Thank you, Mr. Chair.
The CCPA is Canada's leading progressive think tank supported by 10,000 individual and institutional members across Canada, with offices in Ottawa, Vancouver, Winnipeg, Regina, and Halifax. Thank you for inviting our views today on how to prepare the next federal budget.
Today I'm putting forward three recommendations that are immediate, medium term, and long term for inclusion in budget 2010 that will meet the objectives stated by the chair of this committee, James Rajotte, in his invitation to advise this committee and the government on how to attain sustainable, economic, social, and environmental prosperity for all Canadians.
The first recommendation is to improve employment insurance so that it operates more effectively as an automatic stabilizer for the economy.
The second measure, medium term in nature, is to extend and reorient the home renovation tax credit so that it targets home renovations that advance the energy efficiency of all Canadian households across the income spectrum.
Recommendation three is to limit the tax-free savings account to redirect this taxpayer-supported initiative away from high-income individuals to low-income individuals, to give them the ability to build a modest financial cushion.
To address the immediate needs through EI improvements, we noted in April of 2009 in a report called Exposed that unemployed Canadians have not been this exposed to the economic risks of joblessness since the mid-1940s. The government should move immediately to improve access to jobless benefits by decreasing the variability of entrance requirements and introducing a lower hourly threshold. It should extend the duration of benefits uniformly, as it did in Bill C-10 but has not yet done in the proposed latest round of extensions to Bill C-50, and it should raise the income replacement rate, particularly for low-paid workers with dependants who have lost their jobs and cannot find alternative work.
It should be noted that all three ways of improving EI were agreed to in all-party approval at two readings but narrowly missed passage in Bill C-269 in November of 2007, when the present government refused royal recommendation at third reading. We have known for years that the EI system was not recession-ready. There is literally no more time to waste in fixing this automatic stabilizer so that the recession is not unnecessarily prolonged or deepened.
In the medium term, we ask the government to consider extending and reorienting the home renovation tax credit. The recession and widespread job insecurity has led many households that might have otherwise spent up to $10,000 on renovations to postpone taking advantage of the type of supports that the home renovation tax credit offers, which are largely in the category of decorative upgrades. With most household incomes stagnating during this period and many households experiencing significant income losses, Canadians are rightfully concerned with the possibility of rising energy prices. Cutting costs and improving energy efficiency is a welcome solution to both constrained household budgets and growing awareness that our individual energy use habits contribute to the pace of climate change.
The federal government could provide a second year of stimulus, this time targeting tax credits specifically to home renovation projects that improve energy efficiency of homes and apartments. We propose that the government apply any tax expenditure room not taken up in that window of January 27, 2009, to February 1, 2010, and add it to a further $2 billion in tax credits to be made available for work undertaken up to November 2011, and that these amounts be also matched with $2 billion in federal grants so that low-income homeowners and landlords can also participate in a program that improves energy efficiency across the country.
Finally, we recommend that for the longer-term sustainability of our public finances, this government limit the tax-free savings account. At a time when most governments around the world were trying to devise ways of increasing aggregate demand and private sector spending, this government chose to use scarce public revenues to encourage people to save. It did not wait until the recovery was under way to introduce what the Certified General Accountants Association of Canada has called a “revolutionary” new savings instrument. This undercuts the government's argument that the revenue hole caused by the recession is a serious public finance concern.
Budget 2008 showed an anticipated cost of $920 million to the public purse over the first five years of introduction, and went on to state that in 20 years, it was estimated, this measure would leak a minimum of $3 billion annually from the Treasury. Current tax expenditures of about $20 billion a year are provided through the RRSP and RPP tax shelters, which primarily advantage those with high incomes.
The tax-free savings account continues this bias. Given concerns about emerging financial pressures caused by an aging demographic, such revenue losses will add to the difficulties faced by all future governments. The Government of Canada should limit lifetime TFSA contributions to $50,000, or 10 years' worth of contributions, and cap the growth in such accounts to a lifetime limit of $150,000.
The full submission that I have made to this committee, available in English and French, outlines how that could be done. This would amply provide for low-income individuals to create a small financial cushion in case of unforeseen exigencies should they be able to save from their income stream or find themselves in receipt of an inheritance or lottery winnings. Those who find themselves at the top of the income spectrum need no further tax-supported assistance to increase their holdings beyond the tax shelters that currently exist.
Thank you.
