Article content continued

Part of the proposals will extend the 'kiddie tax' regime to adults

However, is a reasonableness test appropriate in a spouse or common-law partner scenario when the provinces’ various matrimonial property regimes grant property rights to such persons regardless of who contributes to the business? Is basing taxation on an individual-by-individual basis, rather than on a family-unit basis, the right or fair approach? Do the proposals contradict our current government’s emphasis on gender equality when many entrepreneurial families have a stay-at-home parent?

It turns out that the Royal Commission on Taxation already thought about many of these questions over 50 years ago. The commission noted the substantial contribution each family member usually makes to the family’s finances, and strongly recommended the family unit be the appropriate taxing unit: “we believe firmly that the family is today, as it has been for many centuries, the basic economic unit in society.”

A partner who stays home to raise children is a key ingredient to the success of the family

While many things have changed over the last 50 years, we submit that this assertion remains just as true today, particularly with respect to families that run businesses. A spouse/common-law partner who stays home to raise children and manage the household is as much a key ingredient to the family’s success as the other spouse’s day-to-day hustle for the business. When you combine that with the further fact that non-active spouses/common-law partners have property rights with respect to family assets that have been used — directly or indirectly — to grow the business, is it really offensive from a tax-policy perspective for the non-active spouse/common-law partner or other family member to receive dividends or realize capital gains notwithstanding they may not have expended the same level of direct effort in the business as other family members?