December 22, 2009

5 Key Reasons To Support Income Splitting

The Minister of Revenue's recent announcement that the government will introduce a Bill into Parliament in 2010 to establish Income Splitting is a significant step forwards.  While passage of the Bill beyond Select Committee is not guaranteed it does offer New Zealand parents the opportunity to show their support next year for income splitting. 

We here republish a 2007 article from the Parents Choice 08 blog

"Income Splitting is a policy which allows parents to split their household income so that they pay less tax overall. It means that families which choose to have one parent at home caring for their children will have that worked recognised through the tax system as being socially useful. It sends an important signal that parenting is valued.

In brief there are five key reasons to support income splitting. They are:

1. It sends a signal via tax policy that parenting is recognised as valuable. Currently many policies such as subsidisation of child care for parents in paid employment, parental leave for full time employees, and the discrimination against working parents compared to self-employed parents regarding tax treatment, all combine to slant the playing field towards getting parents out of the home and into the workforce. Parents Choice believes that policies to encourage people back to work should not be at the expense of those parents who want to spend time at home with their children - especially during the crucial early years of a child's development.
2. It empowers parents and helps strengthen families. It allows parents to choose whether they will have one parent at home or whether some other work pattern suits them best. Either way parents should make these decisions without government policies pushing them both into the workplace. It should be a parents choice.

3. It builds social capital. Having a greater number of parents choosing to parent fulltime means more opportunities for voluntary and charitable organisations to benefit from having bright, capable and often highly-educated people able and willing to volunteer to work part time in the community or in charitable or religious organisations - all of which is likely to build social capital - the glue that holds society together. Prof. Robert Putnam (author of "Bowling Alone") has provided substantial evidence on the benefits of boosting social capital in a community.

4. It boosts the economy. Income splitting holds the promise of helping strengthen families, strengthen communities and boost social capital. The long term economic cost of weak families, communities and the erosion of social capital is all too apparent when one looks at the cost of family breakdown, juvenile delinquency, vandalism, gang-related activity, crime, distrust and division. If we can go to the core of the social causes of such breakdown then the economic cost savings in police, social work, court time, and broader strengthening of social capital is potentially immense. In any case most economists now agree that the real solution to better economic performance is not in higher labour rate participation or longer working hours but in higher productivity. New Zealand already has one of the highest participation rates in the OECD. The solution is in working smarter not forcing more and more parents to get into the workforce or for those already there to have to spend even more hours at the office.

5. It places the wellbeing of children at the centre of economic and social policies. Good economic and social policies need to ensure that parents and children are kept "front and centre" when designing a sound policy framework. To ignore the development stage of the next generation of human capital is foolish in the extreme. People remain our greatest asset. We need to ensure that all children get off to a good start in life - through both their home life and school life. Income splitting says that the relationship between a parent and child is very important, at least as important as that between an employer and employee, and that our laws should recognise this and allow parents to spend more time with their families."

Parents Choice 08 has passed the torch to other groups to carry on the campaign for income splitting.  Here at Centrist Comment we will continue to provide news and updates on this important social policy innovation. If you want to subscribe to the Centrist Comment blog updates click on "subscribe". 
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