Politics vs. Policy

Partisan battles muddle debate
March 12, 2014 9:04 pm Last Updated: March 12, 2014 9:14 pm

News Analysis

PARLIAMENT HILL—Sometimes good politics and good policy are at odds with each other. It’s a challenge the government of the day is most apt to face, but even the opposition parties can end up fighting against good ideas.

So it is with income splitting, one of the Conservatives’ key pledges—a reward for all the hard work and sacrifice of balancing the budget, a dessert to be delivered after the next election when Canada is back in the black.

The problem is, it’s not a very good idea, at least according to the economists who are usually the Conservatives’ most credible supporters on matters of fiscal policy.

Income splitting, say the folks at the Fraser Institute and C.D. Howe Institute, isn’t a great way to cut taxes or support Canadians. The New Democrats agree and have made it clear they oppose the idea. In a rare sign of across-the-spectrum consensus, the Canadian Centre for Policy Alternatives also criticized the idea.

The Conservatives have supported income splitting even in the face of widespread criticism. Alexandre Laurin, associate director of research at C.D. Howe, thinks that may be for political reasons.

“It seems to be badly targeted if the objective is helping families raise their children,” he said.

“There definitely could be some political consideration and ideology.”

But for the Liberals, who have seen their fortunes rise according to ever present pollsters, income splitting is a good and bad idea that shouldn’t be abandoned without maximum political embarrassment.

Observers could be forgiven for wondering what that means.

Flip-flop or a Needed Fix? 

Much has been made of Finance Minister Jim Flaherty’s mixed feelings on the proposal to let couples with children share up to $50,000 of their income to get into lower tax brackets and pay less to federal coffers. 

The problem is, the policy primarily benefits single-earner families with notably high incomes. The average family would see little benefit.

And after years of selling the plan, it seems Flaherty might be listening to the experts and reconsidering.

“It benefits some parts of the Canadian population a lot, and other parts of the Canadian population virtually not at all,” he told reporters at an event in Ottawa in February.

Flaherty said the measure needed close look “to see who it affects in this society and to what degree. Because I’m not sure that overall it benefits our society.”

His skepticism about one of the Conservatives’ most touted tax treats fuelled speculation about a divide at the cabinet table and prompted noted pundits like the National Post’s Andrew Coyne to suggest that Flaherty was on his way out. Of course, Flaherty’s very visible battle with a painful skin condition had already raised doubts about how long he can stay at his post.

Employment Minister Jason Kenney, a possible successor to Harper as leader of the Conservatives, contradicted Flaherty to vigorously defend the idea.

“All I know is we keep our platform commitments,” Kenney said. “We made a platform commitment to introduce income-splitting when we get to a balanced budget.”

But the Conservatives aren’t the only ones sending out mixed signals. The Liberals have used the apparent flip-flop as a way to hammer the Tories for rethinking a policy they themselves don’t—or maybe do—support.

The confusion stems from the fact that the Liberals used to support income splitting, at least according to a priority policy resolution from their 2012 biennial convention. But, like Flaherty, they seem to have reconsidered that stance since C.D. Howe and others critiqued it. 

But to hear the Grits hammer the Conservatives over possibly abandoning the pledge, one could be forgiven for being confused on their stance.

The Liberals have made Flaherty’s rethink of income splitting a major issue during question period, doing their best to punish the Conservatives for the possibility of breaking their campaign promise. 

Party leader Justin Trudeau made it one of his priority attacks, and his finance critic Scott Brison penned an op-ed that summed up the duality of the position the party has taken.

“It was irresponsible for the Conservatives to campaign on bad economic policy that wasn’t thought through. But now Mr. Harper is getting ready to break his promise on income splitting because he no longer thinks the idea is popular enough to get him re-elected,” Brison wrote.

It’s interesting to note, however, that the Liberals made little fuss about income splitting until Flaherty suggested there were better policies out there. With Justice Minister Peter MacKay now reconsidering the government’s tough stance on marijuana possession, it will be interesting to see how hard the Grits hit him over moving in a direction they support.

It all serves to raise the question about how to be an effective opposition. If the role of the second and third parties is to challenge the government to make better decisions, how well does it work if “corrections” are punished more fiercely than previous “mistakes?”