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Federal cabinet split over income-splitting

Video:  Finance Minister Jim Flaherty touched off a heated debate over income splitting for families. The Conservatives promised they’d introduce it. But as Vassy Kapelos reports, Flaherty is backing away from the idea.

OTTAWA – Finance Minister Jim Flaherty opened a rift within the Conservative cabinet Wednesday by casting doubt on the wisdom of using next year’s expected budget surplus to expand income-splitting ahead of the next election.

Income-splitting for families with dependents under the age of 18 was a key promise the governing Tories made in the last election, but with a catch: it was contingent on a balanced budget.

The federal budget Flaherty introduced Tuesday projects a $6.4-billion surplus in 2015, just in time for the coming election.

READ MORE: 7 highlights from this year’s ‘boring’ budget

On Wednesday, however, Flaherty lobbed a grenade into the Conservative caucus room when he said he personally thinks blowing part of that money on a promise that’s expected to cost about $2.5 billion is not the way to go.

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“I would pay down public debt and reduce taxes more, myself, but I am only one person,” he said in a post-budget interview before the Ottawa Chamber of Commerce.

“There’s a tendency among politicians to always – regardless of political stripe – to always want to throw baubles out the window and pretty things – ‘Look over here,’ you know,” he laughed.

RECAP: Special coverage of the 2014-2015 federal budget

Video: Budget 2014 insight with Finance Minister Jim Flaherty

“And this is a shiny thing. Vote for me because I have a shiny thing. I’m not there.”

Prudent fiscal management has historically served Canada well, Flaherty said, but federal governments lost their way over the last 50 years and became spendthrifts.

“We’ve created a large public debt and we should deal with it and we should knock it down,” he added. “Not for my sake, it won’t make any difference to me, but it will make a big difference to the next generations.”

WATCH: Both Harper and Flaherty were asked about their position on income-splitting during Question Period Wednesday – listen below to what they had to say

Just a few hours later, cracks started to appear within the Tory caucus about whether they should abandon their 2011 election promise – and whether Flaherty should continue to serve as finance minister.

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READ MORE: Budget reaction from opposition

Treasury Board President Tony Clement and Employment Minister Jason Kenney said they’re behind income-splitting, while Quebec MP Maxime Bernier sided with Flaherty.

Alberta MP and finance committee chair James Rajotte acknowledged that the policy would benefit only a small percentage of the population.

“It’s a simple fact that there’s a certain percentage of the population – those families with two parents that have incomes that are very disparate – benefit from it,” Rajotte said.

“Those situations where two people working outside the home, with incomes that are comparable, obviously they’re not going to benefit not nearly as much from a measure like this.”

Flaherty should “absolutely” stay on as finance minister, Rajotte said.

WATCH: Budget Talk with Global News’ Laura Stone