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.

Income Tax Act

[Adam Vaughan, Liberal, Spadina—Fort York, ON]

Madam Speaker, I will deal with the question specifically in English, and I apologize.

The move we have made to double the summer employment program is a very interesting one. We could have, perhaps, chosen to raise minimum wages for a very small percentage of federal workers and try to pretend that we are helping young people get work by paying them better even though it is not as broad-based an approach as possible.

However, in doubling the summer employment program and ensuring small businesses are eligible and by not raising their taxes, we would give businesses the capacity to hire. By assisting in the hiring, doubling the grants, and putting more money into the system so more students can be hired, we see it as a comprehensive way to get at one of the groups that have the most difficulty getting employment, one of the groups suffering from low employment, wages, and opportunities: youth.

There are other ways to approach these programs that are contained within our platform, and they are part and parcel with a holistic approach to alleviating poverty, building a strong middle class, and delivering a different approach than perhaps enunciated by some of our members opposite. It is not that raising minimum wages is a bad idea, and I do not think we criticized the idea. The question is this. When we have limited resources and we are in volatile economic times, what is the way we can have the biggest, most direct impact and work with the partners in the economy to deliver results? We would not raise taxes on small businesses or on large corporations; we would leave those dollars in the economy. However, then we would direct activity toward full employment, in particular for young people in this country, as a way of moving this country forward together. It is a different approach, but it is the right approach, and the electors certainly supported it.

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

Madam Speaker, I wish we could reframe this debate. Starting during the election campaign, both the New Democrats and the Liberals were in a stampede to embrace the middle class. I am hoping this is really coded language for addressing inequity. I hope it is really about the inequality by which the wealthiest 0.002% of Canadians have more wealth than the bottom 34% of Canadians. I hope we are really talking about, as the parliamentary secretary suggested, a suite of measures.

However, I do not think we can measure it against how well the middle class works. I do not think any economist has a definition of what middle class means. We do know what inequality means, and it means the poorest fall behind and the billionaires make more. That would take a whole lot more than what we see before us in Bill C-2.

[Adam Vaughan, Liberal, Spadina—Fort York, ON]

Madam Speaker, I share the analysis, quite frankly. Our language may differ but, again as I said in the speech, our goals are the same.

It is about inequality. It is why there is a proposal for a tax increase on the top 1% of wage earners contained in this bill. It is why it would shift the TFSA. Instead of maximizing the capacity in terms of people's contributions to it, it would sustain it at its current level because we see it as an effective tool, but we do not see it as a one-size-fits-all cure-all for some of the challenges.

Alleviating poverty, getting people in low-income situations on a path to middle-class existence, growing the capacity and the size of the middle class, and creating fairness in our society are the goals of our government. This particular bill addresses one particular strategy: income tax for a very specific group of people who have income. However, in dealing with lower-income Canadians or those on social assistance, a whole different approach is required. Cutting taxes for a single senior on CPP would not deliver opportunities or support. Boosting CPP would, and we will see measures addressed specifically to that group as part of a larger equity agenda as our budget unfolds in the weeks and days ahead.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Madam Speaker, I would like to advise you that I will be sharing my time with the member for Barrie—Springwater—Oro-Medonte, and I would like to take this opportunity to congratulate him on his election to the House.

This is the first time I have had the opportunity to rise to speak in the 42nd Parliament. Therefore, first, I would like to thank the constituents of my beautiful riding of Haldimand—Norfolk for electing me for my fifth term and for trusting me once again to represent them here in Ottawa.

I would like to acknowledge the team of volunteers in my community who worked so very hard each and every day over that 11-week period. Without them, I know that I would not be here today.

I would also like to congratulate my colleagues on all sides of the House for their election, and I look forward to working with them over the coming years.

I am incredibly proud to call the riding Haldimand—Norfolk my home, and I will continue to work hard to be the strong Conservative voice my constituents have asked for in Ottawa. I will fight to make our riding an even more wonderful place in which to live, work, and raise a family.

Haldimand—Norfolk is full of hard-working individuals who know the value of a dollar. Our Conservative government always believed that Canadians' money belonged to them and that they know what is best for themselves and their families.

Canadians in all income groups have seen their take-home incomes rise since 2006. The federal tax burden is at its lowest in over 50 years, thanks to our then Conservative government and the more than 180 tax cuts we made. These tax reductions gave Canadians the flexibility to make choices that were right for them to help build a solid foundation for their future economic growth and a higher standard of living for themselves and their children.

Canadians at all levels are benefiting from that tax relief, with low and middle-class Canadian families receiving proportionately greater benefits. More than one million low-income Canadians were removed from the federal tax rolls altogether due to our Conservative government's tax policies. We significantly improved the lives of Canadians, while at the same time, we kept our promise to balance the budget and stay fiscally responsible.

As we all know, the current Liberal government made it clear in its platform that it would be taking the surplus the previous government left it and would be entering into multi-year deficits. One of the problems with that is that there was once a promise to keep the deficit to $10 billion, which has now ballooned to $20 billion or possibly even $30 billion.

Every week we hear more holes in the Liberal costing of their platform. More recently, the Parliamentary Budget Officer contradicted the Liberals' claim of a cost-neutral tax increase to Canadians.

It is clear to Canadians that there is one party that will always look out for hard-working taxpayers, and that, of course, is the Conservative Party.

Among the multitude of tax-relief measures our government introduced, perhaps the most popular was the tax-free savings account, or TFSA. The TFSA is the most important new savings vehicle introduced in Canada since the RRSP was introduced more than 50 years ago.

Available since its introduction by our Conservative government in 2009, the TFSA is a flexible, registered general purpose savings vehicle that allows Canadians age 18 or older to earn tax-free investment income. I should point out that this is a voluntary procedure.

Millions of Canadians have taken advantage of the very popular TFSA. They are an excellent way for Canadians to save tax free and to have the money available for their own personal needs.

As a matter of fact, according to Revenue Canada, as of the end of 2013, nearly 11 million individuals, that is roughly one in three Canadians, had opened TFSAs, and the value of the total assets held in those TFSAs was nearly $120 billion.

The TFSA gives Canadians the flexibility to save for purchases like a new home or car, to start a business, or to save for retirement. Many Canadians have maxed out the old $5,500 limit, and many would contribute more if allowed. Our Conservative government made that possible when we raised the maximum contribution limit to $10,000, effective 2015 and for subsequent years.

The opposition claims that TFSAs only benefit the rich. That is blatantly false. In fact, at the end of 2013, individuals with annual incomes of less than $80,000 accounted for more than 80% of all TFSA holders, and about half of TFSA holders had annual incomes of less than $42,000. About 1.9 million individuals have contributed the maximum amount to their TFSAs. About 46% of these individuals were seniors, and over 70% were aged 55 and older. Roughly 60% of the individuals contributing the maximum amount to their TFSAs had incomes of less than $60,000.

Many seniors in my beautiful riding of Haldimand--Norfolk have shared their concerns with me about the changes proposed by the new Liberal government. Some retirees on fixed incomes struggle to save for their future, and the TFSA, with its limit increase, was one way to make that easier.

The fact is that Canadians are living longer than ever, which is great news for all of us. Since 2006, seniors have been benefiting from important money-saving measures such as pension income splitting and tax-free savings accounts. As of the end of 2013, close to 2.7 million seniors had TFSAs.

The previous government understood that Canadian society thrives in a low-tax environment. It is a shame that the Liberal government is opposed to the enhancements made to the tax-free savings account. They do not realize the benefits it would bring to Canadians across the country. Unlike the prudent fiscal approach the Conservatives took, the Liberals fundamentally believe in irresponsibly high taxes, recklessly high spending, and what seems to be an aspiration toward structural deficits.

Through Bill C-2, the government would significantly cut back on the amount individuals can contribute to their TFSAs, in spite of the fact that all data shows that those in the middle- and low-income classes are far more likely to use their TFSAs. Meanwhile, the new tax changes the government is trying to bring in would provide absolutely no tax relief to those earning less than $45,000 a year. Instead, many low-income people who are using TFSAs would now be worse off under this new Liberal government's proposed plan.

Our government fulfilled its commitment of doubling the TFSA contribution limit to $10,000, something that was helpful to all Canadians, young and old. The Liberal government should be encouraging responsibility in saving, regardless of how irresponsibly it chooses to run the nation's finances.

The Liberals promised Canadians that their plan was revenue-neutral. Since then, the revenue minister has conceded that the plan is not revenue-neutral; it would leave a $1-billion hole. The Parliamentary Budget Officer released a report estimating that the cost will be closer to $1.7 billion. This is a broken promise that proves that the Liberal plan has been grossly miscalculated.

Canadians know that the Liberal tax plan will end up costing them, so they deserve to know where the money will come from. It is my hope that the Liberal government will see the impact these changes will have on Canadians and will change direction so that all Canadians may benefit from TFSAs to the max.

[Sheri Benson, NDP, Saskatoon West, SK]

Madam Speaker, I agree with my colleague's comments about the Liberal tax plan providing the maximum benefit to wealthy Canadians while nearly 60% of the population will receive nothing. In my riding of Saskatoon West, the largest occupational group is people who work in the retail and service sector. That group will receive little to no tax benefit from this plan.

Would the hon. member join with me and the NDP to propose an amendment to the bill to see the tax benefit actually benefit more lower-income Canadians, because during the Conservative government, many in my riding did not benefit at all.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Madam Speaker, we believe that it is important that there be equity, that everyone be allowed to continue to benefit from TFSAs. As I mentioned in my remarks, 60% of those with TFSAs earn less than $60,000. The Liberal government has said that TFSAs disproportionately benefit the wealthy. However, $60,000 a year is not a wealthy income. For 60% of people who have TFSAs, that is what their income is, or less.

We believe that the Liberals should pull back this legislation so that everyone continues to benefit, regardless of their income, because that is good for Canadians and for their families.

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Madam Speaker, I thank the member opposite on her passionate speech about TFSAs.

Let me quote:

Doubling the annual maximum does nothing for the 93.3 per cent of Canadians who cannot max-out their TFSA contributions at the existing limit of $5500/year....

Following a detailed review of this program last winter, the Parliamentary Budget Officer (PBO) said: “TFSA benefits, currently balanced across wealth groups, will become increasingly skewed toward high-wealth households over time.”

After the recent budget, would the member not agree that the TFSA, and especially the increase in TFSAs, was to pander to the Conservative base?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Madam Speaker, in fact, TFSAs were introduced to benefit all Canadians. Right now, 11 million Canadians have opened TFSA accounts. If we think about our population of around 33 million to 35 million people, that is one-third of all Canadians, and they must be 18 years of age or older.

This is a very popular program right across the financial spectrum. The wealthy are included in it, but one-third of the population is not in that bracket.

This is a program that appeals to all Canadians. Over 60% of those who have opened them have incomes of less than $60,000 a year. We believe that they should continue to benefit from this program. If they do not contribute to it to the max, then it should not affect the finances. However, they should be given the opportunity.

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

Madam Speaker, I note that the member talks about the TFSAs. I think there are different circumstances in people's lives. It is not about the rich. There could be a 30-some-year-old who has been barely making ends meet who has not started to save for his or her retirement but who has a bit of a windfall gain in terms of an inheritance. There could be seniors who are converting their income retirement plans.

Could my colleague talk a bit further about the enormous opportunities TFSAs had for Canadians and how they really were not just a tool? I know it seems like a lot of money every year, but that balance carried forward for years when people had extraordinary circumstances.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Madam Speaker, my colleague raises a very good point. At different points in our lives, different circumstances exist. Often someone receives an inheritance or a windfall or perhaps makes a bit of money on the lottery, or any other number of circumstances. Perhaps there is a separation, which is an unfortunate circumstance, but if they find a job quickly thereafter, they would have extra funding that they would need to invest and invest wisely.

I think it behooves the Canadian government to support those individuals and help them protect their earnings going forward so that they can save for a stronger future, which makes a stronger future for us all.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Madam Speaker, thank you for the opportunity to speak to Bill C-2, an act to amend the Income Tax Act. The proposed changes to the act are the following: first, the reduction of room in the tax-free savings account for hard-working Canadians; and second, a reduction in taxes that have been marketed to Canadians as helping the middle class.

To preface any comments regarding these changes, I would like to begin by stating on the record that prior to my election as the representative for Barrie—Springwater—Oro-Medonte, my career was in finance. From personal, to small business, to commercial finance, I have had experience in planning finances and investment portfolios, with the exception of securities, and reviewing financial statements to understand the solvency of both individuals and businesses.

My remarks today are focused on four clear results of this tax-and-spend Liberal ideology we are seeing. One, the reduction of the tax-free savings account hurts seniors and young people more than anyone else. Two, it discourages Canadians from saving their money for the future. Three, the apparent Liberal tax reduction for the middle-class in fact benefits the top 10% of income earners in this country more than anyone else, while doing absolutely nothing to benefit those earning $45,000 per year or less. Four, a proposal that the Prime Minister, the Minister of Finance, and Liberal government have touted as revenue neutral will single-handedly be responsible for $8.9 billion worth of deficit over the next six years.

One of the most innovative tools ever delivered to Canadians, specifically seniors, is the tax-free savings account. While I understand that the government is looking at these changes from a theoretical perspective, my goal is to properly communicate what the practical advantages of these changes are. In my opinion, the Liberal government is reducing benefits to seniors and to all Canadians, benefits that were introduced and changed by the previous Conservative government.

For example, a widowed senior is required by the Canadian tax code to transition their life savings from a registered retirement savings plan, known as an RRSP, to a registered retirement income fund known as a RRIF. Upon transition to the retirement income fund, this senior must start withdrawing a minimum amount, which they are then taxed on. A withholding tax of up to 30% is then levied against withdrawals exceeding the withdrawal limits. Since retirement savings plans and retirement income funds are not truly liquid assets, a person may want to transition their savings into a more liquid vehicle, which is where the tax-free savings account comes in. The hitch is that, as stated, this person is being taxed as much as 30%. The idea that his or her life savings can be placed in a vehicle that can grow without tax in the future is ideal in most situations.

However, the government has reduced the annual amount a person can place in a tax-free savings account, which results in one of two things happening for seniors. First, the person is not able to remove as much of their life savings from their registered income fund in any given year. Second, the person is taxed based on a higher amount and then taxed again on the growth they attain in their senior years. I do not support separating seniors from their hard-earned money, which is likely being used to secure independent living, a healthy lifestyle, and to live out the remainder of their days as they see fit. I do not support under any circumstances raising taxes on seniors in our society.

Likewise, I do not support tax increases on young people looking to make the most incredible investment of their lifetime, in their first home. The CBC has stated the following:

With the TFSA, young people and home buyers have another option....

By contrast, withdrawals to the TFSA can be repaid to the plan at any time, following the year of withdrawal. “And unlike HBP [the home-buyers plan], failure to repay amounts withdrawn from a TFSA never result in tax on funds not repaid”....

The Liberal government has made it more difficult for young people to save for their first home. These young people in the GTA, Vancouver, and other hot markets throughout the country are being mandated now to save up to 10% for the down payment. At the same time, the Liberal government is clawing back one of the most effective tools to save that 10%. The government's action forces young people either to be taxed on the growth of their savings or use the home buyers' plan and pay back the money to the plan over the ensuing 10 years. Repayment, in these circumstances, can be difficult, as moving into home ownership is a life-changing situation and new homeowners often find these times challenging. What the Liberal government will do, therefore, is make it more difficult for young people to save and more difficult to purchase their first home.

While the Liberal finance minister travels around talking about shrinking household debt and increasing down payments on homes valued over $500,000, his government's policies are actually discouraging Canadians from saving for that same home. Therefore, why does the Liberal government say one thing and do another? The government believes that these tax hikes for seniors and young people trying to save for their first home are necessary. They are necessary in order to pay for its apparent middle-class tax cut.

Following the introduction of this apparent middle-class tax cut, economists stated that it would actually help those earning $190,000 a year, that is, those earning more than anyone else. In other words, no one would receive more help than those sitting in the top 10% of income earners in the country. How could the Liberal government, Liberal Prime Minister, Liberal Minister of Finance, and the Liberal MPs promote cutting taxes for those earning $190,000 a year on the backs of seniors in retirement and young people starting out their lives, or like the family I grew up in? We fought for years, like many Canadian families, to get and gain in home ownership.

I wish I could stop here. I wish this was where, to quote the member for Papineau, the “nonsensical” behaviour of this government ended, but it is not. Not only did the government raise taxes on seniors and young people, reduce incentives for saving, provide lower taxes to the top 10% of society, but when it did it, it also threw the government into deficit.

It was reported last week that the former Conservative government had left a $400 million surplus in November. In December, the finance minister announced that the Liberals would run a $3.5 billion deficit this year. This means the government has projected to spend $4.1 billion between November and March more than it takes in. One might ask how. It is because the revenue neutral middle-class tax cut is not revenue neutral and results in the 2016 fiscal year coming with a $1.7 billion shortfall, according to the Parliamentary Budget Officer. Furthermore, it will result in a total $8.9 billion shortfall over the next six years.

When Canadians elected this government they did so believing that the middle class would be the great benefactor, that young people would be given greater opportunity, and that seniors would be given a new way to live out the remainder of their days. Based on the promises the government has made, it has shown that it will say just about anything to anyone to get elected. Canadians will hold the Liberals to account for the actions they take, for the actions they fail to take, and in what order they do so.

The government's priorities are transparent as a result of the actions it has taken first. As it stands today, the government has not prioritized seniors, young people, lower and middle-class Canadians, and our children by its leaving a greater deficit year after year The government has prioritized tax cuts for the top 10% of income earners in Canada. This what the government will be judged on. This is what it will be known for. This is why, as a Conservative, I cannot support Bill C-2.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Madam Speaker, I welcome my friend to the House. I have a brief question for him. All day now we have been asking my Liberal friends across the way for a simple or working definition of what the middle class is. They like to use the term ad nauseam, but when asked what the term actually means in the real world, they spin back with their spin.

The reason we ask the question is that when we look at their tax scheme, those Canadians earning between $48,000 and $62,000 a year would be getting a grand total of $50 in tax cuts from this plan. Meanwhile, people earning north of $200,000 a year would get 16 times more in tax cuts from the Liberals.

Perhaps the Liberals would like to define the middle class as $200,000 and above. I would like my friend to illuminate me, the House, and perhaps some Liberals as well as to what the middle class might actually mean.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Madam Speaker, we certainly heard this narrative throughout the election, talking about the middle class. The member is right that we were not told by the Liberals what the middle class is defined as. They have defined it, though, through the tax measure they have brought in. They said they were going to concentrate on middle-class Canadians. They have concentrated on delivering tax relief to the top 10% of income earners in this country. By definition, what I and I think Canadians see is that the Liberal government and my Liberals colleagues across the aisle believe that the Canadian middle class is composed of those earning $190,000 or more.

The House resumed 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, and of the amendment.

[The Speaker, Liberal, Geoff Regan]

There are three minutes left for questions and comments.

The hon. parliamentary secretary to the government House leader.