So you don’t phrase it as calling him on BS. Say something like “Hey, after hearing what you said, my wife and I were looking over our taxes too, and we want to make sure we’re not missing anything. How did it work out for you that you were better off with her not working?”.
On a tax forum I participate in, we had a thread once discussing what the most expensive $1 of additional income would be.
The worst scenario we came up with is that $1 costs you about $10,000* as follows:
First, you lose $25,000 of deductible rental losses as you cross $150,000 of income. That’s $7,000 in tax (28% income tax on the $25,000 that’s no longer negated by losses). Income is also increased when a deductible IRA for a noncovered spouse over 50 is reduced to $3,000, costing $840 in tax. The combined increases to AGI of 28,000 could also cost $1400 in reduced child tax credits, $590 for reduced medical deductions and $160 for reduced other itemized deductions. So that $1 is a real doozy.
But… in the OP we’re looking at an additional $30k of income. I don’t see any scenario in which they’re not ahead by at least a little bit even in the truly worst-case scenario. The worst I can imagine is that they owe about $20k in taxes on $30 in wages.
(* Of course, the $25,000 loss limitation carries that loss forward. You will be able to deduct it eventually, if only when you sell the property. So most of the cost is really just deferred rather than lost entirely.)
OK.
In Canada, anyone who earns income pays taxes. The only advantage (IANATaxL) is that a couple can share certain expenses, i.e. the higher income one would claim the child-care expenses, child’s tuition, or property tax credit deduction etc. Some things, like pension income, can be split between the two to minimize taxes, but you cannot do “income splitting”.
Anyone making less than the deduction for a dependant (I think, never had to worry about this) you deduct thier meager income if any from the dependant deduction - about $8000 for the first one, less for more children. Single parents can treat the first child or dependant as a “equivalent to spouse”, the full deduction, so it’s neutral wrt marital status.
Once taxable income for each spouse is calculated, the same tax rates apply to single or married.
Am I right in understanding that filing jointly in the USA means you basically pool all the incomes and deductions for both spouses into one big pool and then a single “married” tax rate ladder applies? What is the net result if there is a significant income imbalance - basically the rate is about the same as if each made equal amounts, “income splitting”? Or do you also calculate US rates individually based on individual income?
Pretty much. A married couple with one person earning $100,000 and the other earning $20,000 will pay taxes based on a household income of $120,000 , just the same as a married couple who each earn $60,000. This is generally less than the taxes that would be owed if the person earning $100,000 and the person earning $20,000 filed as unmarried taxpayers and possibly more than the $60,000 earners would pay as singles , since certain methods of avoiding taxes on income ( such as dependent care flexible spending accounts ) put a per *household *cap on contributions so that the married $60,000 earners could contribute $5000 while the unmarried ones could contribute $10,000.
It’s possible he thought this if he did the wrong math.
Numbers for illustration’s sake, IANA tax L:
There’s a bracket at $200,000 p.a.
He’s making $199,999 p.a.
So every dollar she makes is in the higher bracket.
Now, if he thinks the higher rate applies to all the income, it might make sense to him, aside from the fact that he’s wrong; if he believes he’s paying 32% of $199,999=$63,999, and her $12,500 bumps that up to 36% (of, in his mind, $212,499) the difference in income would be within a dollar of the difference in taxes.
That’s not how tax brackets work, but if it were, it would be.
That said, there are costs associated with going to work, monetary and otherwise; the cost of commuting, packaged or restaurant food as opposed to home-cooked (or hiring someone as opposed to her doing it), hiring a maid or living with a less neat house versus the at-home spouse staying on top of that, etc. So factoring that in, it’s possible not all the savings are in taxes.
That would be painful… 
My wife earned only 30-50k for a few years. The marginal Federal Income Tax on her gross income was 50-55% each of those years. The marginal state tax was almost 5% and FICA/Med was 7.65%. So a total of over 60%. And that didn’t account for the deferred tax on her 401k. If she hadn’t made 401k contributions the marginal taxes would have been higher.
We were in the “sweet spot” where the AMT taking away the itemized deductions and exemptions was a killer. And we lost the adoption credit as well, which was a big contributor to the steep marginal rate on the Federal Income Tax side.
On a cash flow basis we were definitely behind, because we went the nanny route, rather than daycare. But my wife wanted to keep in touch with developments in her field and maintain contacts in the industry, which has definitely paid off. She has people begging her to take jobs, while others are struggling to find work after dropping out completely for 2-4 years after having children.
It’s certainly possible for the costs of going to work to be more than the wages/salary (especially for half of a couple). It’s unlikely that the taxes alone will eat the entire paycheck.