Federal Tax Plans Could Affect Provincial Plans

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    A plan to allow Canadians to use income splitting as a tax-saving measure will be just one more example of the federal government financing its policies partly through provincial coffers, says a report by the Mowat Centre. The report says if the federal government goes ahead with its plan to introduce income splitting, the provinces would have no choice but to follow suit thanks to existing tax agreements. That, the Mowat Centre says, would cost provincial coffers around $1.7 billion a year at a time when everyone is strapped for cash. The Tories promised to allow income splitting during the 2011 campaign, saying it would take effect in 2015 as long as there was a balanced budget, which is now expected. The plan would allow spouses with children under 18 to divvy up their incomes to a maximum of $50,000 in order to reduce their overall tax bill. The government estimates 1.8 million families could save an average of $1,300 a year. Despite criticism, however, the federal government has insisted it will press ahead with the measure.