Ok, well he is right that it is discouraging second earner labour supply, and so will end up with second earners staying at home instead. But is he correct when he says we need to subsidise household services?
Just yesterday CPW pointed out to me that we don’t tax household services provided in a relationship – even though it is a service. As a result, it is already subsidised. In fact, we could argue that we should be taxing the imputed rental value of said services – given that they are part of the inherent structure of the household (and households are effectively just firms).
In many ways we could say allowing people to form families is a way of “dodging tax” is that something a civilised society such as New Zealands wants to promote!
Overall, I think Peter Dunne has convinced me that we need to not only avoid income splitting – but start taxing people based on how much they clean their own house. Sure, looking at how I keep my house, this would see a significant fall in my tax burden – but I swear I’m not asking for anything on the basis of self-interest ….
So, in seriousness, we have to ask – why do we have someone wanting to implement a policy on the basis that it will reduce labour force participation by secondary earners? Does he seriously want society to revert to some sort of 1950′s traditional household mold? Even if he does, and even if YOU think that this is what society should do – do you think it is right for government to implement policy to achieve such goals?
That my friends is really a bridge too far – no-one, not even economists, have the foresight and the knowledge to say that they should be the ones determining societies institutions.