Bill C-265 (Historical)

An Act to amend the Employment Insurance Act (qualification for and entitlement to benefits)

Bill C-265--Employment Insurance Act--Speaker's Ruling

[The Deputy Speaker, NDP, Bill Blaikie]

Order. At this time I would like to share with the House a ruling. The Chair would like to take a brief moment to provide some information to the House regarding the management of private members' business.

On May 31, 2006, after having reviewed all of the bills on the order of precedence which, at first glance, appeared to involve spending, I shared with the House a list of bills that caused the Chair some concern. Without making any decision on these bills at that moment, hon. members were invited to present arguments as to why, in their view, each of these bills did or did not require a royal recommendation. This practice of preliminary review is one that the Chair intends to continue.

Accordingly, following the replenishment of the order of precedence in November, I have reviewed the additional bills that have come forward for consideration. I can report that only one of these bills, Bill C-265, An Act to amend the Employment Insurance Act (qualification for and entitlement to benefits), standing in the name of the member for Acadie-Bathurst, gives the chair some concern, given the spending provisions it appears to contemplate.

The Chair would encourage hon. members who would like to make arguments regarding the need for a royal recommendation for this bill to do so at an early opportunity.

I thank the House for its indulgence in this matter.

Income Tax Act

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I am happy to speak about this issue today. I also had the opportunity to talk about Bill C-265.

This is not the first time a bill on taxing social security payments has come before this House. In November 2004, my Conservative colleague was on this side of the House, and we shared his joy when his spouse gave birth to a child. Naturally, we congratulated him.

Today, I congratulate him on again raising this issue by introducing Bill C-305. The purpose of this bill is to reduce the tax rate from 85% to 50% for Canadians and Quebeckers who receive United States social security payments.

At first glance, this bill might not seem very important. But this issue affects thousands of Quebeckers and Canadians. For over 20 years, we have been looking for an equitable way to solve the legislative problem facing Quebeckers and Canadians.

Why could Canadian and Quebec citizens who receive payments from the American government not benefit from the same conditions as American citizens who receive a pension from the Canadian and Quebec governments?

To help members understand where we are at today, I will give some background on this issue. Four protocols have been negotiated between the United States and Canada. I want to talk about the fourth protocol, signed in July 1997 with a number of other countries, including the United States. Under this protocol, only the country of residence is able to tax social security benefits. Since then, Canada has been able to tax American benefits paid to residents of Canada and Quebec.

The problem is that the protocol gave Canada, under the U.S. Social Security Act, the right to increase the tax rate from 50% to 85%. Bill C-305, before us today, would correct this situation.

The Bloc Québécois supports the bill, because it rectifies an error the previous government made in 1997. Several thousands of Quebeckers left their families to go work in the United States, often for years, and have been punished by the provisions of this legislation. These are people who, in many cases, were close to their roots and did not want to leave their country for the United States.

The 1997 legislative amendment enabled the federal government to bring in a lot more revenue at the expense of a population that could be considered vulnerable and economically weak. It is important to understand why Bill C-305 is now before the House and how it corrects a past blunder.

As I mentioned, historically, four protocols have modified the Canada-United States tax convention. In 1980, the income tax convention provided that social security benefits are taxable only in the originating country. It was only sometime later that the benefits were initially taxed in the United States.

The portion of benefits deemed taxable rose from 0% to 50%, depending on the taxpayer's net revenue and when the benefits were paid.

Modest income families and individuals were generally exempt from paying taxes on their benefits. In March 1984, a second protocol modified the Canada-U.S. tax convention. This agreement made social security benefits taxable only in the taxpayer's country of residence. From then on, 50% of the benefit amount was exempt from taxation.

For example, an American citizen residing in Canada was taxed on 50% of the benefits received from the United States. Bill C-305 is designed to return to this situation.

A third protocol was signed in March 1995. It gave the country paying benefits under social security legislation the exclusive right to tax those benefits.

This means that the United States taxed social security benefits paid to Quebec and Canadian residents at a rate of 25.5%, while Canada did not tax benefits received by American taxpayers.

Finally, the fourth agreement to amend the tax treaty was signed in July 1997. It provided that benefits paid under U.S. social security legislation to a resident of Canada would be taxable only in Canada, as if they were benefits under the Canada Pension Plan, except that 15% of benefits were made tax exempt in Canada.

Under this agreement, the tax rate became 85% of the payments made to Canadian residents.

However, the last agreement provides that the benefits paid under Canada's social security legislation to a resident of the United States are taxable only in the United States.

Essentially, the purpose of Bill C-305 is to reduce from 85% to 50% the tax rate on United States social security payments received by Canadian taxpayers.

For over 20 years now we have been trying to find a fair and equitable solution for all Quebeckers and Canadians dealing with this problem.

Thousands of Quebeckers and Canadians live near the border and have been suffering the never-ending repercussions of these tax reforms over the past 20 years.

Of course, this measure does not come without a price, but it is a small price to pay considering the thousands of people who have sacrificed their lives and their families to work far from home and their loved ones. These people wanted to stay here and keep their identity.

We, the Bloc Québécois, support lowering the tax rate on benefits paid to taxpayers, from 85% to 50%, because it corrects certain injustices. For this reason, I would like to congratulate the hon. member for his bill, which we will support.

[Jeff Watson, Conservative, Essex, ON]

moved that Bill C-305, An Act to amend the Income Tax Act (exemption from taxation of 50% of United States social security payments to Canadian residents), be read the second time and referred to a committee.

Mr. Speaker, I am very pleased to rise today to speak to Bill C-305, an act that is designed to lower from 85% to 50% the inclusion rate for the amount of income taxable for Canadian seniors who collect the U.S. social security pension.

I spent a lot of this past weekend in reflection, thinking about things that are important. I thought back to about 10 years ago and how very different things were for me, when I was unmarried and worked at a job scrubbing giant inflatable balloons as they came back from parades. Ten years later, some things have changed in my personal life. I am now married with four kids. I am no longer scrubbing inflatable balloons but have the great privilege of being a member of Parliament representing the communities of Essex.

Sadly, 10 years later some things have not changed. Bill C-305 exists because an injustice was committed a little more than 10 years ago and still needs to be righted.

As I said earlier, Bill C-305 is about lowering the inclusion rate from 85% to 50% for retired Canadian seniors who collect a U.S. social security benefit. This follows on the heels of two previous private members' bills, one by the member for Calgary Southeast and my own private member's bill in the last Parliament, Bill C-265, which passed second reading, as members of the House may know, and went to the finance committee, where it died a very slow death.

There are a lot of new members in the House since the last election and there may be Canadians looking in on this debate this morning who may not know exactly where this particular bill fits in history, so I want to take a few moments to go back and look at how we got to where we are today.

A major change occurred on January 1, 1996, for about 85,000 Canadian seniors in Ontario, Manitoba, British Columbia, Quebec and New Brunswick, who lived in Canada but happened to work in the United States and upon retirement collected U.S. social security cheques. What happened on January 1, 1996, is that their entire retirement changed. They were given a pretty substantial tax increase that changed the economic presumptions for their retirement years.

Of course, that all started three weeks before January 1, a week before Christmas in 1995. When most kids were writing letters to Santa Claus about all the good things they would like, these seniors received letters from a government agency informing them that in three weeks the way they were taxed was going to change.

We have a Canada-U.S. tax treaty that exists for some very important reasons. The two countries came together and agreed, for example, on how a Canadian resident in the United States, or an American who collects CPP, the Quebec pension plan or old age security, was going to be taxed and treated. We had to define on this side how we were going to treat Canadians who collect U.S. social security pensions or Americans who happened to be resident here as well.

At one time, these seniors were not taxed at all but in 1984 two protocols to the Canada-U.S. tax treaty changed the way they would be taxed. They were taxed in the country of residence, not in the source country, where the benefit came from. The maximum inclusion rate was set at 50%, so half their income would be included for taxable purposes. That was the situation that existed from 1984 to 1996.

Then came the third protocol, in the dreaded Christmas letter that these seniors got. The change was that their taxation would be done in the source country, where the benefit came from. They would have 25.5% of their income withheld at source.

Let us imagine this change. There was literally no time for these seniors to respond. There was no ability to cushion against the shock of such a change. There was no control over the benefit they received because it was withheld at source, so what they would get is all they would get. It was a tremendous and very drastic change that happened over that Christmas season. Starting January 1, suddenly 25.5% of their income was withheld at source and they got a much smaller pension cheque.

At that time, a citizens' group mobilized in the region. Canadians Asking for Social Security Equality mobilized very quickly and in large numbers, because many seniors were affected. In our region, I think the member for Windsor—Tecumseh will recall some of the meetings at the time. They came out in the thousands and forced the government of the day to go back to the table and renegotiate with the United States.

In Canada at the time, the finance minister, the current member for LaSalle—Émard, was looking to balance his budget. In the United States, President Clinton was looking to balance his budget and saw an opportunity to tax the richest of the seniors in the United States. He saw this as his opportunity to do that.

Therefore, we had a fourth protocol negotiated between the two countries. It changed back to residence taxation instead of these seniors being taxed in the nation where the benefit came from. But something interesting happened. After these seniors were promised that this was going to be a revenue neutral change, many of them were expecting that we were going back to the 50% inclusion rate. They had a really nasty surprise. The inclusion rate was set at 85%. It did not go back to the way it way before January 1, 1996, so instead of the wrong being righted, it was compounded.

It would be nice to point out, of course, that the finance minister of the day left a convenient loophole for family ships not to be taxed. That was in the same piece of legislation, the same treaty whereby these poor seniors were getting a whopping 70% tax increase. What a cruel irony that the rule-maker got to make the rules in his favour while thousands of seniors, who do not have any ability to make or change rules but are affected by them, had a tax increase instead.

As for Canadians Asking for Social Security Equality, what an incredible group. They mobilized in four successive elections, in 1997, forcing the government of the day to go back and renegotiate, and in 2000, 2004 and 2006. I say this with some bittersweet feelings. This group is very successful at mobilizing and at keeping this issue before candidates, prospective members of Parliament and prospective governments. However, I was talking not long ago with some of the folks doing the phone calls. With every election and every phone call, the cold hard reality is that yet another member is deceased, and another and another, or the latest ailment or disease is afflicting the few who survive.

Of course, this news kept coming, election after election. I can tell members that CASSE does not want to mobilize for another election. Quite frankly, its members should not have to. In my opinion, it is time to pass this private member's bill and get on with this measure. Or also, I would be pleased if this wound up being a line item in a budget, something for which I am working hard.

These seniors have been waiting a long time. They are looking for justice. Who are these seniors? Let us go back and look at what that generation achieved. Certainly they worked in the United States, but they lived in our communities. They built our communities across Canada. Talk about great foreign investment: they went to the United States, brought back their wealth and invested it in our communities here.

Let us go back and imagine these seniors in their prime. World War II has ended. They set about growing families and building homes and barns, hospitals and fire halls in their communities, delivering the services that were necessary and starting the businesses that employed others. They built community centres and churches, improving the quality of life in their communities. They went to work in the auto factories, building the cars their generation would drive. They worked the fields, harvesting and sending product to market.

Former NBC news anchor Tom Brokaw called these seniors “the greatest generation”. I do not call them the greatest generation; I call them the selfless generation, a good example to my generation. They were the dreamers. They had a good vision for this country. They were the builders. With their bare hands and their hard work they built this country and made it what it is today.

Those people were selfless because they thought about the generations to come. They did not think about what they wanted or what they could get from everyone else. They thought about what they could save and invest in their children and grandchildren. That is the kind of thinking of this generation. They planned for their own self-sufficiency. They did not ask anybody else to do anything for them. They saved their pennies. They worked hard. They did not just suddenly get to retirement and wonder who would take care of them. They were thinking long before that. This is why this was such a cruel thing. They knew that if they lived to a certain age they would need to save enough to be fine when they retired.

They were the givers. They gave to others and to charities. They started community groups that worked hard to meet the needs of people in their community. They were fundraisers. They went out and raised money for all kinds of noble purposes in their community. They were the generation that never asked for anything in return.

What happened to these seniors? Many have been forced from their modest accommodations into nursing homes or forced to move in with siblings who were also senior citizens. However, this move was symbolic of something, I think, much deeper. They have been forced from independence to a situation of dependence, which is what this tax increase did.

Seniors have been forced into making choices that they never thought would happen. They do not know whether to pay for their prescription drugs this month or to pay the gas bill to keep the gas on in their homes. They do not know whether they should buy groceries or pay the electric bill? The wonder if they can buy a gift for their grandchild's birthday or if they can lend money to their son or daughter who is in a bit of financial difficulty. This is the generation that saved and planned so they could give to other generations but they cannot make those choices any more. That is what this tax increase did to them.

They are bitter. They were misled. They were told that things would go back to the way they were before. It never happened. Their esteem and their future plans for retirement have been shattered through no fault of their own.

There are several roots to bitterness but one of them is the feeling that we are owed something.

While tax relief for any senior is good thing, and I support those measures, for these seniors they are owed something. They are owed a change, a change that will help them heal and help them get to back on top of their lives.

I am calling on members of this House to come together and to find the will to act now so that these seniors get back on top. We owe it to them.

Employment Insurance Act

[Yvon Godin, NDP, Acadie—Bathurst, NB]

moved for leave to introduce Bill C-265, An Act to amend the Employment Insurance Act (qualification for and entitlement to benefits).

Mr. Speaker, I am pleased to introduce a bill concerning the best twelve weeks. The Liberal Party had a chance to pass a bill for workers who were short work weeks and found themselves falling into what is known as the seasonal gap.

The best twelve weeks will help seasonal workers. This bill also proposes 360 hours. I am pleased that the member for Vancouver East is seconding this bill. I hope that all members of the House of Commons will support it.

In Canada, only 33% of women who pay employment insurance premiums are eligible to receive benefits. The $49 billion that disappeared from employment insurance coffers were contributed by workers. In Canada, only 38% of working men are eligible for employment insurance.

This bill will bring justice to Canadian workers. The Liberals could not do it, but I hope that this Parliament and its minority government will succeed in passing this bill.

(Motions deemed adopted, bill read the first time and printed)