Mr. Speaker, I will follow up a little and continue on a theme about which my colleague has just talked. It is the tax-free savings plan. I have a few comments on that and then a few comments on the government's fiscal position at the moment.
The Minister of Finance put forward the tax-free savings plan as being the centrepiece of this budget. As we know, it will allow Canadians to put $5,000 into a tax-free account. There will be unlimited carry forward room. In other words, if taxpayers do not put in a certain amount of their contribution in any one year, they can carry it forward to another. Tax-free withdrawals can be made at any time.
It is in essence a glorified savings account. The minister made a point in his budget speech of saying that it was the first major investment vehicle that the government had introduced since the advent of the RRSP.
On the surface, there are some decent aspects to it, and in a moment I will go into what they are and where this came from. However, I will also make the point clear for Canadians who are watching, who may have read or heard a little about the tax-free plan and who may think this is a panacea for them and a useful financial tool.
In carrying on with what my colleague had to say, I want to ensure people understand this. This is no substitute for the RRSP. There is no tax deduction for contributions made to this plan. This is a very significant aspect that the Minister of Finance I do not think brought out clearly enough. There is no spousal plan involved with the tax-free plan. In other words, one cannot establish a plan for one's spouse and contribute in his or her name. The $5,000 limit is roughly three times less than that which is allowed by the RRSP.
Who benefits? This is the key point. The Minister of Finance, by putting this into the very first sentence of his budget speech, gave the impression that all Canadians would benefit from his new after tax savings plan. However, it is not the case. The only people who truly will benefit from the use of this new tax plan are those who are already fully invested in RRSPs. Why would one possibly invest in a tax-free savings plan, if one had $2,000 extra, as opposed to invest that $2,000 in an RRSP? If people put into an RRSP, they will get back up to half of their contribution amount, $1,000, which they can then deduct from their taxable income.
With this plan, there is no such tax advantage. Why would one do it? Why would people without money do it? Obviously they would not. As my colleague said a moment ago, the national savings rate today is zero, nothing. In fact, most Canadian families are spending more money than they take in. The average Canadian family today is $116 in debt for every $100 in assets.
That is a condemnation of the way the country is being run. We are being run on debt. Families are being forced into more and more debt to get through month by month to ensure they can gas up the minivan, send their kids to school programs and make the mortgage payment on very expensive real estate today. This is not a society in which the Canadians are gaining wealth. Why would they put money into a tax-free savings plan when they do not have it?
Most of my constituents are financially stressed. Not only that, when we take a look at this tax-free savings plan as opposed, as I said a minute ago, to the RRSP, we need to consider how much money people actually put into an RRSP today. It is 7% of the amount of money that they could put in. We are all allowed a certain amount. Ninety-three per cent of the amount of money overall collectively that Canadians could put into RRSPs every year they do not. Why, when there is such an advantage? They do not have the money. Therefore, what is the point of a tax-free savings plan?
We sat in the finance committee yesterday. I see my colleague from Burlington across the way. He sat at the table as well. This question was asked of an official from the Canada Revenue Agency. “How much money is it actually going to cost the tax collector of this country to run this new vaunted plan that the Minister of Finance has announced?” The official had no idea what the administrative costs would be. It could be hundreds of millions of dollars to set this up. We do not know.
Who pays for that? My constituents, constituents who do not have savings and cannot put money into an RRSP. Therefore, why would they put it into a tax-free savings plan? It may be a great idea for the Minister of Finance because it sounds good, but when the first sentence of his budget speech hits the ground, it means absolutely nothing.
Where did this plan come from? It has been around for a bit. In fact, I have an admission to make. When I was a Conservative member of Parliament, and I apologize for that but I admit it freely, I submitted to the minister of finance a report that I wrote. In the report, I talked about a tax-free savings plan and told the minister of finance that perhaps he should set one up, that it was not a panacea but did have some advantages.
In that prebudget report I recommended to the minister of finance that this might be a decent idea, not a panacea. However, I also said that we needed an income tax cut. That is the primary centrepiece of any tax reform that means anything to my constituents and certainly most Canadians.
This is a good idea. If I were, for example, a dentist making $300,000 a year, or a member of Parliament making $150,000, in other words, three times more than the average family income, I might think this is a great idea. If I had an MP's pension, indexed for the rest of my life, then I would say this would be a good idea. Actually, I probably will use this because I have an MP's pension, unlike most Canadians. When people have pensions it means their RRSP withdrawals will be taxed at the maximum marginal rate. Therefore, why would they put money into an RRSP if they are privileged, like members in the chamber, and have an indexed pension? They would not.
It is only for the people who have maxed out their RRSP, who are in the top 1% of the income tax bracket, who are rich dentists with a lot of income. Only those people will find that they can put another $5,000 of their after tax income in a plan, earn interest tax free and take it out any time. They are laughing at CRA because they have just reduced their taxable income.
Why would the government want to reduce the taxable income of the top 1% of wage earners in the country and call it the centrepiece of a budget for all Canadians? It is a shame. That is not benefiting my constituents because my constituents do not make what I make. They make the average Canadian salary, which happens to be $62,000 a year per family. For those people, this does absolutely nothing. It is shameful.
A couple of experts have looked at this plan. For example, Cleo Hamel, an H&R Block senior tax analyst, said:
All it means is that someone who can put money into a savings account won't get penalized for it. You have to find some kind of savings account that pays you anything...Where are seniors and the poor going to have a chance to save that kind of money?
Marc Lee from the Canadian Centre for Policy Alternatives, another senior economist, commented on it.
By the way, we are joined by one of Canada's pre-eminent economists who sits beside me in the chamber. The member spoke eloquently yesterday about the deficiencies of this plan. We must heed the words of these people who know what they are talking about.
Marc Lee said:
If you have an extra five grand kicking around, this gives you somewhere to park it for the rest of your life...It's something that will only be useful for people who've maxed out the RRSP room.
Economist Derek Holt of RBC said, “It's more about optics than it is about substance”.
If the government wanted to do something to actually benefit Canadians, if it wanted to give some tax relief, it would have cut income tax. If it wanted to get some justice, it would have restored income trusts to the previous pre-horror state they were in last October 2006. If the government truly cared about all Canadians, it would not take us to the knife's edge of deficit. I am not impressed.
We do not believe this budget is enough to bring the government down, but it is part of a collectivity of actions which will very soon, I am sure, result in its very well-deserved demise.