Tuesday, August 17, 2010

Income splitting discriminates

Today Peter Dunne introduced his bill for income splitting to the House. As widely explained everywhere, this would allow couples with children to split their income for tax purposes. The Standard has already pointed out how this benefits a tiny clique of wealthy couples at the expense of everyone else, but there's another reason to oppose it as well: as pointed out by the Attorney-General in a report to the House today, the bill is discriminatory and violates the Bill of Rights:

The ISTC takes a narrow view of family, parenting, and family care arrangements for children because there must be a "couple" with dependent children. the ISTC gives rise to a distinction on the ground of marital status because it explicitly distinguishes between couples with children and sole parents. For the purposes of this report, sole parents include caregivers without a partner, widows and widowers with children but without a partner, separated parents who have not repartnered and sole parents who share childcare responsibilities with another person.

The ISTC results in a comparative financial disadvantage for sole parents of up to $9,080. In effect, the ISTC also stigmatises sole parents as less worthy of tax relief than couples and perpetuates the stereotype that to be a "real" family there must be two parents in a relationship to raise children.

But that's not the only problem. The bill also indirectly discriminates on the basis of sex, as 83% of sole-parent families are mother-only families. While it is not mentioned, the bill obviously also discriminates on the basis of family status, because it applies only to people with children.

Is this discrimination justified? No. While supposedly aimed at allowing couples more flexibility to spend more time with their kids (something which would unquestionably be an important public purpose), the actual effect is to allow couples more flexibility to spend more time with their kids than sole parents. Furthermore, the means the bill proposes to achieve this is not rationally connected to the objective:

Income and marital status determine the amount of and eligibility for the ISTC. However, the need to work fewer hours or more flexible hours in order to care for dependent children flows from the age of the children (infant versus school-age), the individual needs of the children, the number of dependent children and the availability of support and assistance from other people. However, the actual needs of parents do not change the amount of the ISTC available to couples.
Basically what we have here is not a child welfare scheme, but conservative bigotry through the tax system. And that's just not acceptable. National will have to vote this bill to select committee as the price of Dunne's support, but that is more than it deserves. Instead, it should be dumped.