Flaherty backs away from income splitting - Macleans.ca

Flaherty backs away from income splitting

Could a Conservative promise be losing steam?


Late last month I wrote here about the oddly casual way Finance Minister Jim Flaherty had taken to talking about a wide range of important matters, from internal divisions in the Conservative caucus over how much to spend, to the Canada Job Grant, and even the future of the Senate.

My point was that Flaherty increasingly stands out in a government otherwise characterized by, above all else, rigid discipline on messaging. “If he keeps this up, it will be worth listening very closely to Flaherty when he tables his Feb. 11 budget and in the days to follow,” I concluded, adding, “The script doesn’t seem to mean all that much to him these days.”

Well, I was wrong about one thing: We actually needn’t listen all that closely. Flaherty has made it impossible for even the most casual listener to fail to hear him venturing far, far away from the government’s approved talking points. I refer, of course, to his remarks this morning on the signature Conservative plan to allow couples to split their incomes when it comes to paying taxes.

“It’s an interesting idea. I’m just one voice. It benefits some parts of the Canadian population a lot. And other parts of the Canadian population virtually not at all,” Flaherty said. Every short sentence in that bracing quote deserves a quick parsing.

1. “It’s an interesting idea.” That’s true, but hardly complete description. More accurately, income splitting is a policy commitment that Stephen Harper described, during his triumphant 2011 election campaign, as “one of our highest priorities” as soon as such tax breaks became affordable, after the projected balancing of the federal budget in 2015-16.

2. “I’m just one voice.” Again, accurate in some narrow sense, but not a well-rounded description of reality. James Michael Flaherty is the one and only finance minister in the eight-years-and-counting history of the Harper government. He was named, as his admirers like to mention, “finance minister of the year” by EUROMoney Magazine in 2009, the year of the Great Recession, when being a good finance minister really mattered. There is no one voice that carries more weight on federal tax policy.

3. “It benefits some parts of the Canadian economy a lot.” Right. Those in best position to benefit are couples with one partner earning a lot and the other not very much. A study by the Canadian Centre for Policy Alternatives—granted, a left-wing think-tank that’s reliably critical of Conservative policy–suggests the richest five per cent of families, with income more than $147,000, would on average benefit by $3,100 a year.

4. “And other parts of the Canadian population virtually not at all.” That same Canadian Centre for Policy Alternatives analysis forecast that the average benefit  for the bottom 60 per cent of Canadian families, making $56,000 or less, would be $175.

Those numbers are not definitive. Other experts should wade in. Flaherty described himself as bringing an “analytical” approach to the cabinet table. Beyond the obvious political awkwardness for the Prime Minister that this latest outburst of frank talk from his most senior minister presents, maybe there really is an opportunity here to spark some serious, wonkish debate, with figures flying and theories vying.

Which is as it should be. Flaherty’s style sounds eccentric today. If only it could catch on.