plan for family income splitting and the Universal Child Care Benefit.

Not really thinking too hard about things, I might have even voted for it. But I wonder if it would have gotten me ahead in the world.

We were Harper's target demographic: one-income family with kids. That would be one-income married family with kids. Single parents are not Stephen Harper's target demographic.

I've been trying for a while now to figure out if we would have been better off back then, if we had income splitting — and I can't definitely judge either way.

Maybe that's why I have someone else do our income taxes. Or maybe that's because the income splitting benefit is so marginal, you can't see it on the back of an envelope.

I was an average income earner, most of my life. My income didn't surpass the national average until after we'd paid our mortgage, and the kids were gone. The benefits of a university education, I guess.

Half of Canadian workers earn less than roughly $32,000 a year. Because high income-earners raise the average, the average Canadian wage slave these days earns just over $48,000.

But suppose I became Mr. Average today, with a wife at home and four (4) kids 8 years and under, as I was for a while back then. Would Stephen Harper be as good a friend to me as Pierre Trudeau and Brian Mulroney were?

Hard to say, but on average, not likely, or not much.

Today, on my average $48,000 income, I can deduct $11,038 for myself, $11,038 for my non-working spouse, plus CPP, EI and all that other stuff to lower my taxable income. The refund for a dependent spouse today: $1,655.

The maximum benefit from income splitting: $2,000. Well, the equivalent of $350 would have been quite welcome, back in the day. I guess.

If I received the average benefit calculated for families with income splitting, it would be $1,140. But today's Mrs. Average has an income, and can't be deducted as a dependent.

That would mean child care. That would mean costs.

Registered daycare costs up to $950 a month in Red Deer. Being average, we would make that $850 a month, per child.

The Universal Child Care Benefit is being raised to $160 a month for the kids not yet in school, and $60 a month once they get to school, through age 17. So we, with three pre-schoolers costing a total of $2,850 a month for child care, would need to keep our receipts and claim the $2,160 a month the benefit does not cover.

The $8,000 cap on what you can claim per child would have come almost $2,000 a year short of total actual costs. (I'm told by people who looked at the numbers, that with three kids, it's cheaper to hire a live-out nanny, or for two kids, if the nanny lives in the house with you.)

So, for us, the decision today would have been pretty much the same as it was back in 1980s. Have Mrs. Average work full-time, and put half her take-home pay into child care (hoping for a refund at tax time)? Or just forget the hassle, stay home and be poor, rather than working full-time for an average salary, but really keeping less than minimum wage at the end of the month?

We opted for full-time parenting, and until the youngest was in school, we all just learned to be frugal. Well, thereafter as well.

The numbers Stephen Harper has on the table today contain negligible new financial incentive to put Mrs. Average into the workforce when there are preschoolers in the house.

So how did we do it back then? Our average house was an eighth the cost of an average house today (though mortgage rates were triple today's rates).

Utility bills back then were a tenth of what The Averages pay today. Car costs? The total price of gas in the 1980s was less than just the tax component of gasoline today. Gas mileage sucked, but nobody cared.

If Harper really wanted to buy our support, he'd ditch income-splitting altogether, and just lower income taxes for the Modern Averages.

The Averages today earn $74,500. If they live in Alberta, that would be $94,460. That's almost always with two-incomes, and almost none of them will get any benefit at all from income splitting.

They don't have four kids, either, so the Universal Child Care Benefit (which doesn't cover much) and the child care expenses deduction (which doesn't last long considering the life of a family), don't make for the hard decisions we made back in the day.

You know, I really don't think Stephen Harper cares that much about us Averages.

Follow Greg Neiman's blog at Readersadvocate.blogspot.ca