House of Commons Hansard #31 of the 36th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was minority.

Topics

Income Tax Act
Private Members' Business

11:05 a.m.

Reform

Jake Hoeppner Portage—Lisgar, MB

moved that Bill C-223, an act to amend the Income Tax Act (deduction of interest on mortgage loans), be read the second time and referred to committee.

Madam Speaker, it is a real pleasure to rise in the House today to address my private members' bill, C-223.

This bill will be supported by a lot of industries right across Canada. I have had contacts from the housing industry and the banking industry, saying that this bill or this type of Income Tax Act change is long overdue.

This bill will make it more feasible for young families to own a home. When we look at the importance of families to a nation, we see that they are the basic building block of a strong nation. We want a good solid family, a family that has some encouragement and desire to put equity into a home or shelter.

We often forget that these young families will be dealing with a taxation burden never before been seen in Canadian history. Look at the $600 billion of debt which is going to be put on their shoulders in the next century, a debt which they will have to service. The way the government has been going the last three and a half or four years will add another $100 billion to that. We know we have to do something for these young families so that they will have an incentive to continue to pay taxes. Otherwise I think they will feel like giving up and saying “why should I even try to get equity because it is all going to be taxed away from me before I have the interest or the ability to own a home”.

I designed this bill so that it would not be an incentive for home owners to upgrade their dwelling or be favourable to the higher income families. I felt it should address the lower income families, the people who have really been behind the eight ball, giving them a level playing field when it comes to home ownership.

If we look back through history, no matter what happened in the thirties, the twenties and the fifties, home ownership was always something that set the tone for the economy of that decade. When people could afford to buy homes, we had a stronger economy. This is something that was really devastating in the thirties when homes were being vacated and people were moving to lower cost abodes. The country suffered for it. The number of homes built during the last decade was stagnant. A year or two ago home ownership picked up. When I did some research it astounded me that in 1993 there were 350,000 exchanges of home ownership. They were either people who were upgrading to better homes or people who could afford new homes. Out of that 350,000 changes in home ownership 50,000 were new homes. We know there were 50,000 new home owners in 1993. That is when things started looking a little brighter because government was trying to get the deficit under control and people had a little more confidence in the economy.

When we turn that into dollars and cents, it is quite amazing what that does to an economy with 50,000 new homes, plus the furnishings that are put into them, plus the landscaping and whatever that goes with a new home which provides a lot of jobs. That is what this country needs: jobs and the ability to afford to own a home.

This bill also gives these new home owners an incentive to apply their equity which can be used in their retirement. When they have a home to sell when they get to that age where they do not want to take care of it or they are forced into senior housing developments, they at least have some equity to back them up which today is a big problem for a lot of seniors who have never owned a home and have always lived in rental apartments. They find it hard to pay for accommodation later on.

That is another benefit in this bill. It will give people the opportunity to acquire equity that they can in their senior years use as a retirement fund.

For people who have been buying homes lately, who took the gamble because they thought the economy was turning up, I have proposed that this bill, if passed, will be applicable to first time home owners who bought their homes after December 31, 1994. Therefore, there is the opportunity for people who took the chance and went out on a limb because they were allowed to use 5% of their RRSPs to invest in a home, to secure their investment by being able to deduct the interest from the time that the bill is passed.

There was a complaint from a number of people who asked why first time home owners should get this tax break when people who rent out their units do not get a tax break. I was astounded when I researched the Income Tax Act to see what kind of tax breaks rental owners do get. There is a lengthy list which I will not take the time to explain in full but for example, any rental investor who owns a rental unit can declare the property taxes as an expense. They can include the insurance on their rental property, maintenance and repairs, heat, light and water, advertising, interest on the money borrowed, as I am proposing in this bill for first time home owners.

We can see that it is really not a level playing field for the home owners at this time.

People who have rental units can even include automobile expenses that they use for servicing the property, advertizing and commissions paid to obtain tenants. All these things are tax deductible.

That is why home ownership does not always sound feasible because the rental units can be rented at a fair cost compared to servicing the costs of a home. One needs extra wealth and income to own one's home. The bill, for the first time, would give lower income homeowners a more level playing field even if it is not totally level.

I looked at some legislation passed in the U.S. in the 1940s when all mortgage interest became a taxable expense. We are about 50 years behind in our income tax compared to the U.S. There are certain changes in its program I would not want to have in the Income Tax Act, but the U.S. did not look at the issue of how much revenue government was losing. It looked at the issue of how much more money was put into the economy. When taxes are saved they are invested somewhere else, which was behind the idea of writing that into its income tax act.

I found an article written by Hugh Segal. I do not always like what he says. A lot of people have heard him. We must give credit where credit is due. I thought he made some good comments. This is what he said:

Why should the tax system encourage one activity and discourage the other? Why is the family home a target? Why is it less important than an office, a warehouse or a piece of machinery?

That was the way I looked at it. The home is a basic place of shelter, the place where we raise our families with certain moral character, where we try to teach them what is good for the country, what will be ahead of them, what they will have to do and what their responsibilities will be when they become adults. I thought that was a pretty good argument.

In 1979 the Conservatives introduced a bill very similar to this one. However the government of that day did not last very long, only six months, and the bill died on the order paper.

Income Tax Act
Private Members' Business

11:15 a.m.

An hon. member

That was too long anyway.

Income Tax Act
Private Members' Business

11:15 a.m.

Reform

Jake Hoeppner Portage—Lisgar, MB

We can debate that argument when we are dealing with some other bill. The government would probably agree with that statement so we will not get into that debate.

Then he went on to say:

Middle income Canadians would also experience an increase in disposable and discretionary income. There would be an easier transition from renting to owning and the family home would for once be the beneficiary of an enlightened tax policy as opposed to the victim.

That is the way I have looked at it. Why should a home be taxed? It is fundamental if one wants to raise a family as a unit. It is a lot better to raise a family under those conditions.

Another point struck me when I read the article by Mr. Segal. Many first time homeowners would also like to go into private business. They may have the intelligence to be an entrepreneur or to develop things. This tax break would let them either save money for some future rainy day, education purposes for their families or to start a small business. If they had a small equity or some money they could put into a small business, that is probably the direction they would take. It is pretty well ever family's desire to have a business in the home. We know what that would do for job creation.

It is interesting to see all the benefits. The Toronto-Dominion Bank was referred to in an article in the Winnipeg Free Press . I even got some coverage in a paper that really does not want to give Reform too much coverage. There was an article indicating that my bill would help first time home buyers. It made me feel pretty good I got that attention. This is what the article said:

On a typical 25 year mortgage at 6.35% first time home buyers could claim some $1,700 on their income tax, according to Diane Olivier of the Toronto-Dominion Bank.

Some $1,700 of extra income is quite a bit to a young family starting up or to first time homeowners. It is super. I did not do the mathematics, but I think the bank has the ability and the research people to put those figures together. The article continued:

“Some people can be scared off by the costs of purchasing a first house” said Rischuk Park Realty owner Rusty Rischuk. The proposed amendment would make Winnipegers more confident that they can afford a home. I think it is wonderful.

That is from another sector of the economy. People can have confidence in a certain idea or in something that gives them an opportunity to invest. Referring to last summer when the stock market was booming and interest rates were coming down, the article said:

Nearly 60% of the city's homes sold from January to September were bought by first time home buyers.

We know what that does to the building trade, the furniture trade or any business tied to manufacturing these homes.

Income Tax Act
Private Members' Business

11:20 a.m.

An hon. member

It is a job creation effort.

Income Tax Act
Private Members' Business

11:20 a.m.

Reform

Jake Hoeppner Portage—Lisgar, MB

It is job creation, very true. In addition, it said:

A record high 25,000 Winnipeg renters could afford to purchase a home.

This was an added incentive. It really surprised me this was an impact of the bill. It would increase Winnipeg's job opportunities or the building trade by 25,000 homes. That is quite impressive.

I hope my colleagues on both sides of the House will see the bill as something non-political that will encourage and give our young people the opportunity to invest, to have a home and to build up equity that in future years can be turned over for their retirement or for senior housing.

The bill also refers to co-op housing. If people buy a condominium or an apartment in a co-op housing project they will be eligible under the bill as living in individual dwellings.

The bill is very well designed. It will not reduce government revenue. Rather it will probably increase revenue and be positive for the economy, not negative as some people presume.

This opportunity has provided me with quite a bit of publicity in the papers. My delight in this regard is that it shows Reform has good ideas. People who have never voted Reform say this is a bill thought out by a Reformer that helps everybody, the whole country, not just Liberals, Conservatives, Bloc members or Reformers.

If the House cannot see the light of day on that and support the bill, it will be very discouraging to keep on working. What are we working for? We are working for the country. We are trying to build the country.

We are trying to set up an economy for the 21st century that will be positive, that will give our young people something to dream about, and that will tell our young people we in this generation look after them. We will try to support them in carrying the huge tax burden because of the debt load and other mistakes made by past governments.

When we look at the past mistakes we cannot say it was just the government that made these mistakes. We as individuals, as constituents, allowed it to happen. It should have never happened. We were complacent. We did not pay attention so the problem is there.

I will just wind up in my remaining minute by saying that I am asking for the support of my colleagues in the House. If there are some amendments that improve the bill, I will not object to them. I hope the bill will do something for young people to encourage them to keep on building the country as did our pioneer forefathers.

Income Tax Act
Private Members' Business

11:25 a.m.

Stoney Creek
Ontario

Liberal

Tony Valeri Parliamentary Secretary to Minister of Finance

Madam Speaker, Bill C-223 proposes to introduce an income tax deduction with respect to the mortgage interest paid on the first $100,000 of a mortgage loan by individuals purchasing a first home after 1994.

The intent and spirit of the bill is quite laudable, but I would like to make a couple of points with respect to the current Income Tax Act and then move on to some of the other issues this proposal brings forward.

The Income Tax Act presently does not allow for the deductibility of mortgage interest on principal residences. However, capital gains on the sale of a principal residence are not taxable to the owner either. If mortgage interest rates were deductible, capital gains should be made taxable.

The measure, if limited to first time home buyers at maturity, would cost about $3 billion per year. Limiting the interest deduction to first time home buyers may be somewhat difficult. The proposal would create some significant differences in the tax treatment of qualifying homeowners and would be quite difficult to defend. If mortgage interest deductions were then extended to all homeowners the annual revenue cost would be approximately $6 billion. Admittedly, if the principal residence were subject to capital gains, the revenue decline would be somewhat less.

A taxpayer's choice of accommodation, owning versus renting, is a personal choice. The hon. member attempted to make the distinction between renters and owners and provided an example of those who own rental units rather than those who live in rental units. He is quite correct. Those who own rental units are entitled to write off property taxes, insurance, heat, light, et cetera. It is a business activity. Those who rent units do not carry on a business.

Let us go back to the point that a choice of accommodation is normally a personal decision and the costs associated with it are personal expenses. The tax system does not allow deductions and credits for personal expenses. Accordingly principal residences are not treated as investments for tax purposes. The mortgage interest paid on a principal residence is not deductible. The capital gains on the sale of a principal residence is also non-taxable to the homeowner.

The proposed deduction would also be inequitable to taxpayers without a mortgage. Again it is unwarranted because capital gains in principal residences are non-taxable.

Let us look at the present case. First time home buyers already receive tax assistance under the home buyers plan. Under the plan, first time home buyers are allowed to borrow money from the RRSPs without having to include the amount as income.

This proposal would see the deductibility resulting in a net transfer to homeowners with mortgages from other taxpayers who would have either to pay higher taxes or would receive reduced services to finance the deductibility.

In the spirit of reallocation, to which I am sure the Reform Party is quite committed, if there is an expenditure the money has to come from somewhere. It does not come from the sky. There would be an increase in income taxes or a reallocation from income taxes or reduced services. The Reform Party often makes that point. I would just like to make sure that it understands the point.

Furthermore, benefits would not be fairly distributed between groups of taxpayers. Benefits would be earned disproportionately by higher income earners who are more likely to have larger mortgages. Less than 15% of the benefits under the proposal would accrue to families with less than $50,000 in income.

Quite clearly the proposal would create significant differences in the tax treatment of homeowners, identical in every respect except the timing of their home purchase. For example, a first time home buyer would be able to deduct up to $6,000 assuming an annual interest rate of 6% on a $100,000 mortgage annually, while the neighbour carrying an identical mortgage would be denied a deduction because either the residence was not his or her first home or the residence was purchased before the effective date.

The success of the government's work, its deficit reduction strategy which Canadians have been quite supportive, has meant lower interest rates which have reduced the costs of home ownership. One year mortgage rates have declined by more than 400 basis points since January 1995. This has provided savings greater than $3,000 in terms of lower annual mortgage payments for a $100,000 mortgage.

I have respect for the hon. member, for his intent with this bill and for the hard work he put into drafting and researching it. All members of this House are quite clearly interested in strengthening the economy, in ensuring our economy continues to grow and that our young people are able to participate. Quite frankly, the expenditure of $3 billion that is strictly targeted to first time home buyers or, as another hon. member mentioned, an expenditure of $6 billion annually across the board would result in some reallocation of services or an increase in taxes in order to maintain a balanced budget, in order to maintain the level of services Canadians expect.

Although the spirit of this bill is one that every member of this House would clearly support, the technical challenges that this bill faces and the requirement—

Income Tax Act
Private Members' Business

11:30 a.m.

An hon. member

It's too simple.

Income Tax Act
Private Members' Business

11:30 a.m.

Liberal

Tony Valeri Stoney Creek, ON

It is not too simple. It is quite difficult to defend the legislation when one neighbour is able to deduct $6,000 in interest payments and because the other neighbour's home was purchased prior to 1994 and was not a first time purchase, that neighbour would be unable to claim that deduction.

Income Tax Act
Private Members' Business

11:30 a.m.

An hon. member

Are you going to pay back all the debt you have created?

Income Tax Act
Private Members' Business

11:30 a.m.

Liberal

Tony Valeri Stoney Creek, ON

Madam Speaker, we hear heckling from the other side but I am trying to bring some context to the discussion.

At this point the bill is not affordable when we are talking about $3 billion or $6 billion of expenditure. It is not necessary from the perspective that the housing industry in this country has continued to soar over this last little while with interest rates being maintained in a certain range. We foresee the housing industry continuing to grow. In essence we feel the bill is unnecessary at this time. A bigger reason is the equity of the bill. We could not discriminate against those Canadians who because they purchased their homes prior to 1994 would be unable to deduct the interest. If we were to extend this proposal to every homeowner it would be a $6 billion expenditure at a time when we have not yet balanced the budget. Yet we are starting to see these types of proposal coming forward calling for all kinds of expenditure.

As a government we are committed to ensuring we bring forward and support the fiscal policies we have brought forward over the last number of years. We want to ensure a balanced budget. We will ensure that any expenditure of this government is done through a reallocation. We will ensure fairness and equity for all Canadians.

While I urge every member of this House to agree that the intent of the bill is quite laudable, I must ask every member of this House not to support the measure. It is not affordable, necessary or equitable.

Income Tax Act
Private Members' Business

11:35 a.m.

Bloc

Odina Desrochers Lotbinière, QC

Madam Speaker, the bill tabled by the hon. member for Portage—Lisgar meets an urgent need to revitalize the construction sector. It also represents an interesting way of helping future first-time home buyers by giving them a tax break on the first $100,000.

As we know, the interest on a mortgage costs the average homeowner a bundle, and this is true throughout the country, including in Quebec. Often the interest on a mortgage prevents young families from buying a home. It is therefore time for the federal government to take concrete action to encourage the housing industry, an important lever in the Canadian, Quebec and regional economies.

Interest rates are now within the reach of most people. It is therefore appropriate that the government bring in legislation to encourage young families to buy homes more suited to their needs. If the government were to go ahead with certain tax measures, it could thus lighten the financial burden on future homeowners.

The Reform member from Manitoba mentions that he would like to see tax deductions for future home buyers. The Bloc Quebecois has some doubts about the Reform Party's intentions.

This deduction, which would be based on individual income, would help the richer members of society, and once again put the less well off at a serious disadvantage. Here again, we recognize the Reform philosophy lurking behind this bill: protect those with higher incomes and forget about the poorer members of society.

It does not surprise anyone that the Reform Party thinks along these lines, because this clearly right leaning party has frequently had its own contribution to make to the social nightmare created by the Liberals since they came to power in October 1993.

I will, if I may, refresh my colleagues' memory concerning the tax measures that have done great harm to our social climate: unemployment insurance reform, and cuts in provincial transfer payments that have created problems in health services, social programs and education.

What have Reformers done about these destructive Liberal policies? I can think of nothing.

The recent Speech from the Throne and the economic statement by the Minister of Finance show no signs of relief for the less privileged in society, and there again Reform members remain silent. We can get an idea in fact of the Reform Party's social conscience when we look at their position in the current debate on the greenhouse effect throughout Canada. The Reform Party acts as if there were only one province involved in this matter and neglects to propose a comprehensive solution to this global problem.

Let us come back to the bill itself. Although its first objective is to improve the social climate, the Bloc Quebecois has serious concerns about the provisions proposed by the Reform Party to amend the Income Tax Act. We believe these proposals will do nothing to meet the real needs of future home buyers.

In its own income tax policy, the Bloc Quebecois is very clear on the issue of tax deductions versus tax credits. In its policy statement, it makes the following distinctions, which I would like now to examine with you.

There is a difference between a tax credit and a tax deduction. Tax expenditures can take the form of tax deductions or tax credits. Tax deductions are taken into account in the calculation of the taxpayer's net income. They are factored in before the amount of tax payable is determined and they therefore reduce the taxpayer's taxable income. They allow him to benefit from tax savings. These can vary according to the tax rate for that income bracket. Tax deductions are regressive, because the higher the taxable revenue, the higher the savings. In the present system, the higher the tax rates, the greater the tax savings provided by tax deductions.

On the other hand, tax credits are subtracted from the amount of tax payable. They are used to determine the net amount of tax payable. Tax credits are neutral. Tax savings through tax credits are the same for every taxpayer, whatever his or her taxable income.

Let us take the example of three incomes: one less than $29,590, one in the range between $29,590 and $59,180 and one more than $59,180. For each $1000, a taxpayer with an income of less than $29,590 would benefit from an identical tax saving, whether in the form of a tax deduction or a tax credit.

A taxpayer with a taxable income in the $29,590 to $59,180 range would save $260 in taxes if he takes advantage of a tax deduction, whereas he would receive only $170 in the form of a tax credit for each $1,000.

A taxpayer with an income in excess of $59,180 would save $290 in tax if he was entitled to a tax deduction, whereas he would receive only $170 in the form of a tax credit.

It can be seen, then, that federal assistance to individuals via a tax deduction can vary enormously according to the individual's taxable income. A person earning less than $30,000 would receive $170 in assistance per $1,000 of tax deduction, while one earning $60,000 receives $290 in assistance for the same deduction.

The better off therefore receive $120 more in assistance per $1,000 in deduction, when their tax savings are compared to those of people with a taxable income of less than $29,590. There is, therefore, a flagrant injustice.

Our party therefore approves of the principle set out in Bill C-223, but we intend to call for a major amendment. We would like to see the proposed tax deductions changed to tax credits, which would, in our opinion, be fairer for all those affected by this bill.

Income Tax Act
Private Members' Business

11:40 a.m.

NDP

Chris Axworthy Saskatoon—Rosetown—Biggar, SK

Madam Speaker, I am happy to rise to speak to Bill C-223 moved by the member for Portage—Lisgar which sets out to provide mortgage interest tax reliefs to first time home buyers, up to a maximum of $100,000.

It is important that we all recognize the importance of encouraging home ownership. We know that not only a house but a home is an important part of how we provide a good start for our kids and for our families in general. We all share in the concern and the concept that we need to do everything we can to encourage home ownership.

The question is how we go about doing this, in a fair, equitable and affordable way. It is not surprising that the Reform Party would take an issue of some complexity and present a simplistic and unworkable solution to it.

The Reform Party constantly sees complex things as simple. In fact, it consider everything to be simple. Some things are not quite as simple as they appear. Some things require more sophisticated responses than that put forward.

We need to ensure that families can find affordable and good quality homes. The question is how to do that. We know that over the years one of the main disincentives, especially to young families trying to afford homes, has been a high interest rate policy. We now find this reduced. Consequently one of the pressures on home ownership has been reduced.

Let us talk about what this bill does or perhaps what it does not do. First, it does not recognize regional disparities across the country. A $100,000 home in one part of the country may be a mansion whereas in another part of the country may not be much of a house at all. Why treat those who in one part of the country can buy a huge home for $100,000 the same as those who cannot find a very large place in a more expensive community? To treat different circumstances the same way is simplistic and simply will not work.

What about the way in which the bill works? The Reform Party would like to suggest that this is not terribly expensive, that it will encourage growth in the home building market. No doubt it will. We need to cost these issues out. As the parliamentary secretary indicated, this measure would cost $3 billion a year.

As he indicated, and even the Reform Party must know, that money has to come from somewhere. It would come from taxes paid by those who are not covered by this benefit, and I suppose those who are covered by the benefit might have to pay taxes on other things in order to make up that $3 billion difference, or a reduction in services provided to society as a whole through government programs.

That is money provided then by those who do not benefit from this particular provision. I ask why is it fair, why is it acceptable, why is it desirable to have those who cannot afford to have a home subsidize those who can. When was that fair? When was that acceptable? It is clearly simplistic, but when was it acceptable?

What would happen if mortgage rates increased? That is not beyond the realm of possibility. Then the cost would increase even further.

The point has been made that there is no horizontal equity here. What about the person who bought a house some time before 1994 who is struggling to keep that home together and provide a good family life for their children? They will not benefit from this program, even though they may live right next door to somebody who will. One family will benefit to the extent perhaps of $6,000, $7,000 or $8,000 a year in mortgage payment tax credits, tax reductions or tax expenses, whereas the family next door will not. That seems to me to be not only patently unfair but patently absurd as well.

We have a situation which is not fair across groups. It is not fair across families in similar circumstances and it represents a significant tax break to some Canadians who are rather better off than others. We have to ask where would that money come from and how much is involved.

The member who proposed the bill mentioned the United States situation. Some mention has been made of capital gains on principal residences in the United States as a part of that total tax package. I wonder whether the Reform Party through this bill is suggesting that indeed we should have capital gains taxes on principal residences because I am sure Canadians would be interested to learn that.

It is important to recognize the validity of encouraging home ownership. We need to do that, but we need to do it in a fair, equitable and relatively inexpensive way. This bill is an expensive and unfair way and as a result I think will not see the light of day.

Income Tax Act
Private Members' Business

11:45 a.m.

Reform

Art Hanger Calgary Northeast, AB

Madam Speaker, I am pleased to rise today in support of Bill C-223 and commend my colleague, the member for Portage—Lisgar, for his foresight in introducing such a bill. I think it is worthy of debate and certainly worthy of the Liberal side to examine this whole issue of tax relief on mortgage interest.

I again would like to thank the member for Portage—Lisgar for introducing the bill. It is certainly open for broader reference too, not only for first time home buyers but also for everyone who may own a home.

Since this is my first formal speech in the House, Madam Speaker, during this 36th Parliament, I would like to take this opportunity to congratulate you on your appointment and also the Speaker of the House on his election to the chair. I have a great deal of regard for both the Speaker's position, the Chair, and the office. I can assure you that you will have my full co-operation and respect throughout this Parliament.

I would like to thank too my constituents for once again placing their faith in me. I am extremely grateful for the trust they have given to me. I want to assure them publicly that I will represent their viewpoints and wishes as best I can. I will certainly keep them uppermost in my mind as I carry out my duties here in the House.

Canadians have recently suffered through what I would call a terrible recession when we look at the unemployment rates sitting around the double digits over the last little while and now just a little below 10%, 9% approximately. However, the most devastating aspect of all is youth unemployment which is in the neighbourhood of 17%. That is not acceptable.

We as parliamentarians should all be doing everything possible to change that and drive this economy with every means possible to make sure our young people, the future of our country, are working and feel positive about what this country has to offer them in the future. Unfortunately many of them do not feel that their future is all that bright.

Besides the unemployed there are the under employed. Hundreds of thousands of working individuals are under employed. They are barely getting by and most of the time on two incomes and still barely scraping by. I think it is time for the government to take some urgent action to ensure that all Canadians enjoy the rich potential of this country.

As far as I am concerned, this private member's bill is a step in the right direction. Taken in a broad context, if everyone were to be given that relief, it would certainly be a real boon to the economy when one thinks about how many dollars are going to be thrown back into the economy. A dollar in the hands of an employer, an employee or a consumer is much better handled than a dollar in the hands of any bureaucrat, any government official or any parliamentarian.

As the House knows, this bill would provide for the deduction of interest paid by a taxpayer on the first $100,000 of the mortgage on his or her first home. This bill has several advantages which the government would be hard pressed to deny. I would just like to list some of those advantages.

First is a considerably lower tax burden on Canadian families. The member who introduced the bill certainly mentioned families a lot in his presentation. It is very important to recognize the strengthening of the family, the desire that they not be subject to someone else's whims in a way like rental or leasing property but they would actually be able to own their own home.

Second, it would make home ownership accessible to more Canadians. I had a chance to speak to people in the United States who have the advantage of this deduction. It offers them more amenities. One can actually buy a piece of property and be able to afford a few more items that they would not normally be able to afford because of that particular deduction.

Third, it would level the playing field between Canada and the United States. It would make Canada's tax regime more competitive.

People in this country are crying out for tax relief and yet it is falling on deaf ears. Those who are able to do something about it are not doing anything about it. In fact, they are taxaholics on that side. There is no question about that. Taxaholic is a term that our finance critic issued toward the finance minister and I think it is quite acceptable because every time there is a dollar loose somewhere it has to be grabbed. They have to grab as many dollars as they can from those hard working people out there across the country. I do not think that is acceptable especially when it is clear that the people in this country are fed up with taxes. They want relief.

Going on to some of the advantages, again it would increase equity between home owners with mortgages who must pay interest charges with after tax money and those without mortgages.

Most important, here is where my colleague from the NDP falls short. This money placed into the hands of the individual would actually stimulate the economy and create jobs. There is the key to this whole affair.

It is not the tax dollars that have to be replaced. Those tax dollars will not be replaced just by the mere fact that people out there have more money in their pockets and they will do something much more beneficial with it which will generate revenue into the coffers of any government. That is a well known fact.

This government spends precious little time doing anything that would support Canadian families in that regard. This bill would allow the Liberals to have something concrete to demonstrate that their grandiose rhetoric has a bit of substance. There is a dreadful lack of substance opposite.

Owning a home is of great importance to families. Unfortunately it is becoming increasingly difficult for many Canadian families to realize their dreams and own their own homes.

Bill C-223 would give many lower income Canadians that extra bit of cash necessary to allow them to afford that dream. It gives that extra little bit of room. It would give first time home owners the breathing room necessary for them to pay down their other debts, to set aside moneys for saving or to spend more on their families and their needs in that regard.

How can the government possibly object to allowing Canadians the opportunity to spend more of their hard earned dollars on their families? I do not think when it comes right down to it that it can legitimately object, although I listened to the parliamentary secretary who made it very clear that it is not acceptable.

Accessibility to home ownership is particularly important to our young Canadians. They need a break and they have been hit especially hard by tough economic times. They suffer from higher unemployment rates on average and they report a terrible rate of under employment.

Again, I know the parliamentary secretary spoke about the shortfall in the tax system, but it is not acceptable. I think many of these adjustments can be made incrementally but unfortunately the Liberal side is not even willing to entertain some of those very significant changes in the tax structure to offer some relief.

Our generation of young people is the first in Canadian history who will likely not enjoy the economic benefits that this generation has, our parents have. If we are not careful, home ownership will be another example.

I can relate what policies like this have done to other countries but I know I do not have enough time to really get into it. It is unfortunate because I think this is a very key issue.

I can only urge the Liberals to recognize a good idea when they see it. They have a habit of stealing good ideas and I think this is one they could steal. I hope in the end they will support Bill C-223.

Income Tax Act
Private Members' Business

11:55 a.m.

Liberal

John Maloney Erie—Lincoln, ON

Mr. Speaker, in the short time we have left I would like to make a few remarks on this bill.

This private member's bill proposes to introduce an income tax deduction for interest payments for first time home buyers on the first $100,000 of a mortgage loan where the residence was purchased in 1995 or later.

The intent behind this proposal is certainly laudable. The intent is to make it easier for young Canadians to finance the purchase of their first home. However, we should not allow our sympathy in this regard to interfere with what I consider a sound judgment.

I put it to you, Mr. Speaker, and to my friends opposite that it is possible to laud the intent of an idea without supporting the idea itself. This proposal, despite its worthy aims, has flaws.

Let me begin by noting that the Income Tax Act already provides generous incentives for the prospective home buyer. The capital gains from the sale of a principal residence are not taxable to the home owner. In addition, the home buyers plan allows first time home buyers to withdraw up to $20,000 from registered retirement savings plans to use toward the purchase of a principal residence. These withdrawals are not subject to tax as long as the money is returned to the plan within a period of 15 years.

Another consideration crucial to sound tax policy is that taxpayers be treated fairly. This proposal would confer significant tax benefits upon Canadians purchasing a first home in 1995 or later. This proposal, however, would confer nothing upon Canadians who are renting or who purchased a first home in an earlier year. This proposal would also confer nothing upon young Canadians moving into another residence because their family is growing or because a change of employment requires them to move to another location.

I would find it difficult explaining to these taxpayers why they are not as deserving of tax relief as others.

The taxpayer's choice of accommodation is really a personal decision and the costs associated with it are personal expenses. The Canadian income tax system in general does not allow deductions or credits for personal expenses, and properly so. Personal expenses reflect to a great extent the pace and income levels of individuals. It is not fair for taxpayers at large to subsidize the personal expenditures of others.

Should this proposal be adopted, non-homeowners would find themselves subsidizing the home purchasing decisions of others.

The change proposed by the member of Parliament for Portage—Lisgar would primarily benefit higher income Canadians. Approximately 50% of families with over $80,000 of income have mortgages in Canada today. Compare this with only 10% of families with incomes under $30,000.

The great majority of benefits under the proposal would naturally accrue to higher income earners who are more likely to have larger mortgages. The result would be an increased taxation of all Canadians to pay for the accommodation of the more fortunate. I do not find this prospect a pleasing one.

I also feel this proposal would be sending out the wrong message by providing an incentive to enter into debt and maintain indebtedness. A rational homeowner benefiting from a tax deduction for mortgage interest would see little need to pay down the outstanding principal. By encouraging Canadians to carry larger mortgages for longer periods of time, we would be discouraging saving and financial independence. Surely, this is not the lesson we wish to pass on to young members of our society.

Finally, we come to the issue of cost. The Department of Finance estimates that the federal revenue loss associated with this proposal could reach $150 million in the year of introduction. Moreover, the cost would escalate in future years as more and more home buyers enter the market. Under a mature system the cost to the federal government could exceed $3 billion annually. If deductibility were extended to all homeowners, the cost would reach $6 billion annually. The provinces would also experience a substantial reduction in revenues. This is a very hefty price tag by any standard.

I also wish to emphasize that the lower interest rates resulting from the government's deficit reduction strategy have significantly reduced the cost of home ownership. One year mortgage rates today have declined by more than 400 basis points since January 1995, providing savings greater than $3,000 in terms of lower annual mortgage payments for a $100,000 mortgage.

In conclusion, I am sure that those present here today would join me in improving the spirit of this proposal. I would urge, however, that this spirit not sweep them along into supporting a measure that is not affordable, necessary or fair.

Income Tax Act
Private Members' Business

Noon

The Deputy Speaker

Order. The time provided for the consideration of Private Members' Business has now expired and the order is dropped to the bottom of the order of precedence on the Order Paper.