A Certainty: Changing Taxes Reflect Our Changing Lives
Brandon Sun, November 2, 2006 - David McConkey
The way that income taxes are collected provides an interesting
snapshot of how our society works and changes. This thought occurred to
me this fall when I took an evening course on income tax preparation.
The last time I took such a course was 15 years ago. The differences in
the income tax system since then reflect our society’s
changes and challenges.
This column: complexity and diversity. Next time: productivity,
sustainability, and the future.
Complexity: Our tax system is complex because our society is
complex. And our tax system, like our society, is even more complex
than it was 15 years ago.
Despite calls for tax simplification, politicians continually re-jigger
the system to promote actions in the lives of Canadians. This
development has been dubbed the “nanny state.” For
example, the new Conservative government has introduced tax credits for
transit users and parents who enroll their kids in sports programs.
Another area of increased complexity is provincial. Fifteen years ago,
provincial taxes were simply a percentage of the federal tax. Now, the
provinces have developed their own systems of tax credits and tax
rates.
Canadians are still mystified at the tax reform that was brought in by
the Mulroney Conservatives in 1988. Specifically, the public is
confused by the changeover from “deductions” to
“credits.” For example, charities say they give you
a tax-deductible receipt. It is actually a tax credit. (Even our tax
course text occasionally mixed up credits and deductions!)
The system of tax credits is thought to be fairer than deductions. The
government, however, can overstate the benefits it is providing
taxpayers. For example, in 2006, every Canadian resident receives
$1,348 off the federal taxes they would otherwise pay. But you
won’t see that number anywhere on your tax return. Instead,
the government gives you a “basic personal amount”
of $8,839. The higher number sounds much more generous,
doesn’t it?
Diversity: Related to complexity is diversity. One example is
adoption. In previous years, adoptive parents often just went to the
next town to pick up their new child. Now, they often go to the other
side of the world. A new credit for up to $10,000 for adoption expenses
accommodates this change in reality.
Probably the greatest increase in diversity has been with marriage.
Now, common law relationships have the same income tax status as
legally married couples. And, of course, those couples can now be
composed of individuals of the same sex.
Along with the change in the definition of marriage, we can anticipate
some continuing interesting discussions.
Is there a “marriage penalty”? This is a term often
used in the United States, and refers to taxes that discourage
marriage. In Canada, for instance, there are credits that single people
can use that are denied to married people. Also, GST and some other
credits are calculated differently for married and single people.
When are two people living in the same residence roommates, and when
are they married? Especially now that “married”
refers to both common-law and legal marriages, as well as different and
same sex couples. Tax advantages or disadvantages could hinge on a
crucial word: “conjugal.”
In the next column, I’ll comment on income taxes and
productivity, sustainability, and the future.
See also:
Charitable Donations: Top Ten Canadian Tax Tips
Our Citizenship, Paid For By Our Taxes
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