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Personal Income Tax System, Time For An Overhaul?
Transcript of Personal Income Tax System, Time For An Overhaul?
Time for an Overhaul?
Positives in the Personal
Income Tax System
Negatives in the Personal
Income Tax System
Around the Globe
Tax Impacts on Single
The positives in the income tax system in Canada consist of:
-as Canadians we are able to contribute to our own RRSP (Registered Retirement Savings Plan) to some extent
-Canadian Pension Plans can be split equally between spouses
-assets a pone a spouses death can be put into a tax free plan to be put towards opportunities that are available
-we can split investment income between two spouses
-self employment income can be split among members of a household to some extent
-nine different counties apply the personal income tax system
-the French and Portuguese systems have family income but explicitly allow for family size to reduce there tax
-the Czech Republic, Germany, Ireland, Poland, Switzerland and the U.S allow family members file jointly to split the income fairly
-other countries rely on individual taxation but often allow for family tax principles such as the transfer ability of deductions or splitting the income
Consider two families who live in Canada, both have two children, one has two working parents while the other only has one. The two working parent both earn a salary of $35,000 and the one working parent earns $70,000 a year. The two working family has $10,264 of income tax while the one working family pays $14,165. This is an extra $315 monthly penalty.
The overhead costs in running a household are lower per person for larger compared to smaller households which could potentially be fixed by
-the treatment of different types of families
-improve a families way of living
The second point would be a spouse staying at home earns untaxed leisure or production income, which can affect people with two working parents because they incur costs of living which could potentially be fixed by
-not having the minimum costs of living not having tax on them
-by becoming more fair between families
the last is that under family taxation, a spouse who chooses to work faces a much higher tax rate of tax compared to individual taxation. This would make it harder for
-a spouse to become financially independent
-adds on a bigger expense
-there needs to be more changes in the system but it will take some time
-it is okay the way it is now but with the economy the way it is going there are many improvements that could be made
-some situations in the system are unreasonable
-there has been progress on the personal income tax system but it is not as its fullest potential
-there need to be corrections done about the taxes raised to fight the deficit during the 1980s and 1990s.
-there needs to be more done on the equal treatment of families no matter what the size is
-the negative of the personal income tax system is that the refundable income tax credits are too low for low income households
-fairness should be achieved by horizontal equity by the equal treatment of equals
-some examples of situations that are happening that we could fix about the personal income tax system would be: