Mr. Chair, I'd be happy to go through the proposed amendment from a technical perspective.
The charging provision for the tax on split income is in subsection 120.4(2). As was noted, it currently applies the tax on split income at the highest marginal rate. That's defined in subsection 248(1) of the act as just the highest personal income tax, or the “highest percentage” in subsection 117(2), which is where you have the different marginal tax rates. It would make the tax on split income apply at the lower of the highest individual percentage and what's called the “appropriate percentage”. The appropriate percentage is defined in subsection 248(1). As well, looking back to the different marginal tax rates, it's defined as the “lowest percentage” that's listed in subsection 117(2), so the lowest of all personal income tax rates. The highest is 33% and the lowest is currently 15%. Of course, the lesser of 33% and 15% will always be 15%.
This would have the effect of applying the tax on split income at the lowest personal income tax rate, which would create an incentive to split income insofar as it would ensure that any income you're able to divert would be taxed at the lowest marginal rate, regardless of the tax rate of the actual income earner.