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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:

Taxes - Tips and Reflections

Charitable Donations:  Top Ten Canadian Tax Tips 

Our Citizenship, Paid For By Our Taxes

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