“So if you can’t fix every aspect of it, you’d oppose fixing any one aspect of it? ”

I am against moving AWAY from simplifying the tax system and improving it – which is what income splitting is indicative of 😉

“I get that you’re all about freedom of choice for the individual. But then you argue that people should be forced to act as individual units, which kinda defeats the point of freedom of choice.”

All men are born free, yet everywhere they are in chains. Fundamentally, I think the relevant unit for policy is the individual. If we have a problem with two individuals that earn the same cumulative income as one getting taxed proportionally less then we have a problem with the progressive tax system – so lets look at that instead.

“I can’t see why you’d be against it.”

As I’ve said, because it is a change in the tax system that specifically changes the way individuals are treated based on their household status. It is the individual that supply’s labour, it is the individual that makes choices, they are the unit of taxation.

When it comes to redistribution, sure we can think about the household unit if we want to do something – then at least we can target directly through the benefit system.

@Eric Crampton

I love that video – but I’m not really sure why we need government to “promote” either as a policy target.

@Gregor W

“To me the issue is clear though; the opportunity cost of raising children in a one income family and attempts to resolve the tax in-equability.”

If the issue is one of “external benefit from children” then we should subsidise children directly methinks.

“redressing some of the taxation imbalances they are currently subject to. Piecemeal maybe, but not arbitrary.”

Fair point. However, if the “tax imbalance” is stemming from the fact we have progressive taxation, then there are other groups of people feeling the same issue – in that case shouldn’t we be looking at changing the nature of the tax system to redress this imbalance, rather than just helping out one group.

“Back to my original post, I would suggest that tax policy can and should be used an extension of social policy”

Personally, I think the distinction between tax for revenue gathering and social policies needs to be clearer – which is why I favour putting all redistributionary policy through benefits.

However, this is a bit of a side-step. Even if we continue to redistribute the way we are I think we need to recognise that if it is “unfair” for a household to pay higher tax with a single earner than dual earners we must also believe it is “unfair” among individuals – this seems like a critique of the entire progressive tax system – not a call for a fiddle.

Like Matt, you’re taking an overly literal reading to avoid answering the question. I’m talking about households who split the workload between them – it’s irrelevant what the split is.

“As for fairness, I’ll stick to the areas where I have some professional competence. Economics, incentives, that sort of thing. Fairness I’ll leave for folks over in the philosophy department.”

This is a simple matter of why two households, with the same level of gross income, and the same outlays, should pay different tax rates. I didn’t realise that economics professors had to defer to the philosophy department on questions of basic math.

If you only understand incentives, then try this: thanks to the current tax system, I have a financial incentive to cut back my working hours, and deny my wife her freedom of choice by pressuring her into work. I also have a financial incentive to force her to move out, because she’ll be financially better off living as an individual. Why should that be?

@Matt Nolan
“No, it is the benefit system that is inconsistent”

No it’s not. For instance, I can reduce my individual tax by gifting to another individual economic unit – a trust. I can also reallocate my taxable income through an LAQC, another economic unit. If you want to fight this based on maintaining the purity of the tax system, you’re too late matey.

“But then I’d say that the issue is progressive taxation – and dealing with that directly would be easier and more efficient than arbitrarily fiddling the tax system to help only ONE of the groups that is disadvantaged by it.”

So if you can’t fix every aspect of it, you’d oppose fixing any one aspect of it? Sounds a bit defeatist.

“This bill treats these two people differently on the basis of martial status – which is a relatively arbitrary bias.”

It’s not arbitrary. In principle I’d support income splitting between flatmates, as long as one flatmate CONSENTS to having the other freeload off them. Somehow I don’t think there’s much danger of people rorting the system that way.

I get that you’re all about freedom of choice for the individual. But then you argue that people should be forced to act as individual units, which kinda defeats the point of freedom of choice.

The fact is that the current tax system creates a penalty for people who choose to arrange their affairs in what is a common and uncontroversial way – as a single-income household. Income splitting is not a ‘subsidy’ as you and Eric keep insisting – it is the removal of a disincentive. With income splitting, couples would be free to allocate their work and leisure between themselves without being stung by the tax system for certain choices. I can’t see why you’d be against it.

“I would say “what are we trying to achieve with our spending decisions”. ”
Fair point. Maybe that is the nut off the issue. Not semantics about what form a family group but what issue is intended to be remedied by the proposed change.
To me the issue is clear though; the opportunity cost of raising children in a one income family and attempts to resolve the tax in-equability.

“We have a preference for different sectors of the economy as individuals – an institution like government would preferably have a reason for subsidising that is rooted in economic theory or a moral judgment. In either place these should be clear rather than arbitrary.”

I should have been clearer here. I meant the larger ‘we’ rather than the personal.
I agree with your sentiment that the decision should be rooted in economic theory or (gasp!) moral judgement. The whole point of this proposition is that it is absolutely a moral judgement (back to the ills of social engineering again) and quite possibly, sound in terms of longer term economic principles. Whether or not the issue has been clearly positioned as such with the public should absolutely be challenged however.

“Do we really need more middle class welfare?”
I’m not sure I consider this welfare when the bulk of the tax was gathered from the base it is being returned to. More of a rebate for an excessive imposition?

Overall, I can’t agree with your supposition that this is arbitrary. Maybe I am missing something but to me this policy has a very direct focus; middle class working families (a fair proportion I would guess are United Future and the Nats constituency) and redressing some of the taxation imbalances they are currently subject to. Piecemeal maybe, but not arbitrary.

“I’m sorry but your argument appears to be “we can give money to these households so why not” – I would say a more appropriate question is why?”

A fair question. Back to my original post, I would suggest that tax policy can and should be used an extension of social policy. If the Government of the day wishes to promote what it sees as desirable behaviour or social model, in this case externalising some of the short term costs of raising kids within a family unit for what could be positioned as longer term benefit (i.e less financial strain on households, more rapid capital formation within them, various intangibles related to the family dynamic etc.) and can convince the electorate that it is a sensible idea, then that is reason enough.

The offshore outsourcing solution does sometimes seem tempting though.

“Jesus. Dunne thinks it’s a feature, not a bug, that it would push women back into the kitchen.”

Which is far worse that outsourcing childcare?

http://www.theonion.com/video/report-many-us-parents-outsourcing-child-care-over,14146/