Michael John Savage

[Income Tax Act, February 4th, 2005]

Mr. Speaker, I am pleased to take part in the debate on Bill C-265.

I would like to first congratulate my colleague from Essex and his wife on the birth of their son. I had the chance to meet them early in our respective careers as parliamentarians at an orientation session, and I wish them both the very best.

Bill C-265 proposes to extend the exemption from tax granted to U.S. social security benefits from 15% to 50%. The government does not support this bill. The 15% exemption that already exists is a concession negotiated in a treaty that already represents some departure from basic tax policy principles. Extending the exemption to 50% would exacerbate the situation.

I believe that it would be helpful for members of the House to have the benefit of some history regarding the taxation of social security benefits as set out in the Canada-U.S. tax treaty and why it is that we have agreed to the 15% exemption.

The history has been complex and the current state of affairs represents the delicate balance between competing interests, a balance which the Conservative member's bill ignores. The Canada-U.S. tax treaty included rules for the taxation of social security benefits paid by one country to residents of the other since 1984. The evolution of these rules has progressed in three distinct phases.

Between 1984 and 1996, the treaty contained a residence-based taxation rule. Only the country of residence was allowed to tax social security benefits. During this time a resident of Canada receiving U.S. social security benefits would only pay tax to Canada. There was however a 50% deduction in computing taxable income in respect of those benefits because at that time the U.S. only taxed a maximum of 50% of U.S. social security payments. This represented a tax advantage over Canadian benefits, which were fully subject to tax.

In addition, U.S. residents receiving Canadian benefits were not subject to Canadian tax and so benefited from the 50% maximum inclusion rate in the United States. One consequence of this was that high income U.S. taxpayers did not pay the tax on old age security benefits, which applies to incomes above a certain level.

This residence-based rule was seen to be unfair. There were calls to change the rules so that all recipients of Canadian benefits were taxed in the same way regardless of residence, and so the rules were changed.

In 1995 Canada and the United States agreed to replace the residence-based rule with a source-based rule. In other words, the new rule would allow only the country from which the payment arose to tax that benefit. The result was that a Canadian resident receiving U.S. social security benefits was taxed only by the United States.

In addition, the maximum inclusion rate under U.S. law had risen over time from 50% to 85%, so a U.S. citizen in receipt of U.S. benefits would be subject to ordinary U.S. rates on a maximum of 85% of that income. If the recipients were Canadian residents, they would either pay U.S. rates or, if they were U.S. citizens, they would be subject to a final withholding tax. This rate was computed as 85% of the standard U.S. withholding rate of 30%. This was a final tax and was non-refundable.

For high income Canadians this tax was usually acceptable since, if they had to pay tax in Canada on this income, their marginal rate of taxation would likely have been higher than 25.5%. However, for low income taxpayers who otherwise rely on the progressive nature of the Canadian tax system to fairly distribute the tax burden, the 25.5% withholding tax constituted excessive taxation and caused, in many cases, severe hardship.

These taxpayers, had they been subject to tax in Canada on this income, would have paid little or no tax. Because they were subject to U.S. taxation, a quarter of their income was lost.

Conversely, U.S. residents receiving Canadian benefits under this rule could choose between the 25% withholding tax or, if they filed a tax return in Canada, graduated income tax at ordinary rates. For low income U.S. taxpayers, this meant they paid little or no tax.

At that time there was a great discrepancy in the taxation of these benefits to the detriment of many low income Canadian seniors. Canada and the U.S. recognized this unfair treatment and we came together again to change the rules.

To relieve hardship on low income Canadians, we agreed to restore residents only taxation. The current rule provides that social security payments are taxed as if they were payments from the home country's benefit plan. A Canadian recipient of U.S. social security is treated as if the payment were from CPP, QPP or OAS.

United States recipients of QPP, CPP or OAS are treated as if they were receiving U.S. social security benefits. This meant that Canadians receiving U.S. benefits could avail themselves of the graduated rates of our tax system and were no longer subject to a flat 25.5% withholding tax. As mentioned, the maximum inclusion rate in the United States had changed from 50% to 85%.

As a concession to the United States, we agreed to the 15% exemption for these benefits to match the maximum inclusion rate in the U.S. However, any rationale for returning to a 50% exemption based on an analogy to the U.S. rules disappeared once these rules were changed. That is the history of the taxation of social security benefits between Canada and the United States. That is pretty exciting too.

As the history reveals, it is a complicated issue. It also shows that any rule will advantage some over others. What is important is to find a rule that makes sense, that is fair, and that avoids imposing hardships on taxpayers who are least able to adapt to such hardships.

We have such a rule. While some higher income taxpayers may complain that they were better off under the previous regime with a U.S. withholding tax, the concerns regarding low income taxpayers were more urgent. Many of these taxpayers were simply not in a position to absorb a high withholding tax.

While a 15% exemption is a departure from the basic principle that individuals in similar circumstances should pay a similar amount of tax, it represents an agreement stemming from a process of careful negotiation. Extending this exemption to 50% would be completely out of line with tax policy and would fail to take into account the history of how the current exemption was reached. I therefore ask hon. members to join me in not supporting this bill.

[Health, February 4th, 2005]

Mr. Speaker, my question is for the Minister of State for Public Health. In light of all the warnings recently from the World Health Organization about a potentially catastrophic flu outbreak, what are the measures being taken by the federal government to protect Canadians against an influenza pandemic?

[Atlantic Canadian Businesses, February 4th, 2005]

Mr. Speaker, in the month of January I had the opportunity to visit a number of businesses in my constituency.

These businesses have several things in common. They are successful and employ many Atlantic Canadians. They focus on innovation, technology and the developing markets, not only in Atlantic Canada but around the world. Another thing they have in common is that ACOA has been involved in their success, not through grants but through loans, providing support and accessing capital investment, innovation, marketing and training.

These companies are forming the backbone of the Atlantic Canadian economy and providing jobs that are innovative, well paying and sustainable. Companies like Ocean Nutrition are finding great success based in Dartmouth with a plant in rural Nova Scotia and potentially plants around the world.

The Atlantic innovation fund has played a very strong role in ensuring the success of Atlantic Canada and it must continue. ACOA is a success story. I congratulate the leadership of ACOA, our current minister and those who have gone before him, for seeing the long term potential of Atlantic Canada and helping us to reach it.

[Dartmouth Work Activity Society, February 1st, 2005]

Mr. Speaker, last Friday I was privileged to attend the wonderful graduation ceremony for the Dartmouth Work Activity Society. This organization is focused on providing skills upgrading for adults who have faced a variety of challenges.

Without this opportunity many would have no recourse other than to give up on meaningful employment and join others who have virtually given up on life.

Going back to school as an adult is not easy. Learning new skills takes courage, commitment and sacrifice.

The success of the program is evident as many of the grads were unable to attend the ceremony because they were at their new places of work.

I congratulate these graduates. I am confident they will succeed in life through their hard work and unwavering confidence.

I also know they would join me in congratulating and thanking the Dartmouth Work board and staff, particularly Frank Gibson, an inspiring and dedicated community leader, for recognizing that the quality of a society is perhaps best judged by how many people we empower through education and dignity.

[Finance, February 1st, 2005]

Mr. Speaker, the federal government has a very sophisticated process for coming up with these numbers.

Last year the economy was rebounding from BSE, SARS and the fluctuating dollar. I compare this to my province of Nova Scotia where for 15 years the provincial Conservative government kept saying it would be balanced, yet we were $200 million to $500 million in deficit. If we are going to make a mistake, let us make a mistake on the side of having the money and putting it on the debt, instead of the other way around.

[Finance, February 1st, 2005]

Mr. Speaker, that is quite a mouthful. If I had known the question would be longer than my speech, I would have allowed a little more time.

However, I want to address a couple of them. In terms of accountability, there has never been a perfect government in Canada.

What differentiates this government and particularly this Prime Minister is the way in which we have dealt with this issue. One of the first actions of the Prime Minister was to cancel the sponsorship program, to have a parliamentary study into it and to have an inquiry. We established the Gomery inquiry, which has gone on for a long time, will go on for a lot longer and we will get to the bottom of it. That is something the Prime Minister has done, and he has said that it will not happen again.

In terms of international work, I had the opportunity a few weeks ago to be in the Middle East to meet with Israelis, Palestinians and a number of people. They all say the same thing. Canada is a beacon to them. Canada is the honest broker that can make a difference in the world.

The member mentioned CIDA. CIDA's budget has grown at twice the rate of the economy. That is important work.

We have a number of agencies. We have the Canada Corps which monitored the elections in the Ukraine. I am very proud that the Prime Minister has a place in the world, recognizes a place for Canada, is leading it and is seen as a leader throughout the world.

[Finance, February 1st, 2005]

Mr. Speaker, I will be splitting my time with the member for Northumberland—Quinte West. I thank you for the opportunity to speak to the House about some of the priorities important to the people of my riding of Dartmouth—Cole Harbour, priorities I believe all Canadians share.

I will not take up all of my time boasting about the government's record in the last 10 years, but I do want to say how proud I am to be part of this Liberal government, a government that takes a balanced approach in dealing with the challenges of our country. It is a government that has achieved great things over the past decade. We have a strong and vibrant economy, millions of jobs have been created, we are alone in the G-8 with respect to our surpluses, and we have eliminated the deficit.

The official opposition will argue that we did not cut enough taxes. It makes some wild claims about our success as a government. It would probably say we did not cut enough programs either. On the other side, the NDP will probably complain that we have not done enough. I probably agree with much of what it has to say, but the fact is that our government is balanced and moderate.

We believe that government can and should play a key role in the lives of Canadians. We believe that Canadians expect us to spend their money on their priorities and they expect us to live within our means.

When we took office in 1993, we inherited a massive deficit of $42 billion. It was a Liberal government that made the tough and painful decisions to bring some order and stability back to government. Now the Liberal government is even balancing provincial budgets.

The recent agreement with the province of Nova Scotia and the federal government on offshore revenues has resulted in a significant and immediate infusion of federal money to Nova Scotia. It was not a gift; it was the right thing to do. It was a commitment that the Prime Minister made. With the great support of the member for Halifax West and his Newfoundland counterpart that commitment was fulfilled.

Our premier, Mr. Hamm, has indicated wisely that he will take this $830 million and apply it to the provincial debt, a provincial debt that was created solely by a Tory government over the period of 15 years, from 1978 to 1993, arguably the worst provincial government in the history of the country. It is certainly one of the worst, after eight years of consecutive Liberal balanced budgets in Nova Scotia from 1970 until 1978 under the leadership of Gerald Regan, Peter Nicholson, Allan Sullivan and Scott MacNutt. Between 1978 and 1993 we had 15 consecutive deficit budgets. This decision and this money will free up close to $50 million a year for my province of Nova Scotia. I applaud the premier for making that decision.

With the new equalization agreement, Nova Scotia gets another $151 million this year and $1 billion over 10 years in new health care money. It is clear the Government of Canada has stepped up and shown its commitment to Canadians, but for me particularly, to all Nova Scotians, including the people in my riding of Dartmouth—Cole Harbour.

We are now fully engaged in the budget discussion and I want to commend the finance minister for his leadership in seeking input as he constructs a living document that will reflect the values of Canadians. However, I want to share a few thoughts that I think are important to Canadians.

First, the recent events in Asia have given us pause. The devastating situation has moved our country in a profound way. As the death toll continues to mount, it becomes more and more important that the government and Canadians not forget the great needs. It reminds us that while we have issues here in Canada, they pale in comparison to the needs of the developing world. We would do well to have our discussions about budgets within the context of the enormous wealth of our nation and that by being born in Canada, we are privileged people. I believe we owe something to those who were not.

I would like to acknowledge the efforts of the Minister of International Cooperation who has brought strength, sensitivity, seriousness and a sense of urgency to the issues, not only in Asia, but those issues related to Africa, particularly her efforts on behalf of Africa in the HIV pandemic.

In that light, I was interested that the previous speaker from the official opposition spoke about hitting our UN target of .7% of GDP. I hope all the people in his party feel as strongly about that. It is an issue I support. We are a generous country and I believe that most Canadians understand that we have a responsibility to the rest of the planet.

At home, our good government and sound fiscal management has given us the capacity to further invest in key priorities. Some of those other people have spoken about child care, our health care system, for me particularly, the importance of promoting a national wellness strategy to keep people well, home care and palliative care, and the very important issue of caregiver support that we need to make our health care sustainable. I had the opportunity on Friday, with the Minister of State for Families and Caregivers, to host a conference on caregiving in my riding.

Post-secondary education, for me, is second to none. We have seen great things accomplished with the money that we have invested in research over the past five years. Canada is a leader now in the world of research. However, there is more we can do and there is more we must do.

It is fair to say that students and universities suffered while we got our fiscal house in order and while we got our health care system in order. In Nova Scotia, we have the highest tuition rates in the country. While we have taken steps to address some of those issues, it is perhaps time we focused more comprehensively on education.

I would like to see our government give serious consideration to establishing a dedicated Canada education transfer that would address some of the serious issues facing our students, universities and colleges. We can do this with appropriate and agreed upon national standards. We can reverse the trend that has seen students taking more of the burden of the post-secondary education costs.

Another issue is ACOA. I would encourage the government to reinvest in Atlantic Canada and, in particular, ensure that ACOA is able to continue its work in support of economic development in the Atlantic region. ACOA is a beacon of light and we should provide adequate funding and support of the “Rising Tide” report, a report that maps out a plan for strengthening economic prosperity in Atlantic Canada.

I had the opportunity in the last two weeks to visit a number of businesses who credit ACOA for helping them develop new technologies, for finding new markets, and for employing thousands of Atlantic Canadians.

National defence and the Coast Guard is another issue. I live in a military riding and I believe we have to reinvest in our military. I am glad we are starting to do that. Five thousand is a good start. We must do more. Our military families are the heart and soul of our armed forces. They need continued and further support, and I will certainly support that effort.

Our Coast Guard does wonderful work under difficult circumstances. It is the front line for our coastal security and for protecting our sovereignty. Two recent parliamentary reports identified the difficulties facing the Coast Guard. We need to inject significant dollars in order to ensure that our vessels are able to do the job they are asked to do. The Coast Guard is important, not just to my riding, but for the entire country.

All Canadians can be proud that we live in a great country. Despite our differences, we share some common values, we are generous, we understand the importance of supporting each other, we believe in collective responsibility, and we believe that our country is truly just when each of us has an equal opportunity to be successful and to live with dignity. I believe our government has done much for Canadians. I believe we can do a lot more, and I believe that we will.

[Finance, January 31st, 2005]

Mr. Speaker, I completely agree with the member's comments, particularly around debt. Not only have we managed the deficit and now have surpluses in Canada, we are now paying down the debt of the provinces.

Dr. Hamm has announced in Nova Scotia that the $830 million that he has received on the offshore deal will go to pay down the debt in Nova Scotia, a debt that was incurred between 1978 and 1993 by 15 consecutive deficit years under the Conservative government, after eight consecutive budget years of Liberal government.

I think it is a great thing that we have started to take control of the debt and are able to open up some operational funding.

I know the member has been a great champion of the environment from his time on city council in Toronto. I wonder if he has any thoughts as to some environmental initiatives that he would like to see the government undertake in the years to come.

[Natural Resources, January 31st, 2005]

Mr. Speaker, my question is for the Minister of Natural Resources.

All Canadians were delighted last Friday to see an offshore resources agreement between the federal government and the governments of Nova Scotia and Newfoundland and Labrador, fulfilling completely the Prime Minister's commitment. This deal requires, however, that resource is discovered.

There are some challenges. The minister plays a key role in the Atlantic energy round table. Could the minister assure us he will examine all aspects of our offshore industry, including regulatory protocols and timelines, in order to maximize the economic benefit to the people of Nova Scotia and Newfoundland and Labrador?

[Riding of Dartmouth--Cole Harbour, December 14th, 2004]

Mr. Speaker, this Christmas season has already been great throughout Dartmouth and Cole Harbour.

In particular, the revived Dartmouth downtown has been the centre of much excitement. Last weekend, for instance, over 4,000 people crowded around Sullivan's Pond to see the inaugural lighting of the downtown trees. Last Sunday, Christmas Full of Caring, which raises money for the homeless, held its phenomenal 10th annual dinner.

As well, yesterday Dartmouth celebrated the life of Joseph Howe with the naming of a park in his honour, a fitting tribute to the father of responsible government in Canada.

Dartmouth--Cole Harbour is also the home of another famous person, Mike Clattenburg, the creator and producer of the Trailer Park Boys , a show that is also filmed in Cole Harbour. This past Sunday we saw the show's very touching Christmas special, an episode which I am sure has special meaning for us all.

On September 23, the Chronicle-Herald had a headline that read, “Downtown Dartmouth Comes Alive”. This is absolutely true. We will continue to work to ensure its continued success.

Finally, I wish all my constituents the very best of the holiday season.