The second aspect involves the Withholding tax (Lohnsteuer) which is paid on employment income.
Family taxation implies that married couples may split the total basic exemption (Grundfreibetrag).
In 1962, a Royal Commission on Taxation was initiated under Kenneth Carter by Prime Minister John Diefenbaker to examine and to recommend improvements to the federal tax system.
"[6] From the Carter commission's report: The 1970 Royal Commission on the Status of Women recommended a system of elective joint taxation to address the issues of both tax fairness between families and concerns regarding disincentives for women's participation in the work force.
Households of similar gross incomes are bearing broadly different tax obligations.
[9] Households with the same total income are eligible for identical tax-delivered benefit payments but may have significantly different tax liabilities.
[9] Further, while bearing the same general costs of everyday life, such as child care, one jointly filing family is unable to experience greater tax relief (available to individually filing parents), due to the requirement that child care expenses be applied to the lower spouse's income.
The proposed policy would allow families, with children under 18, to split their household income of up to $50,000, once the federal budget was balanced.
The Tories estimate that almost 1.8 million families would be able to capitalize on the tax package and they would save an average of $1,300 annually.
Howe Institute concluded that incoming splitting "does more harm than good,"[11] and a 2014 study by the Canadian Centre for Policy Alternatives claims that would primarily benefit wealthier families.
Howe Institute study went far beyond the scope of the limited proposal in the Conservative campaign platform by including the consequences of the provinces following suit.
[11] It also speculates upon the effects of workforce participation of the lower earning spouse[11] which is easily addressed by elective joint taxation such as recommended by the 1970 Royal Commission on the Status of Women.
[8] In February 2014, a day after introducing the 2014 budget, Finance Minister Jim Flaherty distanced himself from the concept of income splitting, but others within the Cabinet still support the idea.
[13][14][15] The 2015 Canadian federal budget proposed measures to allow families to split their income.