Bill C-2 (Historical)

An Act to amend the Income Tax Act

This enactment amends the Income Tax Act to reduce the second personal income tax rate from 22% to 20.‍5% and to introduce a new personal marginal tax rate of 33% for taxable income in excess of $200,000. It also amends other provisions of that Act to reflect the new 33% rate. In addition, it amends that Act to reduce the annual contribution limit for tax-free savings accounts from $10,000 to its previous level with indexation ($5,500 for 2016) starting January 1, 2016.

Income Tax Act

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Mr. Speaker, I appreciate member's passion on the subject. However, in all honesty, I think there are some things that we need to clarify for the record.

The NDP ran on smoke and mirrors. A lot of the things in the NDP platform quite simply were not embraced or trusted by Canadians. I will go back and talk about the $15 a day affordable daycare plan, which was not costed out and which many provinces across this country were not going to buy into.

Let us talk about the $15 an hour minimum wage. Originally that was presented as a minimum wage for all working Canadians, but after clearing the smoke, it was apparent that only a very small percentage of Canadians would have benefited from a $15 a day minimum wage.

The biggest question I have for the NDP, which I have asked several times during this debate, is if the New Democrats are so passionate about protecting working-class Canadians and low-income families, why did they support the UCCB along with the party opposite, the Conservatives? The universal child care benefit gave the same benefits to those earning hundreds of thousands of dollars as to families who needed it. Why did they support that? Why did they support the UCCB as a party, when the Liberals are putting forth the Canada child benefit, a program that would benefit nine out of ten Canadian families and lift hundreds of thousands of children out of poverty? No, the NDP did not support it, but the UCCB. My question for the NDP is why?

[Anne Minh-Thu Quach, NDP, Salaberry—Suroît, QC]

Mr. Speaker, we are talking about the Liberals' Bill C-2. They claim that their bill will have a positive impact on middle-class workers, but it will actually make the rich richer. Two-thirds of Canadians will not see a penny more despite this proposed tax cut.

People earning $45,000 or less per year will not benefit from the Liberals' tax cut. The Liberals are making a big fuss about this, and that is why we are standing up in the House to say that we really need to work on bringing in meaningful measures that benefit the many thousands of Canadians who earn approximately $31,000 per year.

Society's poorest people are waiting for the Liberals to spare a thought for them and do something to help them put food on the table, pay their debts, and buy prescription drugs.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, my constituents want us to attract more doctors, but the Liberal Party wants to take more money with this bill.

During the election campaign, the NDP leader said that a tax rate higher than 50% was a bad policy for Canadians. Today we are discussing the same policies, which the NDP support.

Can the member explain to me why the NDP changed its mind?

[Anne Minh-Thu Quach, NDP, Salaberry—Suroît, QC]

Mr. Speaker, I am sorry, but I did not fully understand the question.

I would like to come back to the TFSA contribution limit, which the Conservatives increased to $10,000. A number of economists said that it would benefit only the wealthiest 30% of Canadians, while the NDP is trying to come up with ways to help the middle class, people who are tightening their belts.

That is why we are standing up in the House today to say that the government needs to make changes that will help people who earn an average of $31,000 a year, that is, people in the lowest tax bracket.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Speaker, when the Liberals originally introduced this new system of tax breaks, they promised it would be revenue neutral. Shortly after taking office, however, they abandoned this promise. It is projected by the parliamentary budget officer that Bill C-2's changes will cost Canadians $8.9 billion over the next six years.

This gross miscalculation speaks to the government's incompetence, and the fact that the Liberals are proceeding with this legislation after admitting they have broken this promise to Canadians speaks to their integrity.

In fact, many of the government commitments seem to be falling by the wayside: a $10-billion deficit cap, consultation with opposition, openness and transparency. That is three months and three major broken promises. So much for sunny ways.

This leads to a lack of trust in the government's future plans. There is a lack of transparency with this promise. Who knows how much higher these costs will go? There is a lack of evidence or explanation for why Bill C-2's changes would stimulate economic growth and development for Canadians.

Tax breaks for the middle class are not, in themselves, sufficient to stimulate economic growth and development. It is, therefore, quite likely that more initiatives will have to be introduced.

These will require even more money from the government. This money will either have to be drawn from reduced spending on public services or from the taxpayer base. Given the vulnerable economic state of Canada, tapping further into government revenue is particularly risky for this country as a whole, and also for individual Canadians.

The government continues to move ahead with these types of long-term commitments, even amidst a struggling economy, a weakening dollar, and plummeting oil prices. Canadians are asking how much higher the cost will go. These kinds of commitments are one more chip into creating long-term structural deficits, and in turn they discourage investment and growth in a struggling economy.

Our Conservative government worked very hard every day in office to stretch every cent. We left the government a surplus and expected that to be spent with caution. It seems that work was all for nothing.

The Liberals continue signalling that they plan to run massive, long-term structural deficits, which will increase the burden on taxpayers and leave Canada more vulnerable to sudden economic shocks. Our Conservative caucus will continue to stand up for taxpayers, and press the government to approach spending in a responsible manner, to protect against risk, to ensure stability and long-term prosperity.

On the subject of changes to the tax-free savings account, all Canadians over 18 may contribute to TFSAs for all purposes, not just education and retirement savings. This makes the savings mechanism the most flexible way for all to save. It is because of this that many Canadians of all backgrounds have come to rely on the tax-free savings accounts.

We have heard from students saving for higher education, families saving to start a family, entrepreneurs saving for their businesses, parents saving for their children, and low-income seniors saving for retirement, all of whom are investing in TFSAs.

It is Canadians of all kinds of financial backgrounds too. The majority of TFSA accounts belong to low- and middle-income earners. The fact is that two-thirds of TFSAs are held by tax filers with incomes less than $60,000.

What kind of message is the government projecting when it is taking away the ability for Canadians to save for their future, while racking up massive deficits?

Why does the government continue down the path of a nanny-state approach, limiting choice for Canadians to save their own money?

These are not mandatory contributions. In contrast, the Ontario Liberal plan for a provincial pension plan is. If the argument is that very few Canadians have the ability to afford a maximum contribution, why is the member opposite so opposed to offering that choice, while in other instances forcing it upon others?

Personal fiscal responsibility is something that our government should be encouraging, regardless if it refuses to lead by example.

We are in uncertain times, with dropping commodity prices, a dipping dollar, and slowing economic growth.

Recently, the PBO released a report on the state of household indebtedness and financial vulnerability in Canadians, showing that household debt-servicing capacity continues to trend upward, while capacity to meet debt obligations diminishes.

Households now face overwhelming exposure to negative income and interest rates, and are more likely to become delinquent in debt payments.

Responsible Canadians are looking for a way to save when times are good, so they can be protected. Reducing TFSA contribution limits would reduce the abilities of real Canadians to save for retirement and to protect themselves from economic shock.

This would translate to a greater burden upon all taxpayers to support those who will be unable to support themselves. Why is the government hiding these future costs from its taxpayers?

In contrast to Liberal deficit spending, whose purposes are unclear, TFSAs provide a concrete vehicle for financial independence for Canadians. Instead of encouraging consumption, they encourage saving—promoting independent control over funds—which shields Canadians from economic shock.

The burden of economic shocks on vulnerable Canadians will ultimately fall on the overall taxpaying base if the government must step in and support these individuals. Money will come from taxpayers, or public services will be compromised for the expense of increased government financial support.

TFSAs remove barriers for all Canadians to maximize their financial positions. TFSAs are open to all Canadians over 18 years of age with valid social insurance numbers. They are simple and accessible. Anyone can contribute any amount. They encourage financial literacy and curiosity.

In fact, the majority of TFSA accounts belong to low- and middle-income earners. TFSAs allow investments—any sort of investment—deposited into them to grow tax free. TFSAs make retirement savings more accessible, simple, and compelling. If individuals do not save enough for retirement, all taxpaying Canadians will ultimately be responsible for the burden.

The government's spending plans, including its nebulous deficits, are risky. We have seen no concrete evidence for targeted growth plans. Savings will shield vulnerable Canadians from the risks involved.

Conversely, limiting savings tools will limit economic self-protection and make Canadians more economically dependent upon the government. This is dangerous, given the lack of clear economic plans and directions from the government. Government dependence will likely translate to higher taxes for Canadians across a wide socioeconomic spectrum.

In popular debate, the media, and academic research, a brain drain out of Canada is cited as a very real possibility. Most doctors, lawyers, and other skilled professionals are found in the upper tax bracket, and their departure could be very dangerous for Canada.

Progressive taxation reduces investment, risk-taking, and entrepreneurial activities, since a large share of these activities is done by high-income earners.

The substitution effect is a principle that essentially states, “I'm getting less money for each hour I work; therefore, I should work fewer hours”.

Tax avoidance activities such as reporting less income, using tax-planning techniques to reduce the tax burden, working fewer hours, or even not seeking job promotions are very real possibilities.

Progressive income taxes reduce the returns to education, since high incomes are associated with high levels of education. They reduce incentives to build human capital, the kind of investment the Prime Minister talked about in Davos, while turning his back on our resources sector.

Academic consensus among experts is that taxes on both corporate and personal income are particularly harmful to economic growth, as economic growth ultimately comes from production, innovation, and risk-taking.

The conclusion is that tax rates of over 50% will not raise revenue. Between provincial and federal income taxes for top income earners, this is what would happen under Bill C-2.

I will not support Bill C-2.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Mr. Speaker, I caught the speech a little earlier by the hon. member from Saskatchewan. I have spent some time in Manitoba and I know about the concept of meadow muffins, and we have just been delivered a big plate of them.

Let us talk about the surplus.

The Conservatives tried to balance the budget. They tried to give us a surplus. I am sure they did. However, we found out just this morning that over $1 billion of that should have gone to first nations education, and billions more should have gone to our veterans and to people waiting extraordinarily long times for family reunification. The cuts that the Conservatives applied certainly contributed to the bottom line, and they still failed to balance the budget.

Let us talk about TFSAs.

I thought the member's comment was interesting when he said that tapping into government revenues is not such a very good idea. However, that is precisely what TFSAs do. As the Conservatives' own former finance minister, Joe Oliver, at least was prepared to admit, allowing higher TFSA limits in the future will in fact de-fund the government. When asked about the impact on the ability of governments in the future to help people, the answer was, well, we will leave that to the grandkids of the member for Calgary Heritage to figure out how to square that.

Who is actually benefiting from the TFSA, except for the very wealthy? Who suffers, except for the rest of Canadians?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Speaker, I thought that was more of a speech than a question.

I just want to say one thing. We are discussing financial figures and indices here. We are discussing true figures of economic factors. This is not about the political position that this or that party takes. This is about Canada and Canadians.

Therefore, I would say to the member that if he does not believe in the TFSA, then why is it being kept at $5,500? It is because the current government believes that it will benefit them with the Canadian taxpayers, and will benefit the Liberals in votes down the road and in their position. That is why they are keeping it, and that is why they are trying to play a double standard here.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I thank my colleague, with whom I cross paths regularly at the Standing Committee on Finance.

I also want to thank him for explaining really clearly how the Conservative Party wants to protect the wealthiest members of our society, at the expense of the majority of Canadians. He did this twice. First of all, when he talked about taxation, of course, he almost seemed to suggest that what the Conservatives really want is a flat tax rate.

It is called a flat tax in English, which obviously would be paid by the lower-income earners and the middle class to compensate for the lower taxes paid by the richest.

I also want to come back to the issue of TFSAs. My Liberal colleague mentioned in his comments that only 7% of Canadians make the maximum TFSA contribution at the current limit. If the limit were doubled, the same 7% would be able to double their contribution. This would be very harmful to public finances in the long term, given that the parliamentary budget officer stated that this measure would cost nearly 0.7% of GDP, even though 0.7% of GDP was too much to spend on international aid.

How can he justify increasing the limit, knowing that it will place such a heavy burden on our public finances and undermine our ability to provide the high-quality services that Canadians expect?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Speaker, I thank my colleague. I enjoy having him on the finance committee.

All I can say is that 11 million Canadians have contributed to TFSAs. I am not sure about the 7% figure for those who maximize to the $10,000 limit. In fact, if those figures are correct, it means we still have a major number of Canadians who have enjoyed contributing to TFSAs, and it means that it is to their own benefit to do so.

Again, we have the right to say that the majority of Canadians are with it, they like it, they have enjoyed it, and it is going to be beneficial for Canadians in the long term, if we are thinking of doing investment in the long term for our future generations.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, I too am pleased to join in the debate today. This is, of course, really the first substantial piece of legislation that has been put forward by the Liberals. It is interesting that we have mostly been focused on the change in the marginal tax rate and the TFSA, and I am going to spend most of my time on those two issues, but for people who might be following the debate, this legislation does have a couple of other pieces to it: charitable donation tax credits, income earned by child, income earned by a trust, and taxation of corporations and shareholders.

If our party, when we were government, had put this particular bill forward, I think the Liberals would have said we had put forward an omnibus bill. They would have asked what we were doing and they would have said it was an omnibus bill because it included six different pieces.

I recognize that within an important piece of legislation it is sometimes sensible to do things that perhaps are not that controversial and are a bit of housecleaning, so there are some more pieces to this bill. It is not an omnibus bill, although the Liberals would have characterized it as such if we had put it forward, but there are some additional pieces.

As I indicated, the focus of my comments is going to be on the two pieces that most people are making comments on today. One of my colleagues called it the bill that giveth and taketh away. I think I would describe it as a bill that represents the first broken promise of the Liberal government.

The Liberals are saying they went to Canadians and were given this mandate. They told Canadians they were going to tax the rich and give it to the middle class. The Liberals did indeed tell Canadians that particular piece of information, but what they also said when they were going to Canadians during the election period was that the change would be revenue neutral. That is broken promise number one, and it is a big broken promise. It is an $8.9-billion broken promise over six years. This is not about fulfilling a promise, but about breaking a promise to Canadians.

What is that change in the tax structure that giveth to the middle class and taketh from the rich? Apparently just today, I understand, the Prime Minister of Canada called it a tiny bit of redistribution. That is what he called that change in the tax level for people who earn over $200,000. Moving from 29% to 33%, he said, is just a tiny bit of redistribution.

If we do the math, what he has actually done is given them a 12% increase in their taxes. Going from 29% to 33% is 12%. People can make $200,000, and it is a lot of money, but people with a large family who all of a sudden are hit with a 12% hike in their taxes will find It is a pretty significant hit. Everyone's circumstances can be a little bit different, but for those people who earn over $200,000 who are maybe paying off student debt or who have other elements, calling it a tiny bit of redistribution is a bit of a fallacy.

When the Prime Minister said he was going to give the money to the middle class, he never really defined the middle class. I do not think Canadians would consider the parliamentarians in this House, who are making good money, to be part of the middle class. I think our salaries are available on a website, and we are just below the $200,000. Some of the parliamentary secretaries are probably butting up to that level. They are actually benefiting the most from this tax break. If Canadians had been told that fact, they would have perhaps been less enthusiastic. They might have asked about those people making $190,000 getting tax breaks, and not only getting tax breaks but adding to the debt of our nation by doing so.

To be quite frank, the Conservative government believed in keeping our taxes as low as possible. Conservatives always support lower taxes. To be frank, when $6 a week is being added directly to the debt of this country, I think that if I had to make a choice, I would say, “Please do not put that $6 a week onto my children. I will pay that $6 a week myself.”

There are a lot of problems with this measure, which is absolutely unsupportable from our perspective. The biggest concern is that it would create a structural deficit when we actually handed the Liberals a surplus. Wrong promises and miscalculations have created a significant problem for them. We have called this a “whoops” in other speeches. This will be a burden on our children.

Now I want to shift to the tax-free savings account. The Liberals seem to love the stick approach to getting people to do things when it comes to government programs, making things mandatory, increasing the CPP, like the Ontario government is doing. They do not like carrots. They would rather have a big government program that makes people do things. Our party believes we need to provide Canadians with the opportunity and the flexibility to make their own choices.

The Liberals talk about only the rich being able to afford $10,000. I will give the House a couple of real-life examples about why the TFSA is an incredibly important tool for Canadians and that the $10,000 contribution limit is quite reasonable.

My first example is that of a young adult who has come into a small inheritance. This young person has never been able to contribute to a tax-free savings account, having just finished school. This young adult decides to put that money into a tax-free savings account and is able to grow that investment instead of spending that inheritance right away. This individual has decided to use it for the future, and in a couple of years buys a first house. Is that an inappropriate thing to do? It is a reasonable and sensible choice for someone who otherwise would have had no options.

Many seniors are now selling their homes and moving to assisted living facilities, or to a complex that provides support. They might have made some money on the sale of their homes. They have maxed out their RRSPs, but they have room to put some of that money into a tax-free savings vehicle that will help them in the future to pay their monthly expenses.

These are just two examples of why having a robust tax-free savings account is important. I recognize that not all Canadians can put in $10,000 every year, but there are times in their lives when they could. That is the beauty of the product. It is not that individuals had to contribute $10,000 every year. There are years where people might not be able to put a penny in, and there might be some years where they could top it up to where they needed to be.

I have demonstrated today that Bill C-2, the first substantial bill to be put forward in the House by the Liberal Party, has some serious and significant flaws. It would add to Canada's structural deficit. It would not do all that much in terms of the middle class. It would take away an important tool that people have in terms of saving for their future, whether they be young or old.

I would ask that the Liberals perhaps reconsider this legislation. They have been given a surplus. I would urge them to not keep adding to the debt. We are $18 billion, we are $30 billion in deficit. Those are frightening numbers. Perhaps the Liberals should rethink their plan and look at what they are going to leave for their children and their grandchildren.

[Lloyd Longfield, Liberal, Guelph, ON]

Mr. Speaker, there were some regressive themes throughout the member's speech.

I am wondering about this program of TFSAs that is based on receiving an inheritance or selling a house in order to have a windfall to use, versus a program of creating prosperity, as we are suggesting, by investing in Canada, creating jobs, and stimulating our economy with real growth. That is something we have not seen for over 10 years.

The previous government was focused on cutting services and programs to artificially balance a budget that had a one-month snapshot. It looked like it was balanced, but the next month was not. Its financial programs resulted in $154 billion of additional debt to our country. Almost half of the debt we have incurred since Confederation is owned by the Conservative government of the last 10 years.

We are trying to redress the mismanagement of our finances with a program of hope and hard work, versus divisive politics and cutting costs to try and achieve false positives. Which part of hope and hard work does the hon. member not get? Is it the hope part or the hard work part?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, he has again demonstrated how bad the Liberals are with math. It is quite stunning. They make this mistake in terms of what the changes to this tax rate are going to do, and then he throws out numbers that are, quite frankly, totally wrong.

When I look at the actual record of our government, I see that we paid off close to $40 billion in debt. During a global recession we did, with the rest of world, enter into some stimulus spending, but when Minister Flaherty stood up in the House during the worse global recession and talked about targeted spending, he also had a plan to get back to a balanced budget. It was executed perfectly. It was very hard to turn off the taps. He stimulated and he targeted, and during a global recession, Canada had the best recovery.

The Liberal government is heading into deficit spending for a recession we are not even in.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Mr. Speaker, earlier today I asked the member for Louis-Hébert a question about income inequality.

I could ask the Conservative member the same question, because I am wondering why the Liberal and Conservative governments insist on helping people who already have financial resources.

Take the TFSA, for example. In my riding of Hochelaga, most people do not even have enough money to pay their rent, so how can they put a few dollars in a TFSA? These people need help.

Why is priority not given to investments that will help people out of difficult situations and address inequality, rather than to helping those who are not so badly off?

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, what the member is failing to recognize is the scope of things our government did. TFSAs were one tool.

A government has a responsibility to help all citizens and to provide the tools and opportunities for their success. Certainly we did many things for the people who have challenges in their lives, whether it was the biggest increase to the guaranteed income supplement or the many measures we brought in to help those with disabilities or the 130 tax cuts that had a positive impact or the GST going from 7% to 6% to 5%.

What I fail to realize is why the NDP has such an objection to providing a tool that will allow people to move forward and be self-determining in terms of what they are doing and how they are doing it. Instead it always wants the government-knows-best route and the government has to run a program. It does not want to give tools to Canadians. It wants to make sure we have a big, bureaucratic government program to do it.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Mr. Speaker, I rise in opposition this afternoon to Bill C-2, an act to amend the Income Tax Act.

Bill C-2 would implement the so-called Liberal middle-class tax cut. The biggest problem with that so-called Liberal middle-class tax cut is that it does not actually cut taxes for middle-income Canadians. I will get to that in just a minute.

Bill C-2 would reduce the income tax rate from 22% to 20.5% for Canadians earning less than $200,000. It sounds pretty good on the surface, and I guess during the election campaign a lot of Canadians thought it sounded pretty good, but, like everything, the devil is in the details. What does it actually mean? How much are Canadians actually going to save? The answer is not a lot.

Take, for example, a Canadian who earns between $62,000 and $78,000. How much would that Canadian save under the so-called Liberal middle-class tax cut? The answer is about $117 a year or $2.25 a week. What does $2.25 get someone in Canada these days? I think a person would be lucky to get a double-double at Tim Hortons.

What about someone who is making $48,000 to $52,000? How much would that individual get back by way of the so-called Liberal middle-class tax cut? It would be $51 a year, or less than a $1 a day. That person would be lucky to to get a doughnut or a muffin at Tim Hortons in the morning for less than $1, but that is what the Liberals are offering Canadians earning $48,000 to $52,000 a year.

How about Canadians who earn $45,000? I would say that is pretty well smack dab in the middle of the middle class. How much will get under the so-called Liberal middle-class tax cut? The answer is zero, zip, nada. As I say, the biggest problem with the so-called Liberal middle-class tax cut is that it does not cut taxes for middle-class Canadians.

What is the cost of the so-called Liberal middle-class tax cut? The Prime Minister, during the election campaign, went all over Canada with his sunny ways and blue skies, saying it would be revenue neutral. Then barely after the ballots were counted, the Prime Minister had his finance minister, because I guess he did not have the courage to do so himself, say it would not be revenue neutral.