Finance Committee on April 14th, 2008

[Mike Wallace, Conservative, Burlington, ON]

Right. So if I give you my card, you'll be able to send me that note?

[Michael Conway]

Absolutely.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

To stimulate world-class champions of continuing education, is that a new program you want us to establish in this continuing workplace? Education and training, is that a program?

[Barry Gorman]

At the moment, we do not believe there is any such facility in Canada, at least as far as we've been able to discover. One of the real problems that corporations have is obviously finding in-house training, continuing education programs, things of that nature. We believe that if there were a university or a community college that would take on the task of literally being a clearing house for these kinds of programs and could get the Canadian business community to be made aware of its facility, it would be a tremendous service to the business community.

[Mike Wallace, Conservative, Burlington, ON]

I have one more question for you, and hopefully I'll have some more time after that.

We've heard from other economists since we've been doing this study about the EI system that maybe we should have an experience rating system, in terms of the cost to businesses. Those who don't lay off too often and don't experience a lot of unemployment in their industry would have a different rating, in terms of their costs for EI, from those industries that do. Does your organization have any comment or any position on that?

[Barry Gorman]

We have never specifically taken a look at any EI issues of that nature.

[Mike Wallace, Conservative, Burlington, ON]

That's it? Oh my gosh.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much. You're a little bit over already.

Mr. McKay, five minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Mr. Chair.

Thank you, witnesses.

It's pretty obvious to pretty well everyone outside this government that at some point or another carbon is going to have to be priced in some manner or another.

I'm looking at your chart, Mr. Heady, on page 19, where you talk about environmentally related taxes. If you flip that chart, you could pretty well chart Kyoto compliance, with Denmark and Norway and various other countries at the top end being fairly close to, if not Kyoto compliant, and the ones at the bottom end, being the U.S., Mexico, and us, not entirely Kyoto compliant. Probably the exception might be Japan.

Is that a fair observation?

[Christopher Heady]

I've never thought of it in that way. But certainly I think that environmentally related taxes, particularly ones that are closely related to carbon, are a very good way of trying to become compliant with the Kyoto Protocol.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Is it your view that carbon-related taxes or environmentally related taxes change behaviour?

[Christopher Heady]

Yes, we do have evidence that they change behaviour.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Professor Brooks, a little earlier you were a little bit concerned about, if you will, the third pillar of tax policy, namely the influencing and the changing of behaviour. Would you be of the view that excise tax or consumption tax, as it relates to an environmental issue, is a good thing, or is that not a good thing?

[Prof. Neil Brooks]

Not surprisingly, I like excise tax. I like all taxes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You might be in a minority on that point.

[Prof. Neil Brooks]

Sure. I love paying my taxes. I think they buy us the kind of society I like to live in.

I think taxes are useful in terms of getting prices right. If some activity is generating negative externalities, a market economy will only function efficiently if prices reflect the full cost and full benefit of the activity. Therefore, if we've got carbon and we know there's this enormous social cost, the market can't perform properly. So we've got to get that price right, and the way we do it is by imposing a tax on carbon to try to get the price right.

I'm not opposed to those.

[John McKay, Liberal, Scarborough—Guildwood, ON]

We have been living in a bit of a la-la land in terms of both water and air. We've never priced those as goods. So the product of the environmental degradation has never been priced into the ultimate product to the consumer.

I want to get both comments here, both on the business side and from your side. Is it your view that Canada is ready to deal with the issue of the pricing of environmental carbon, and the question really is, by what means?

I'd ask that of both Mr. Conway and Professor Brooks.

[Prof. Neil Brooks]

I think pricing carbon and activities that in effect cause social externalities is important. We've got to get the prices right, and therefore I'm not opposed to pricing any product that in effect generates negative externalities by imposing a tax on it. That's what excise taxes are all about. They're really not taxes; they're the government attempting to get the price of those products correct so the market can perform its allocated efficiency function.

You know the politics of it as well as I do, so I won't go into that. I just don't think there's a case for not doing it. I've never heard the case for not doing it, frankly.

[Michael Conway]

One of the themes running through our entire submission was simplification, which is why we called for the harmonized sales tax, the group tax reporting, and a review of the tax system. The tax act is huge now, and it's got to be looked at.

In terms of environment, I think a study should be undertaken in the same theme for harmonizing across the country. If everyone comes up with their own system, it's going to be like what we have with the GST right now and the non-harmonized provinces. Consequently, since the environment issue is in front of us, I would urge the government to consider a study bringing in a harmonized system, with all the provinces and the federal government looking at that, and carry it through to all the other themes, HST, and move toward a much more harmonized—

[John McKay, Liberal, Scarborough—Guildwood, ON]

B.C. goes one way, Alberta goes another, and there's no federal leadership on top. We agree.

[The Chair, Conservative, Rob Merrifield]

I think the point has been made and the time has gone, so we'll now move to Mr. Dykstra for five minutes.

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Chair, I'm going to use 10 or 20 seconds of my time to point out that, with all due respect to all four of you gentlemen, the motion that Mr. Pacetti and I put on the floor was about tax policy and how we should tax versus how we should spend.

One of the reasons we've gotten into this is that we're trying as best we can...and I know this is Parliament Hill, and partisanship gets involved in it, but you can see how, once we start to talk about spending, we move directly into the partisanship of who can spend the taxpayers' money better.

Maybe this is just a general comment, Mr. Chair, that if we're going to expand the motion, we should do so formally, to say that we're also going to ask our tax policy experts to give us advice on how we should spend taxpayers' money. It makes it extremely difficult to work through this otherwise, and I think it's very difficult for our researchers and analysts to be able to give us a good indication of what is some top-notch advice that we're getting from you gentlemen.

That's not to say we aren't getting good advice from you; it's just that it gets itself mired in the muck.

Mr. Brooks, you did comment about the difficulty around current tax policy—whether it be from the last ten years, the last five years, or the last two years—with respect to finding a way to assist those at the lower end of the pay scale.

A question for all four of you concerns a couple of things we did and whether this is something we should continue. We've heightened the threshold for those who are in the lower income scale in terms of how much they have to pay in federal tax. For example, in 2006 about 625,000 people came off the federal tax rolls, and in 2008 an additional 300,000 came off the tax rolls.

This leads into the whole part of your comments about a consumption tax. We have to pay some political concern to the lowest-income folks, and not just tax policy concerns, so I want to get that perspective from all of you. Once we reach a point where we have the lower income scale of our wage-earners not paying federal tax, how do you propose we provide a way to benefit those individuals and families?

I know your opinion on what we have proposed, but I'm asking you, is there then a better way that you would propose, other than lowering the consumption tax, or maintaining a GST credit, or offering some form of credit to these folks? They aren't paying federal income tax anymore, which is a positive thing, while at the same time they're at the lowest income threshold in the country.

[The Chair, Conservative, Rob Merrifield]

That was a two-and-a-half-minute question, so we'll have two and a half minutes to answer. Carry on.

Mr. Brooks, you can start.

[Prof. Neil Brooks]

The only way to reach low-income people is through transfer programs. For example, it would have been much better policy not to reduce the GST but in fact use that revenue to increase the working income supplement, which I think is a very good program and can be substantially increased. In the United States, the comparable program is $4,000 a year, the earned income tax credit. I think the money could well have been used to do that in order to create some employment, and so on. I think it could have been used to increase the child tax benefit. That clearly benefits low-income people. I think it could have been used to provide more early childhood education for children, which clearly benefits low-income people.

I just think there would lots of ways. If what you're concerned about is low-income people, I don't think the GST credit did anything for them.

[Rick Dykstra, Conservative, St. Catharines, ON]

I am concerned about them. Yes, it is in fact only part of it—