Income splitting helps fewer than 1 in 6 families, PBO says

The parliamentary budget officer says the family tax cut announced last year will cost the federal government about $2.2 billion this year and will benefit fewer than one in six households.

The program is meant to fulfill the Conservatives' 2011 election promise to bring in income splitting for families once the budget was balanced.

"The FTC [family tax credit] benefits about two million households, or 15 per cent of the Canadian total," a newly released report by the PBO says.

It goes on to say "middle and middle-high income households benefit most because they are more likely to have a family income and income tax structure conducive to FTC gains."

Opposition critics have complained since the scheme's unveiling that it is inherently unfair because its benefits are skewed toward the wealthy.

That criticism seems to be in line with what a former finance minister concluded last year.

The late Jim Flaherty, while he was still in the finance portfolio, denounced his own government's plan as one that "benefits some parts of the Canadian population a lot — and other parts of the Canadian population virtually not at all."

Since that time, the government significantly modified the original promise and turned outright income-splitting into a non-refundable federal tax credit — and capped it at $2,000.

At the time of the announcement, Prime Minister Stephen Harper acknowledged "concerns had been raised" about the original, unrestricted promise as being simply too expensive.

Finance minister reacts

In addition to the family tax credit, the government also expanded the universal childcare benefit — boosting the monthly payment to families with children under age 6 to $160 from $100.

It also introduced a new payment for children aged 6 to 17 of $60 a month.

In response to the parliamentary budget officer's report, Finance Minister Joe Oliver defended the program.

"Under our Conservative government, the tax burden on Canadians is at the lowest level in more than 50 years," he said in a statement. "The family tax cut and enhanced universal child care benefit will benefit 100 per cent of families with kids — the vast majority of benefits going to low- and middle-income families."