The Harper government's proposed income-splitting for some parents was improved by modifications announced last week, but the rationale for it still doesn't hold water. And the billions it will cost should be put to better use.

These are the conclusions of Jonathan Rhys Kesselman, an SFU prof known for hardnosed, non-ideological tax analysis, in a paper released Tuesday.

Prime Minister Stephen Harper introduced incomesplitting for seniors in 2007, and during the 2011 election campaign he promised to extend it to families with children. Kesselman poked holes in the economic case the party used to justify these policies in previous studies he did for think-tanks such as the business-oriented C.D. Howe Institute. Now, in this paper for the Caledon Institute of Social Policy, he faults it on broader grounds - everything from doing a poor job of supporting families with children, to further entrenching the disadvantaged position of women in too many families, to dampening Canada's economic growth.

He concedes that two modifications Harper announced last week will both eliminate the negative hit on provincial budgets that had been a feared side-effect of the policy, and lessen the degree to which the policy favours the rich.

Yet he still dismisses the two purported benefits most often touted by income-splitting supporters - that it is fairer to tax single-income families at the same rate as double-income families, and that it supports families with children.

If the objective is fairness to families with comparable levels of income, Kesselman writes, then why restrict it to couples with children? If income-splitting is fair - although he doesn't think it is - then it should be extended to everyone.

Or, if the objective is to support families with children, as the policy's supporters also claim, then why does it provide the least benefit - often none - to families with the greatest need? Why does it apply to only the 13 per cent of families with children - those who have two adults with unequal incomes? Why does it apply regardless of whether the lower-income spouse uses time not spent working to care for children or to pursue other interests? And why doesn't it focus on parents with preschoolers, since stay-at-home parents aren't providing child care while their kids are in school?

Some other analysts defend income-splitting. But Kesselman argues they fail to take into account the compensating untaxed benefits enjoyed by families with a stay-athome spouse - mainly child care and household chores, which are worth several thousand dollars a year. And they assume money in families with unequal income-earners is equally shared when, in fact, it often is not.

He also argues that the policy will increase the cost of a low-or non-earning spouse starting to earn more. This is because the effective marginal tax rate on extra money earned will not be the 15 per cent that low-income workers generally pay on the next dollar earned, but rather a higher rate - as much as 29 per cent - that the higher-earning spouse will have to pay as a result of no longer being able to split as much income.

To the extent that this encourages people to stay out of the labour force, he said, it will have two implications - a loss of potential productivity in the economy as a whole, and the inability of dependent spouses to improve workplace skills that they will need if the