Bill C-2 (Historical)

An Act to amend the Income Tax Act

This enactment amends the Income Tax Act to reduce the second personal income tax rate from 22% to 20.‍5% and to introduce a new personal marginal tax rate of 33% for taxable income in excess of $200,000. It also amends other provisions of that Act to reflect the new 33% rate. In addition, it amends that Act to reduce the annual contribution limit for tax-free savings accounts from $10,000 to its previous level with indexation ($5,500 for 2016) starting January 1, 2016.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Mr. Jovanovic, I would like to begin by confirming certain figures with you.

Let's talk about the cut to the second tax bracket.

A person whose income is under $45,000 will not benefit in any way from the tax cut. Let's take the Statistics Canada figures for non-economic family members, who are generally single people. There will be absolutely nothing for the first seven deciles, that is to say the 70% of the population with the lowest incomes. The average income of the eighth decile was $52,600 in 2013. So, a few people in this 70% to 80% will benefit from a tax reduction, but all of those below that will get nothing. Are we in agreement up till now? You seem to acquiesce.

The government says that nine million taxpayers will benefit from a tax reduction. According to my calculations, 18 million taxpayers are under that threshold and will not see a tax reduction under this bill. Once again, correct me if I am wrong.

You have probably seen the report of the Parliamentary Budget Officer I requested. This is what he concluded. If we were to reduce the first tax bracket, this would affect 83% of taxpayers. However, the percentage of taxpayers affected by the decrease in Bill C-2 is far lower, since it is approximately 30%.

Have you evaluated the impact of a 1% cut to the first tax bracket rather than a 1.5% reduction of the second bracket, as proposed in Bill C-2?

[Trevor McGowan, Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance]

We're here to discuss Bill C-2, an act to amend the Income Tax Act. The bill has three main components; first, changes to the personal income tax rates; second, changes consequential to the introduction of the new top marginal income tax rate; and third, restoring the TFSA to its previous level.

I'll first describe the personal income tax rate changes.

These amendments are in clause 1 of the bill.

First, this amendment reduces the second personal incomes tax rate to 20.5% from 22%. This reduced rate would take effect on January 1, 2016. For the 2016 taxation year, it would apply to income earned in excess of $45,282 and up to $90,563. These bracket thresholds are indexed to inflation for subsequent taxation years.

Second, this amendment introduces a new 33% personal income tax rate. This tax rate would apply to individual taxable income in excess of $200,000 and would take effect on January 1, 2016. As with the other bracket thresholds, the $200,000 threshold would be indexed to inflation.

A number of income tax rules either use the top personal income tax rate or use rates or formulas that reflect it. Clauses 2 to 8 and also 10 of the bill contain consequential amendments to a number of provisions that relate to the top marginal rate. In addition, the federal budget tabled on March 22 announced a number of additional consequential amendments to be introduced in a future bill.

Individuals who make charitable donations to registered charities and other qualified donees may be eligible to claim a federal charitable donation tax credit. Annual donations of up to $200 are entitled to a 15% tax credit rate. Donations in excess of $200 are currently entitled to a 29% tax credit rate.

For gifts made after 2015, clause 3 of the bill would provide a 33% tax credit for donations in excess of $200 to the extent that donors have income in the new top income tax rate bracket. Under the income tax rules, a special tax applies at the highest marginal tax rate to so-called split income paid or payable to a minor. In general terms, this tax is intended to prevent individuals who are taxed at the top marginal rate from diverting certain types of income to their children to be taxed at much lower rates.

Effective for the 2016 and subsequent taxation years, clauses 3 and 4 provide that the tax on split income will remain subject to the flat top rate taxation but at the new rate of 33%. Trusts, other than qualified disability trusts, and estates, other than graduated rate estates, currently pay tax at the top federal marginal tax rate applicable to individuals. Effective for the 2016 and subsequent taxation years, clause 5 provides that trusts and estates that are subject to this flat top rate taxation would be taxed at the new top rate of 33%.

Given that corporate tax rates generally are lower than personal tax rates, special refundable taxes are imposed on investment income of private corporations in order to limit the ability of individuals to defer taxation by holding investments in a private corporation. Clauses 6 to 8 provide that these refundable taxes and the related refund rate be increased effective January 1, 2016 to reflect the proposed new 33% personal income tax rate.

Most significantly, the refundable additional part 1 tax on investment income of Canadian-controlled private corporations often called CCPCs would be increased by four percentage points from 6 2/3% to 10 2/3%. The refundable portion of part 1 tax on investment income of CCPCs would be increased by four percentage points from 26 2/3% to 30 2/3%. The refundable part 4 tax on portfolio dividends received by private corporations would be increased by five percentage points from 33 1/3% to 38 1/3%. The rate at which refunds are made out of a private corporation's pool of refundable taxes previously paid, known as refundable dividend tax on hand, would be increased by five percentage points when it pays dividends. This is from 33 1/3% to 38 1/3% of dividends paid.

Finally, clause 9 of the bill returns the TFSA annual contribution limit to its previous level of $5,500 from $10,000 and reinstates indexation of the TFSA annual contribution limit. These changes would be effective for the 2016 and subsequent taxation years and would not affect the $10,000 limit for 2015.

That's all. We'd be happy to answer any questions.

[The Chair, Liberal, Wayne Easter]

Good morning.

Pursuant to the order of reference of March 21, 2016, we'll deal with Bill C-2, An Act to amend the Income Tax Act. As well, as noted in the committee agenda, we will go an hour and a half with Department of Finance officials, and then we'll get into committee business and scheduling.

I note we are scheduled until the end of April, but we'll talk about the motions that are on the committee list, as well as the agenda going forward.

Welcome, officials from the Department of Finance. We have Mr. Jovanovic, who's the general director, tax policy branch, and Mr. McGowan, senior legislative chief, tax legislation division, tax policy branch.

Welcome. The floor is yours.

Financial Statement of Minister of Finance

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, it gives me pleasure to speak to the budget entitled “Growing the Middle Class”.

Let me start with a quote from the Minister of Finance himself. He really summed it all up in his opening remarks. He said:

Today, we begin to restore hope for the middle class. Today, we begin to revitalize the economy. Today, we begin a long-term plan that will use smart investments and an unwavering belief that progress is possible to ensure that Canada's best days lie ahead.

As I said, that really sums up what this budget is all about. It sums up the objective of the budget. However, the budget is made all the more difficult by what the previous government has left us, or has left us without. Program after program was cut by the previous government. Earlier, the Leader of the Opposition talked about how the Conservative government had a surplus. No it did not. That was a surplus on a monthly basis, but accounting is usually done over the long term. The Conservatives left this country with $160 billion of added debt imposed on every citizen in this country. Not only did they leave us with debt, as I said, but they also cut programs and services. Even worse, they created disunity in the country.

If we are going to bring Canada ahead as a federation, we need to have a government that is willing to work with the provinces, to work together to grow the economy, to put in programs that we can utilize together to create growth in the economy and jobs for Canadians.

In reality, the budget builds on the measures introduced in December which provided a middle-class tax cut. We are dealing with that now with Bill C-2. Really what that did is bring better balance to the taxation system by giving those in the middle class a tax break and balancing that by taking a little more from those who can afford it. This budget builds on that commitment.

One of the key parts of this budget is looking to the future. That is done with the Canada child benefit, assisting those families in raising their children, giving them better opportunities to spend money where it is needed. The Canada child benefit will replace the current complicated child benefit system.

The Canada child benefit will provide a maximum annual benefit of up to $6,400 per child under the age of six, and up to $5,400 per child for those ages six through 17. Families with less than $30,000 in net income will receive the maximum benefit. Nine out of 10 families will receive more child benefits under this program than under the current system. Specifically in my own province of Prince Edward Island, they will receive $47 million more in child benefits during the 2016-17 and 2017-18 period. That is a benefit to families. It is putting the money where the resources should be put.

Not only are we dealing with families, but we are also dealing with the education of students so that we build for the future down the road. We are making post-secondary education more affordable through this budget. We are enhancing Canada student grants to give young people the opportunity to be able to afford to go to university and college.

Budget 2016 proposes to increase Canada student grants by 50%, from $2,000 to $3,000 per year for students from low-income families, from $800 to $1,200 per year for students from middle-income families, and from $1,200 to $1,800 per year for part-time students. We are not only building on the very young people, but we are building the education system as well for all Canadians.

I know this area is a little controversial, but for all Canadians we are improving the safety net for those who find themselves in difficult times as a result of being out of work. We are improving the employment insurance system after the disastrous way it was handled by the previous government.

We are expanding access to new entrants and re-entrants by dropping the 910 hours' entrance requirement to whatever the regional rate is. We are reducing the two-week waiting period to one week. We are improving the program for working while on claim. That is extremely controversial. It was extremely controversial in my area, because under the previous government's system, a person was penalized for going to work. Even people who were on maternity leave were penalized for going to work and keeping up their skills, especially those who worked in a hospital setting for one day a week while on maternity leave.

I do not mind admitting that there is some controversy around the next point I will make, and that is extending the five-week pilot project to those areas that were hardest hit by the downturn in the economy. I would say there is some controversy in my own region over that because that five weeks was not applied in that particular region, but it is targeted to those areas which have been greatly impacted by the downturn in some of the commodities in the marketplace.

The minister has committed to look at that into the future. The minister has committed to review the employment insurance system and those measures going down the road. I look forward to that review, to ensure that we get fairness and equity throughout the total measures around employment insurance in this country.

We improved the safety net for those finding themselves out of work. I do not have the time available to go into it, but we do look beyond employment insurance and we are investing in skills and training. We are enhancing the investments in training itself, strengthening the union-based apprenticeship training, supporting flexible work arrangements, and improving labour market information for Canadians. We are trying to put that workforce in a place where their skills will be needed in the future and expand on those skills to grow the economy.

However, it is not enough to deal with today's reality. We are looking at the long-term future. During the election campaign we talked a lot about investment in infrastructure. While we are looking at $11.9 billion over five years starting right away, budget 2016 puts this plan into action with an immediate down payment on this plan: $3.4 billion over three years to upgrade and improve public transit systems across Canada; $5 billion over five years for investments in water, waste-water, and green infrastructure; $3.4 billion over five years for social infrastructure, including affordable housing, early learning and child care, cultural and recreational infrastructure, and community health care facilities.

We are investing in the future. Specifically in my comments I should make this point: Major transfers to Prince Edward Island will total $582 million in 2016-17, an increase of $29 million from the previous year; $380 million through equalization, an increase of $19 million from last year; $147 million through the Canada health transfer, an increase of $8 million from the previous year; $54 million through the Canada social transfer, an increase of $1.6 million from the previous year.

My point is, my province benefits from this budget in terms of the transfers, in terms of the programs, and Canada as a whole can look to the future with opportunity and excitement because of what this budget does.

It addresses the problems created by the previous government and puts in place investments in families, infrastructure, education, and skills training, which is what Canadians really need to grow, with opportunity and the hope for prosperity in the future. That is what the Minister of Finance has done in this budget. I ask everyone in this House to be supportive of that to help build Canada's future.

Public Service Labour Relations Act

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, it is a privilege to stand in this place to share some thoughts on yet another very important piece of legislation, something that I suspect people should be supportive of.

I have had the opportunity on previous occasions to address different types of legislation. I would recommend that my colleagues, no matter what side of the House they are on, take into consideration that this legislation is before us because there was a Supreme Court of Canada decision that was made, and as a result legislation was then required. I would argue that this type of legislation could have, and possibly should have, been introduced long ago, even prior to the last federal election. I think it would have been nice to have had something in place.

I am very happy with the approach that this government has taken in addressing legislation, in particular with some of the labour issues. I truly believe that we can do much more in terms of improving the quality of the relationship between labour and management, not just within the private sector, but also the public sector.

A couple of weeks ago, I met a member of the public union at a local restaurant. He shared with me a questionnaire that was circulated among the civil service. It was discouraging. The questionnaire results were based, I believe from 2014. The results were very disturbing, in the sense that there is a high level of dissatisfaction, of mistrust. There is this sense that the Government of Canada was not listening to the needs of Canada's public service, or at the very least was not demonstrating respect for our civil service.

There has been a change in attitude since the last federal election. We have seen our new Prime Minister and the Canadian government take a different approach in dealing with our civil service, or unions in general. We recognize the valuable contributions they make to our society. This is ultimately recognized, not only here in terms of the citizenry of our country, but also in other jurisdictions in the world that have recognized the professionalism throughout our public service.

I tried to assure my constituent when he was sharing these very poor results from 2014 that there is a new attitude in Ottawa, in terms of appreciation and gratitude for the phenomenal work that our civil service puts in.

When I look at the legislation before us today, it is an extension of other areas in which the government is trying to demonstrate that things have changed. There was a four-month extension that was given.

I listened to the comments, whether they were from Conservative critic or the NDP member of Parliament from Elmwood—Transcona, about wanting to see changes. I have good news for them. The good news is that we within government want to see change in the way in which our standing committees themselves operate. If the opposition takes the gesture that is coming right from the Prime Minister and the cabinet, and in essence from the government benches, I would suggest that we will see amendments brought forward, not only potentially to Bill C-7, but to other pieces of legislation.

I had the opportunity to serve over 20 years in opposition, and I have often had a sense of frustration when I wanted to see amendments brought forward, and for whatever reason—usually because they came from the wrong side of the committee—opposition amendments were just completely outright rejected.

I am suggesting, as have other colleagues, that there is a new open attitude toward the way in which committees and standing committees could be working into the future.

I tend to agree with the Prime Minister that a lot of the heavy lifting and the hard work can in fact be done in our committees. Therefore, when the member for Elmwood—Transcona talks about some of the ways he believes we have fallen short on the legislation, let me suggest for him and for all members—it does not matter whether they are even on the opposition benches, so even for my colleagues on the government benches—that if they are prepared to do the work and the consultation and share their ideas in a proactive fashion, in a progressive manner, they should not be surprised to see their amendments actually accepted and ultimately improve the legislation.

That could happen with Bill C-7 or any other piece of legislation, but the onus and the responsibility in good part is on those who are sitting on the committee. At the end of the day, if we are passing legislation through second reading and a member has some thoughts and some ideas that could improve the legislation, the government is open to listening to them. Why would we not approve, or at the very least consider, amendments that would improve the quality of the legislation itself? All Canadians would benefit from that. The Prime Minister has spoken out on this. We want to see more effective and functional standing committees that will ultimately contribute to improving the system.

I recognize, in the hour or hour and a half in which we have had the opportunity to debate this issue, that there were a number of members who talked about the importance of amendments. Let me qualify that by saying—and the parliamentary secretary in particular made reference to a fairly extensive survey where literally thousands of RCMP officers were consulted and feedback was solicited, and we received a considerable amount of information—that we understand what is being asked of the government in coming up with the legislation as to what they would like to see in the legislation. I will make more reference to that a little later in my comments.

We have to look at amendments to legislation from a holistic approach, everything from the legislation itself and the impact an amendment would have on the legislation, to what degree we are hearing from the different stakeholders and the witnesses who ultimately appear before a committee.

One of the things I really enjoy, coming from a provincial legislature to the House of Commons, is the degree to which standing committees have the ability to bring experts from across the country to provide their input on legislation—and on other matters, but specifically on legislation.

When the bill ultimately goes to committee, we will hear from experts from virtually all regions of our great nation, coming forward, sharing their thoughts, and I suspect from a combination of what they, opposition members, and government members are saying, that we might actually see some amendments brought forward.

I decided to take some time to emphasize the importance of this because there is a time limit. I do believe there is some merit to see the bill ultimately pass in a timely fashion.

As has been pointed out, the Supreme Court of Canada made its decision in January 2015. It said we needed to change the law to enable our RCMP, a wonderful national institution, to unionize if it chose to do so.

We were given a year. We had to apply for that four-month extension. From a court procedural sense, we need to speed up the process if we can. However, it should not be only about the perspective of the court. Many members of our RCMP have been anxiously awaiting this. The sooner we put this in place, then the sooner we would be allowing those fine members, who have served us so well over the years, to do what they would like to do.

There are two good reasons why I would recommend to my colleagues, no matter what side of the House they sit on, that they allow this legislation to go to committee. The sooner it gets to committee, the more opportunity the committee will have to deal with the many different issues that have been raised so far in the debate. Ultimately it will come back from the committee, and looking at the actual number of sitting days and the government's proposed legislative agenda, we see that time is a scarce commodity in this chamber. We could do a great service by recognizing the value of getting the bill to committee stage.

A number of thoughts came to my mind while I was listening to the Conservative critic, and I wanted to pose a question for him in regard to those thoughts. Some of his remarks were a bit off topic, for example, when he referenced debt and deficit that he attributes to Liberal prime ministers. If he has been listening closely to what the government has been saying, he is probably finding it intellectually challenging as to why he might stay on that side, given the number of times he has quoted Liberal prime ministers. Rather than adding more comment on that particular issue at this time, I will wait until we get the opportunity during budget debate. Suffice it to say that, when the member referenced the deficit, I would suggest that the Conservatives had a huge deficit and debt issue, far exceeding any Liberal administration since Confederation.

The member also made reference to Bill C-4 as if it were bad legislation. I am from Winnipeg, and maybe it is because Winnipeg faced the general strike of 1919 that I tend to differ with the Conservative Party. I recognize the valuable role that unions play in society, both today and into the future, but the Conservative Party in particular does not recognize this. We saw that with respect to the questions the member put forward and his statements while addressing Bill C-7. The member was critical of Bill C-4, but he does not recognize that Bill C-4 would improve Canada's labour legislation, just like the bill we have before us today. If passed, Bill C-7 would improve the labour situation here in Canada.

Bill C-4 is not the government's first priority piece of legislation. Our first priority was Bill C-2, which concerned our tax break for the middle class. Bill C-4 is a priority because the Conservatives changed labour legislation to the detriment of the union movement in Canada. That particular piece of legislation was brought in to rectify a wrong that the Conservatives had put in place.

That is the reason why I suggested earlier that the Conservatives have a different approach to dealing with labour legislation, which has ultimately led to what we have in Bill C-7 today. They had eight or nine months to deal with the legislation in some form or another. They have talked a lot about the secret ballot. They had the opportunity to put that into the legislation if they were prepared to bring it forward back then. However, it was a low priority, even though the Supreme Court of Canada had ultimately made a ruling. I would suggest that the Conservatives were negligent on this file and, as a result, that has created a time crunch, and I hope and I trust that all members will recognize that.

Before I get into more of the details of the legislation itself, I did want to pick up on a couple of important points. The most important one is that this legislation was brought forward to deal and assist with a free bargaining process for our RCMP officers. I do not think that enough could be said about the incredible work that our RCMP officers do from coast to coast to coast. The RCMP is one of those great Canadian institutions from which Canadians as a whole get a great sense of pride, especially when we see the traditional red uniform with the hat. It is something I believe embodies a great sense of pride for Canadians. It is an iconic institution that is recognized around the world as one of the greatest police forces of modern time. I believe we should all pay tribute to the fantastic work that the RCMP does.

We need to also recognize that this is not the first time that a police or law enforcement agency is looking at the possibility of forming a union. We have had police unions in Canada dating back almost 100 years, so Canadians do not need to be fearful of a union, as some members on the other side might try to espouse. There is a great deal of benefit to recognizing the valuable role unions have played in police forces in Canada to date. It is not as if we are going into an area that has never been explored in the past. The opportunity for the RCMP to unionize is very real, and I suspect it will likely happen. However, at the end of the day, it is the RCMP that will ultimately make that decision. The important thing to recognize is its right to have a collective bargaining regime. That was the essence of the ruling that was made by the Supreme Court.

I will highlight this fact. In that massive consultation and surveying that was done with RCMP officers, there were a couple of points that need to be recognized. One was that there was strong support for a union throughout all of those consultations and so forth. There was also strong support for a single national bargaining unit, and the idea of binding arbitration versus the ability to strike.

With those very few words, I trust and hope there will be a few questions.

Income Tax Act

[The Speaker, Geoff Regan]

It is Bill C-2 and if I said Bill C-6, I apologize, but I do not think so. The vote is on Bill C-2.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, I hate to interrupt votes for clarification, but I thought we were voting on Bill C-6. However, I heard you call Bill C-2 and I do not want to vote the wrong way. I just want a clarification.

[The Speaker, Geoff Regan]

The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-2.

The House resumed from March 11 consideration of the motion that Bill C-2, an act to amend the Income Tax Act, be read the second time and referred to a committee.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Speaker, I am pleased to rise to speak to Bill C-2. I am interested in finding out why the Liberals think that someone earning $200,000 a year deserves more tax credits. That is completely irrational and makes no sense.

My riding encompasses Montmagny, L'Islet, Kamouraska, and Rivière-du-Loup, as the name suggests. My riding borders the riding of my colleague from Rimouski-Neigette—Témiscouata—Les Basques and it includes Rivière-du-Loup and La Pocatière. La Pocatière is the gateway to the Lower St. Lawrence region, which is considered to be the poorest region in Canada. In some municipalities, the people are very far from rich.

Under this bill, Canadians who earn less than $45,000 a year, which represents the vast majority of my constituents, will not get any money at all.

The Liberals are implementing policies to supposedly help the middle class. This party boasts about being the middle-class party, but in reality, it is not helping 99% of middle-class Canadians, who do not earn more than $45,000 a year.

In my riding, family income does not exceed an average of $50,000 a year, which is very low.

As members of Parliament, we earn $167,500 a year, and we will soon earn nearly $170,000. Parliamentary secretaries earn a little more than $200,000. I will not even get into how much ministers earn. The fact remains that people in our tax bracket do not need this. We earn enough money and we do not need this money to justify tax cuts. We are the ones who will benefit the most. That makes absolutely no sense.

I repeat: in my riding, the middle class does not earn $170,000 a year. It earns less than $45,000 a year. I am a business owner, and I can tell you that I do not pay average wages of $45,000 a year if I want to keep my business afloat and continue to invest.

According to the government, this measure should be revenue neutral, in other words, it should not cause a deficit. The parliamentary budget officer said that the deficit will not be $1 billion, as announced, but rather $1.7 billion. It is completely irrational and makes no sense. What is more, that amount is permanent. It will be a permanent item in the budget in the years to come. By all accounts, this measure is ill-conceived and flawed. It needs to be changed. In any case, more than two-thirds of the population will not get one cent from this measure. It is not fair to anyone.

On average, a family might get an extra $6.50 a week. That is totally ridiculous. That is not even enough for two cups of coffee. The government needs to realize that it cannot use borrowed money to put the country in debt for policies like these, just to give a small group of people some extra money that is significant for that particular group. The majority of the Canadian middle class earns $45,000 or less a year. There is no doubt that changes need to be made to this legislation.

The other item is the TFSA. I am a business owner and I invest a great deal in my business. Over the past 10 or 15 years, I did not have the opportunity to take advantage of an RRSP or the TFSA because I invested my money in my business. Not everyone can count on owning a business to save for the future.

This measure allowed people to save $5,000. Then the ceiling was raised to $5,500, and then finally to $10,000. The Liberals just took away the $5,000 we added in our budget.

That is no way to help people save for the future. People have to understand that just because there is a ceiling does not mean that everyone is going to reach it one day.

That is not what that means at all. It means that people are being given tax room so that they can save.

I think it was the member for Hochelaga who said earlier that, in her riding, there are poor people who cannot invest a single penny because the cost of staying in their house or apartment is so high.

That is the reality. It is not just true in her riding. It is the same everywhere. When we develop a policy, we need to do so for all Canadians. Some people are successful and can save money. I forget the exact name, but there are organizations, I think they are called ACEF, that provide education, information, and training on how to save for adults and youth with good incomes. Tax room in the form of TFSAs or RRSPs is needed so that people can save money.

These are programs or mechanisms that allow people to save money. If these mechanisms, this room to save, were not available, people would not save money. People need to save. They need to start thinking about the future when they are young. When they get close to retirement and they have more money to invest, they need to be able to make tax-sheltered investments so that they can live comfortably for as long as possible.

The bill is badly flawed. I repeat: the middle class does not earn $170,000 a year. Everyone agrees that Canada's real middle class, people who earn less than $45,000, will not benefit at all from this bill. It is therefore a bad bill.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Mr. Speaker, I would like to take the opportunity at the beginning of this speech to thank all of the people of Peace River—Westlock for giving me the opportunity to stand in the House and make this speech.

Today, I rise to address the issue of fiscal responsibility. The previous Conservative government left the Liberal government a $1 billion surplus. At a time when the rest of the world was in economic turmoil, we kept a steady hand on the wheel and steered our country through that turmoil. Not only did we manage our resources prudently, but we paved a $1 billion road into the future.

In a few short months, the Liberals have squandered that surplus. When they originally introduced their new tax plan, they promised it would be revenue neutral. Since then, the Minister of Finance has conceded that the plan was not revenue neutral and would in fact leave us with a $1 billion in the hole.

A report from the parliamentary budget officer estimates the costs to be closer to $1.7 billion. This gross miscalculation speaks to the government's incompetence, and the fact that the Liberals are proceeding with legislation after admitting they have broken this promise to Canadians. This speaks to their integrity.

In my riding in northern Alberta, we have a number of industries, agriculture, oil and gas, and lumber, to name a few. We are a province of entrepreneurs, business people who understand the necessity of practising fiscal responsibility if they want their businesses to grow and thrive.

A spending spree on the taxpayers' dime is not only a sign of poor fiscal management; it is an irresponsible behaviour that has drastic consequences down the road.

Who is going to pay for this shortfall? The Liberal Party has talked about eliminating a number of tax credits. When we look at the available tax credits, it is clear who will pay for the shortfall. It might be first-time home buyers, or families with kids in sports or the arts, or students or apprentices. The very people who need the tax credits will be the ones paying off the Liberals' billion dollar spending spree.

As everyone here knows, the price of a barrel of oil has negatively impacted Alberta. There have been massive layoffs in the oil patch, and this has had a ripple effect in many of our communities.

In my riding, unemployment is up, EI applications are up, and the outlook for businesses, especially those connected with the oil patch, is grim. I had a call from a transport truck driver the other day. He is in his fifties and has worked hard his entire life. Now, he cannot find work. Trucking outfits are scaling back, and no one is hiring. His EI has run out, his savings are dwindling, and his rent is past due.

Why is the government focusing on tax credits and income tax hikes when what we need is a plan to create jobs? We need a plan to get Canada back on solid ground.

There is a lack of evidence or explanation on why the changes in Bill C-2 would stimulate economic growth and development for Canadians. The Prime Minister believes that small businesses are tax havens. Does he plan on increasing payroll taxes on job creators?

It is important to remember that small businesses create a large percentage of the jobs in Canada. Increasing payroll taxes on our job creators creates an extra burden on companies that are already struggling in these economic times. The fact is that many companies are downsizing right now. Now is not the time to increase business taxes.

Neither is it time to raise taxes on higher income earners. These are the people who traditionally create jobs and grow our overall economy. By increasing taxes on these job creators, we are discouraging success, and punishing those who have done well for themselves. We cannot spend our way to growth, and we cannot tax our way to prosperity.

We have looked at all the tax cuts the Liberals are proposing for the middle class. Based on Finance Canada's estimates, the new Liberal tax plan amounts to, on average, an extra $6.34 per week for those individuals who qualify, and $6.34 might buy a block of cheese or a few litres of gas. This tax break would not be enough to grow our economy. It would not stimulate growth or innovation. This modification to the income tax rate would hardly qualify as a significant tax relief for Canadians and it comes with a much larger price tag.

When the previous Conservative government was in office, we reduced taxes more than 140 times. We have a proud legacy of tax fairness. We cut taxes through targeted measures that were responsible.

We would all be better off if the government worried less about the income tax rate and instead focused on creating jobs so more people could pay in.

There is another amendment I would like to address, and that is the issue of tax-free savings accounts. The Liberals have unaccountably decided to slash contribution limits for the tax-free savings account to $5,500.

Many Canadians rely on these savings accounts to plan for their future. Students save for higher education, couples save to start a family, entrepreneurs save to start a business, parents save for their children, and low-income seniors save for their retirement. These changes would make life less affordable for Canadians who are trying to save for their vulnerable years.

Financial literacy is a subject now taught in some schools. As a parent, I will teach my own children practical money skills. It is an important concept to grasp, that if we want to keep ourselves financially secure and free of uncontrollable debt, financial responsibility is important to the well-being of individuals, families, businesses, and our nation.

A recent report from the parliamentary budget officer points out that Canadians are taking on uncontrollable levels of debt, and we have the highest debt in the G7 at 171% of our annual income. Households now face overwhelming exposure to negative income and interest rates and will likely become delinquent in their debt payment.

Responsible Canadians are looking for a way to save when times are good so that they can be protected. Reducing TFSA contribution limits would reduce the ability of Canadians to save for their retirement and to protect themselves in economic downturns.

TFSAs provide a concrete vehicle for financial independence for Canadians. We should be encouraging responsible saving. Instead, the Liberals are turning a blind eye to financial literacy. They are taking options away for saving and are putting more Canadians at risk. This will translate into a greater burden on all taxpayers to support those who are unable to support themselves.

I would like to point out that this future cost to taxpayers is what the Liberals have neglected to calculate. Fiscal responsibility is a fundamental component of good government. The Liberal tax plan, a plan that runs massive and long-term deficits, will burden the taxpayer and leave Canada more vulnerable to sudden, economic shock.

Our Conservative caucus will stand up for taxpayers and press the government to approach spending in a responsible manner, to protect against risk, and to ensure stability and long-term prosperity.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Whoops, Mr. Speaker, it would blow a $1-billion hole in the deficit. I repeat, $1 billion.

Then we just found out from the parliamentary budget officer that, no, it will not be a $1-billion hole, but more like a $1.7-billion hole in the deficit. That is on top of the billions and billions and billions of dollars the government keeps on digging as it blows through the $1-billion surplus the previous Conservative government gave it.

Who is going to bear the burden of the so-called Liberal middle-class tax cut? We guessed it: middle-class Canadians. In order to pay for the so-called Liberal middle-class tax cut, the government is going to roll back TFSAs, the tax-free savings accounts, the most flexible investment mechanism available to Canadians.

It would roll back the opportunity for students to save for higher education, roll back the opportunity for families to save for their children, roll back the opportunity for entrepreneurs to save for their small businesses, and roll back the opportunity for seniors to save for a later day. That is what the current government wants to do. The Liberals want to roll back TFSAs from middle-income Canadians.

The frightening part is that the Liberals are just getting started, because the Prime Minister and members opposite keep talking about boutique tax credits. The Liberals effectively want to roll back all of the tax relief that the previous Conservative government provided Canadians. Canadians on average got back $6,600 in tax relief. All of that is in jeopardy because of the Liberals' so-called middle-class tax cut.

I heard one of my colleagues say “smoke and mirrors”. I would say that the Liberal middle-class tax cut is really a Liberal middle-class tax cut fraud. That is what it is.

The so-called Liberal middle-class tax cut would do absolutely nothing to give back to hard-working Canadians who work hard every single day in order to move ahead. It would give them back absolutely nothing. The so-called Liberal middle-class tax cut would do absolutely nothing. In fact, it would take away the opportunity for hard-working Canadians to save and invest. On top of that, it would burden middle-class Canadians with billions of dollars of additional debt that other middle-class Canadians would in the end repay.

It is absolutely essential and imperative for the sake of middle-class Canadians that Bill C-2 be defeated.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Mr. Speaker, I rise in opposition this afternoon to Bill C-2, an act to amend the Income Tax Act.

Bill C-2 would implement the so-called Liberal middle-class tax cut. The biggest problem with that so-called Liberal middle-class tax cut is that it does not actually cut taxes for middle-income Canadians. I will get to that in just a minute.

Bill C-2 would reduce the income tax rate from 22% to 20.5% for Canadians earning less than $200,000. It sounds pretty good on the surface, and I guess during the election campaign a lot of Canadians thought it sounded pretty good, but, like everything, the devil is in the details. What does it actually mean? How much are Canadians actually going to save? The answer is not a lot.

Take, for example, a Canadian who earns between $62,000 and $78,000. How much would that Canadian save under the so-called Liberal middle-class tax cut? The answer is about $117 a year or $2.25 a week. What does $2.25 get someone in Canada these days? I think a person would be lucky to get a double-double at Tim Hortons.

What about someone who is making $48,000 to $52,000? How much would that individual get back by way of the so-called Liberal middle-class tax cut? It would be $51 a year, or less than a $1 a day. That person would be lucky to get a doughnut or a muffin at Tim Hortons in the morning for less than $1, but that is what the Liberals are offering Canadians earning $48,000 to $52,000 a year.

How about Canadians who earn $45,000? I would say that is pretty well smack dab in the middle of the middle class. How much will get under the so-called Liberal middle-class tax cut? The answer is zero, zip, nada. As I say, the biggest problem with the so-called Liberal middle-class tax cut is that it does not cut taxes for middle-class Canadians.

What is the cost of the so-called Liberal middle-class tax cut? The Prime Minister, during the election campaign, went all over Canada with his sunny ways and blue skies, saying it would be revenue neutral. Then barely after the ballots were counted, the Prime Minister had his finance minister, because I guess he did not have the courage to do so himself, say it would not be revenue neutral.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Mr. Speaker, I too am pleased to join in the debate today. This is, of course, really the first substantial piece of legislation that has been put forward by the Liberals. It is interesting that we have mostly been focused on the change in the marginal tax rate and the TFSA, and I am going to spend most of my time on those two issues, but for people who might be following the debate, this legislation does have a couple of other pieces to it: charitable donation tax credits, income earned by a child, income earned by a trust, and taxation of corporations and shareholders.

If our party, when we were government, had put this particular bill forward, I think the Liberals would have said we had put forward an omnibus bill. They would have asked what we were doing and they would have said it was an omnibus bill because it included six different pieces.

I recognize that within an important piece of legislation it is sometimes sensible to do things that perhaps are not that controversial and are a bit of housecleaning, so there are some more pieces to this bill. It is not an omnibus bill, although the Liberals would have characterized it as such if we had put it forward, but there are some additional pieces.

As I indicated, the focus of my comments is going to be on the two pieces that most people are making comments on today. One of my colleagues called it the bill that giveth and taketh away. I think I would describe it as a bill that represents the first broken promise of the Liberal government.

The Liberals are saying they went to Canadians and were given this mandate. They told Canadians they were going to tax the rich and give it to the middle class. The Liberals did indeed tell Canadians that particular piece of information, but what they also said when they were going to Canadians during the election period was that the change would be revenue neutral. That is broken promise number one, and it is a big broken promise. It is an $8.9-billion broken promise over six years. This is not about fulfilling a promise, but about breaking a promise to Canadians.

What is that change in the tax structure that giveth to the middle class and taketh from the rich? Apparently just today, I understand, the Prime Minister of Canada called it a tiny bit of redistribution. That is what he called that change in the tax level for people who earn over $200,000. Moving from 29% to 33%, he said, is just a tiny bit of redistribution.

If we do the math, what he has actually done is given them a 12% increase in their taxes. Going from 29% to 33% is 12%. People can make $200,000, and it is a lot of money, but people with a large family who all of a sudden are hit with a 12% hike in their taxes will find it is a pretty significant hit. Everyone's circumstances can be a little bit different, but for those people who earn over $200,000 who are maybe paying off student debt or who have other elements, calling it a tiny bit of redistribution is a bit of a fallacy.

When the Prime Minister said he was going to give the money to the middle class, he never really defined the middle class. I do not think Canadians would consider the parliamentarians in this House, who are making good money, to be part of the middle class. I think our salaries are available on a website, and we are just below the $200,000. Some of the parliamentary secretaries are probably butting up to that level. They are actually benefiting the most from this tax break. If Canadians had been told that fact, they would have perhaps been less enthusiastic. They might have asked about those people making $190,000 getting tax breaks, and not only getting tax breaks but adding to the debt of our nation by doing so.

To be quite frank, the Conservative government believed in keeping our taxes as low as possible. Conservatives always support lower taxes. To be frank, when $6 a week is being added directly to the debt of this country, I think that if I had to make a choice, I would say, “Please do not put that $6 a week onto my children. I will pay that $6 a week myself.”

There are a lot of problems with this measure, which is absolutely unsupportable from our perspective. The biggest concern is that it would create a structural deficit when we actually handed the Liberals a surplus. Wrong promises and miscalculations have created a significant problem for them. We have called this a “whoops” in other speeches. This will be a burden on our children.

Now I want to shift to the tax-free savings account. The Liberals seem to love the stick approach to getting people to do things when it comes to government programs, making things mandatory, increasing the CPP, like the Ontario government is doing. They do not like carrots. They would rather have a big government program that makes people do things. Our party believes we need to provide Canadians with the opportunity and the flexibility to make their own choices.

The Liberals talk about only the rich being able to afford $10,000. I will give the House a couple of real-life examples about why the TFSA is an incredibly important tool for Canadians and that the $10,000 contribution limit is quite reasonable.

My first example is that of a young adult who has come into a small inheritance. This young person has never been able to contribute to a tax-free savings account, having just finished school. This young adult decides to put that money into a tax-free savings account and is able to grow that investment instead of spending that inheritance right away. This individual has decided to use it for the future, and in a couple of years buys a first house. Is that an inappropriate thing to do? It is a reasonable and sensible choice for someone who otherwise would have had no options.

Many seniors are now selling their homes and moving to assisted living facilities, or to a complex that provides support. They might have made some money on the sale of their homes. They have maxed out their RRSPs, but they have room to put some of that money into a tax-free savings vehicle that will help them in the future to pay their monthly expenses.

These are just two examples of why having a robust tax-free savings account is important. I recognize that not all Canadians can put in $10,000 every year, but there are times in their lives when they could. That is the beauty of the product. It is not that individuals had to contribute $10,000 every year. There are years where people might not be able to put a penny in, and there might be some years where they could top it up to where they needed to be.

I have demonstrated today that Bill C-2, the first substantial bill to be put forward in the House by the Liberal Party, has some serious and significant flaws. It would add to Canada's structural deficit. It would not do all that much in terms of the middle class. It would take away an important tool that people have in terms of saving for their future, whether they be young or old.

I would ask that the Liberals perhaps reconsider this legislation. They have been given a surplus. I would urge them to not keep adding to the debt. We are $18 billion, we are $30 billion in deficit. Those are frightening numbers. Perhaps the Liberals should rethink their plan and look at what they are going to leave for their children and their grandchildren.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Mr. Speaker, when the Liberals originally introduced this new system of tax breaks, they promised it would be revenue neutral. Shortly after taking office, however, they abandoned this promise. It is projected by the parliamentary budget officer that Bill C-2's changes will cost Canadians $8.9 billion over the next six years.

This gross miscalculation speaks to the government's incompetence, and the fact that the Liberals are proceeding with this legislation after admitting they have broken this promise to Canadians speaks to their integrity.

In fact, many of the government commitments seem to be falling by the wayside: a $10-billion deficit cap, consultation with opposition, openness and transparency. That is three months and three major broken promises. So much for sunny ways.

This leads to a lack of trust in the government's future plans. There is a lack of transparency with this promise. Who knows how much higher these costs will go? There is a lack of evidence or explanation for why Bill C-2's changes would stimulate economic growth and development for Canadians.

Tax breaks for the middle class are not, in themselves, sufficient to stimulate economic growth and development. It is, therefore, quite likely that more initiatives will have to be introduced.

These will require even more money from the government. This money will either have to be drawn from reduced spending on public services or from the taxpayer base. Given the vulnerable economic state of Canada, tapping further into government revenue is particularly risky for this country as a whole, and also for individual Canadians.

The government continues to move ahead with these types of long-term commitments, even amidst a struggling economy, a weakening dollar, and plummeting oil prices. Canadians are asking how much higher the cost will go. These kinds of commitments are one more chip into creating long-term structural deficits, and in turn they discourage investment and growth in a struggling economy.

Our Conservative government worked very hard every day in office to stretch every cent. We left the government a surplus and expected that to be spent with caution. It seems that work was all for nothing.

The Liberals continue signalling that they plan to run massive, long-term structural deficits, which will increase the burden on taxpayers and leave Canada more vulnerable to sudden economic shocks. Our Conservative caucus will continue to stand up for taxpayers, and press the government to approach spending in a responsible manner, to protect against risk, to ensure stability and long-term prosperity.

On the subject of changes to the tax-free savings account, all Canadians over 18 may contribute to TFSAs for all purposes, not just education and retirement savings. This makes the savings mechanism the most flexible way for all to save. It is because of this that many Canadians of all backgrounds have come to rely on the tax-free savings accounts.

We have heard from students saving for higher education, families saving to start a family, entrepreneurs saving for their businesses, parents saving for their children, and low-income seniors saving for retirement, all of whom are investing in TFSAs.

It is Canadians of all kinds of financial backgrounds too. The majority of TFSA accounts belong to low- and middle-income earners. The fact is that two-thirds of TFSAs are held by tax filers with incomes less than $60,000.

What kind of message is the government projecting when it is taking away the ability for Canadians to save for their future, while racking up massive deficits?

Why does the government continue down the path of a nanny-state approach, limiting choice for Canadians to save their own money?

These are not mandatory contributions. In contrast, the Ontario Liberal plan for a provincial pension plan is. If the argument is that very few Canadians have the ability to afford a maximum contribution, why is the member opposite so opposed to offering that choice, while in other instances forcing it upon others?

Personal fiscal responsibility is something that our government should be encouraging, regardless if it refuses to lead by example.

We are in uncertain times, with dropping commodity prices, a dipping dollar, and slowing economic growth.

Recently, the PBO released a report on the state of household indebtedness and financial vulnerability in Canadians, showing that household debt-servicing capacity continues to trend upward, while capacity to meet debt obligations diminishes.

Households now face overwhelming exposure to negative income and interest rates, and are more likely to become delinquent in debt payments.

Responsible Canadians are looking for a way to save when times are good, so they can be protected. Reducing TFSA contribution limits would reduce the abilities of real Canadians to save for retirement and to protect themselves from economic shock.

This would translate to a greater burden upon all taxpayers to support those who will be unable to support themselves. Why is the government hiding these future costs from its taxpayers?

In contrast to Liberal deficit spending, whose purposes are unclear, TFSAs provide a concrete vehicle for financial independence for Canadians. Instead of encouraging consumption, they encourage saving—promoting independent control over funds—which shields Canadians from economic shock.

The burden of economic shocks on vulnerable Canadians will ultimately fall on the overall taxpaying base if the government must step in and support these individuals. Money will come from taxpayers, or public services will be compromised for the expense of increased government financial support.

TFSAs remove barriers for all Canadians to maximize their financial positions. TFSAs are open to all Canadians over 18 years of age with valid social insurance numbers. They are simple and accessible. Anyone can contribute any amount. They encourage financial literacy and curiosity.

In fact, the majority of TFSA accounts belong to low- and middle-income earners. TFSAs allow investments—any sort of investment—deposited into them to grow tax-free. TFSAs make retirement savings more accessible, simple, and compelling. If individuals do not save enough for retirement, all taxpaying Canadians will ultimately be responsible for the burden.

The government's spending plans, including its nebulous deficits, are risky. We have seen no concrete evidence for targeted growth plans. Savings will shield vulnerable Canadians from the risks involved.

Conversely, limiting savings tools will limit economic self-protection and make Canadians more economically dependent upon the government. This is dangerous, given the lack of clear economic plans and directions from the government. Government dependence will likely translate to higher taxes for Canadians across a wide socioeconomic spectrum.

In popular debate, the media, and academic research, a brain drain out of Canada is cited as a very real possibility. Most doctors, lawyers, and other skilled professionals are found in the upper tax bracket, and their departure could be very dangerous for Canada.

Progressive taxation reduces investment, risk-taking, and entrepreneurial activities, since a large share of these activities is done by high-income earners.

The substitution effect is a principle that essentially states, “I'm getting less money for each hour I work; therefore, I should work fewer hours”.

Tax avoidance activities such as reporting less income, using tax-planning techniques to reduce the tax burden, working fewer hours, or even not seeking job promotions are very real possibilities.

Progressive income taxes reduce the returns to education, since high incomes are associated with high levels of education. They reduce incentives to build human capital, the kind of investment the Prime Minister talked about in Davos, while turning his back on our resources sector.

Academic consensus among experts is that taxes on both corporate and personal income are particularly harmful to economic growth, as economic growth ultimately comes from production, innovation, and risk-taking.

The conclusion is that tax rates of over 50% will not raise revenue. Between provincial and federal income taxes for top income earners, this is what would happen under Bill C-2.

I will not support Bill C-2.