A few days ago, Paul Adams wrote a very compelling article about the nuances and complexities of being “middle class”. Apparently most Canadians consider themselves “middle class”, although the “middle-income is getting a smaller share of the total Canadians earn than they were 30 or 40 years ago”. His article is about the various ways middle income can be defined and what this may mean for Trudeau who is focused on the “middle class”.

There is no such thing as a homogeneous middle-income class. This is particularly true when it comes to tax policy. The reality is that families who consider themselves middle income are so diverse in their composition that they are impacted quite differently by the tax system.

As an example, consider the current Conservative government’s 2011 election commitment to allow families with children under the age of 18 to split income for tax purposes. This sounds like a proposal that should appeal to “middle-income families”.

The reality is, however, that such a tax change will not benefit most middle income families. Single parent families will not benefit at all no matter what their income. In addition, middle-income families with two earners in the same tax bracket will also not benefit from this proposal. The middle-income families who will benefit most are those with one spouse in the highest tax bracket and the other spouse in the lowest tax bracket or better still not working. A study done by the C.D. Howe Institute calculated that 40 per cent of the benefits would go to families earning over $125,000.This is a tax change that will encourage people to withdraw from the labor force or not enter the labor force.

What about splitting income for seniors introduced by the Conservatives in 2006? Which middle-income seniors benefitted from this tax change? The only seniors who gained from this were “middle-income seniors” with one spouse in a high tax bracket and one spouse in a low tax bracket or who never worked. Singles, widows, and widowers were out of luck, even if they considered themselves “middle class”, which is unlikely, because most are probably living barely above poverty levels.

The same is also true for the special tax credits that were introduced by the Conservatives since 2006 to help “middle-income families” put their kids in athletic or cultural activities.  Families who may think they are middle class but don’t pay tax will find that they have not benefited from these tax breaks because these tax credits are not tax refundable.

The point of this is that when it comes to designing tax policy there is no such thing as the middle class. What matters is who benefits and who doesn’t.

The 2015 election will be fought over how to use the surpluses beginning in 2015-16. For the Conservatives, the first claim on these surpluses will be to fulfill their 2011 election promises. This includes allowing “middle-income families” with children under the age of 18 to slit income; expanding the fitness tax credit to adults, and, doubling the annual contribution to the tax-free savings account.

These tax changes will provide little or no benefit to the majority of middle-income families.

The so-called low-tax policy agenda implemented by the Conservative government over the past seven years has been aimed at creating special tax benefits for particular narrow groups with the goal shaping their social and family policy agenda.

Issues of fairness and economic efficiency were completely ignored.

The challenge for the Opposition parties is to design alternative strategies on how to use the surplus. They might choose to use part of it for new spending on their political priorities and promises.  Nevertheless it seems inconceivable that they would not use some, or all, of it to implement tax policies that will benefit the majority of so-called middle-income Canadians, and strengthen economic growth.

This isn’t simply about using a small surplus to reduce taxes for a small number of  middle-income families. It means looking at the complete tax system (the rate structure, the child care expense deduction, the working income supplement, the child tax benefit, among others) and how it penalizes low- and middle -income families with high punitive marginal tax rates.

What is required are tax proposals from the Opposition parties that will over haul the existing tax system and, together with the new surpluses, create a tax system that is fairer and more efficient

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