Are Taxes Keeping Your Family Small?

Posted on December 5, 2008
Filed Under Finance |

We all know the story. A young couple meet, fall in love, get married and start to put down roots. The future is bright. A home is bought and with two incomes our young couple are living the Canadian dream.

Eventually our young couple has a child, maybe two. Mom ( sometimes Dad) quits her job to stay at home to raise the little ones. This decision means a big pay cut. Throw in mortgage payments, saving for juniors education , turning on the lights and having a little food in the fridge. Before you know it our young couples finances are stretched tighter than a fat guy’s cummerbund at an all you can eat wedding buffet. They would like to have more kids but will probably stop at two.

Canada has become a country where small families have become de rigueur. When I was a kid - the late 1960’s early 1970’s four kids was the norm. Now according to Stats Canada the norm is now 1.5 children. Now the only math I’ve ever been good at has been the simple stuff : addition, subtraction, percentages etc. These basic math skills have pointed one thing out to me- we are not replacing ourselves.

This is bad news for Canada’s graying population and the one point fivers alike. With fewer people working and paying taxes who is going to support us in retirement?

The government is going to face two grim choices. Promise not to tax income trust’s or, Whoops ! sorry the word government derailed my train of thought. Lets get back on track. The government will have to reduce benefits or put an even heavier tax burden on the young.

We can’t blame people for having less kids, it’s expensive. Over the last 30 years total family incomes adjusted for inflation have actually gone down. According to the good folks at Statistics Canada, in 1980 the median family income was $58,000/year in 2005 it was $57,000/year. To make matters worse , a generation ago that family income was earned by one working parent.

Yep. The only financial hit dear old dad paid was the actual cost of raising his little progenies. Here comes the basic math again. Our young couple today pays a double whammy. Not only do they have the cost of raising their children but they also lose an income from the parent doing the raising of the kids. At least for the first year, as most Canadian moms stay home from work the first year of junior’s life.

Today’s families after expenses and taxes have less to spend on themselves than seniors on social assistance . Yet Ottawa still taxes the hell out of our young family. Why? Because our young family looks wealthy in the eyes of our archaic post word war two tax system. The current system looks at what they made, not how many hands are in their pockets looking for their hard earned cash.

The average income for a Canadian senior couple is roughly $ 50,000/year. For our young couple raising future tax payers, the number is roughly $ 87,000/year. The tax system sees the young couple as wealthier so they end up paying between them two and a half times more taxes than the senior couple.

The problem with this is that the senior couples kid’s are already out the senior couples ” paid for” door. They are no longer paying for their house or saving for their kids educations while throwing a bale of diapers into the shopping cart on payday.

I believe the government has to view our children for what they are- future taxpayers. A future benefit to our country. Ottawa has to stop looking at our young couples kids as personal choices. We need to re evaluate our post world war- two taxation system. As a nation we are pricing ourselves out of children and therefore our future.

Maybe our future should include a taxation system that taxes families instead of individuals. Why not Let a father or Mother who earns $ 80,000/year split that income with the spouse who has decided to stay at home and raise our future taxpayers? Or lets take it a step further and do it like the French, and allow the income to be split amongst the children as well.

France, long famous for it’s hoity- toity waiter’s and surrender monkey army, now claims the highest birth rate in the first world. Imagine if Canadians could split their income amongst their family members ?

Not only would this allow our young families to have more kids/future taxpayers, but it would also be better in terms of stress reduction on those families. We all know what the number one stress is, in any modern marriage… money.

If we don’t do something soon we will be forced to face a demographic disaster. To pay for our existing senior and social benefits our new taxpayers will face an ever increasing tax burden. This will therefore cause the next generation of Canadian parents to have even less kids. They simply wont be able to afford them because the government will be compelled to collect even more taxes from them. A likely scenario is that the programs that Canadians have come to expect in old age will simply disappear.

We need to do something soon, and create a new set of circumstances for our future. How do we want to live out our golden years? Do we want to grow old in a country where we will enjoy medicare and pension programs ? Or do we want to grow old in a country with little or no medicare? A country where we will have to wipe our own old bums, because our kids have all moved to France to start families!!!

Stacey Patrick Laliberte is an Aircraft Maintenance Engineer living in Calgary. When not busy fixing jets,Stacey manages his investment portfolio. Stacey’s newest hobby is writing on his blog. http://quantuminvestmentblog.com/

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