Has Flaherty got Harper's back, or is he stabbing him in it?
The finance minister seems to be at odds with the PM, but is it all an act?
Joe Biden and Jim Flaherty are both known for speaking their minds, being proud of their Irish heritage and now — perhaps — for providing cover while their bosses changed their minds.
In May of 2012, the U.S. vice-president said he was “absolutely comfortable” with same-sex marriage.
- Watch: The At Issue panel on Flaherty and income splitting
- Flaherty backs away from income splitting
- Income splitting aids wealthiest families, CCPA study says
Aides brushed it off as an off-the-cuff comment and cautioned against reading too much into it. Three days later, Biden's boss — President Barack Obama — reversed his position and became the first sitting U.S. president to publicly support same-sex marriage.
The perception of Obama’s move seemed all the less radical because he had apparently been "beaten to the punch," and was early enough ahead of the election for the public to absorb and forget.
On Wednesday, Finance Minister Jim Flaherty said of his government’s centrepiece election promise of 2011: “I’m not sure that, overall, it benefits our society. I think income splitting needs a long, hard analytical look.”
If the objective is to provide support to families in raising children, it would distribute most benefits where they are least likely to be needed.- C.D. Howe Institute Commentary
Later, while speaking with reporters, Flaherty went further, suggesting he’d already had his own analytical look.
“It benefits some parts of the Canadian population a lot,” he continued. “And other parts of the Canadian population virtually not at all.”
Much studied topic
It’s a conclusion we have heard many times before, just not from someone in government — never mind the person who is (ostensibly) in charge of the budget.
The following organizations have all offered opinions on income splitting:
- C.D. Howe Institute
- Fraser Institute
- Canadian Taxpayers’ Federation
- Canadian Centre for Policy Alternatives
- The Broadbent Institute
Each of these groups, despite different political leanings, reached the same general conclusion: at best; there are better ways to provide tax relief — at worst; it’s a terrible idea that will make things worse for the country.
Each also offered alternatives to how to spend the estimated $2.5-billion the promised income splitting would cost.
“The same amount of money could triple the working income tax benefit,” says Rick Smith, the executive director of the Broadbent Institute.
“It could result in a 25 per cent increase in the Child Tax Benefit, it could be a very large increase in the general parental tax benefits,” Smith also suggests.
“If the objective is to provide support to families in raising children, it would distribute most benefits where they are least likely to be needed,” found a report on the income-splitting proposal by the more conservative-minded C.D. Howe Institute.
Its suggestion? Just about anything else.
“Other policy instruments could be better targeted for families most needing support, or the funds could be used for general tax reduction, without the adverse effects of (income) splitting,” concludes the report.
The Fraser Institute was dismissive of the campaign promise in 2011. It suggested eliminating the middle tax-brackets would be a more effective and meaningful way to reduce taxes.
Or, “an even better and simpler option,” it said, “would be to implement a 15% flat-tax, which would negate the need for income-splitting.”
The Canadian Centre for Policy Alternatives suggests, rather than lowering taxes, the government help families earn more income.
“If Canadian governments are concerned about supporting families with children,” it concluded in a recent report on income splitting, “a far more equitable way of doing so would be to provide a universal child care program.”
Tough political choice
If the prime minister's intention is to back out of the largest promise from the last election campaign, he’s going to need quite the shiny bauble to help voters forget that before heading to the polls in 2015.
Of course, if Flaherty isn’t channelling Joe Biden and breaking the political ice for his boss — it must mean he is emulating another well-known Irish-Catholic politician.
In late May of 2002, former Finance Minister Paul Martin sparred openly with his boss, then-Prime Minister Jean Chretien. Two days later he was shuffled out of cabinet.
So, Harper has two options: either come up with a replacement promise or find a new finance minister.