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

[Blaine Calkins, Conservative, Red Deer—Lacombe, AB]

Mr. Speaker, I would like to quickly ask my hon. colleague this. Most income earners, when they are starting out in their lives, are at their lowest point of income earnings, for example, under $45,000 if they are single, and they might not be able to save money. It does not make financial sense for them to put money into an RRSP as a tax deferral at that particular time.

Therefore, I would like to ask my colleague this. Does the tax-free savings account allow younger people or people starting out in their careers an opportunity to put money into an account where it is tax sheltered until they get into a high-income earning position where contributing to an RRSP makes more sense because they would get a bigger tax break at that tax bracket? I wonder if my hon. colleague could, through his financial experience, enlighten the Liberal Party across the way on how, if we empower people to look after themselves, it means fewer people the government has to look after.

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

Mr. Speaker, the hon. member is absolutely correct, not just with respect to the flexibility that is given through the tax-free savings account for younger Canadians; but it is ideal to take advantage of it because, the older one gets, usually the greater one's salary—there is an increase in revenue earned—and that point in life is the best opportunity to take advantage of an RRSP. That is 100% correct.

I am not sure why our colleagues across the aisle do not realize this. However, if they do not realize it, I can certainly see where the coffers of the government are going in the future.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I would like to share my time with the member for Malpeque.

It is with great pleasure that I rise in this House today to talk about real change for Canadians. The middle class has gone too long without a raise, and in challenging economic times, we have taken action to help them.

In the next budget and over the next decade, our government will be making historic investments into infrastructure and supporting families through the Canada child benefit, which would lift hundreds of thousands of children out of poverty, and benefit nine out of 10 Canadian families. Bill C-2 is just one of many concrete actions that our government is undertaking in order to help the middle class. We were elected on a plan to grow the economy and help the middle class, and that is exactly what we did in December when the Minister of Finance introduced Bill C-2 in this place.

We are looking at initiatives to help the largest number of Canadians succeed, and we have already begun by cutting taxes for the middle class. Families work hard to make ends meet, and they need a government that understands their reality. The tax cut for the middle class would benefit many in my riding. This is not only true for my riding but for all Canadians. About nine million Canadians would benefit from this measure in 2016. Single individuals who would benefit would see an average tax reduction of $330 every year, and couples who would benefit would see an average tax reduction of $540 every year. The maximum tax reduction would be $679 per individual and $1,358 per couple. That is real change—putting more money in the pockets of the families who need it most. When the middle class is strong and prosperous, we create jobs, spur investment, and create a country that works for all Canadians.

That is not all. We are asking Canadians who have been fortunate enough to succeed to contribute a little more. That is why we are going to create a new tax bracket for those who earn over $200,000 a year. The new rate will increase from 29% to 33%. It will affect 1% of Canadians, but benefit most Canadians.

Bill C-2 also reduces the annual contribution limit for tax-free savings accounts from $10,000 to $5,500 and reinstates indexation of the TFSA annual contribution limit for 2016 and subsequent taxation years.

My opposition colleagues will say that this measure prevents Canadians from saving. That is completely untrue. Only 6.7% of eligible Canadians were able to make the maximum contribution to a TFSA. Doubling the annual contribution limit does nothing for the 93.3% of Canadians who cannot max out their TFSA contributions at the existing limit of $5,500 a year. Obviously most Canadians do not have enough money to make the maximum contribution to their TFSA. In fact, in 2013, Canadians had $592 billion in unused contribution room.

Governing this country calls for a long-term vision. In April 2015—I was not a member of Parliament then, but I was very interested in what the previous government was doing—the former finance minister said that lost revenue due to the higher TFSA limit was a problem for the Prime Minister's grandchildren to deal with. That is not the right way to do things. That is why we brought the limit back down to $5,500 per year. We want to safeguard the future of the next generation.

I am proud to be part of a government that serves all Canadians. That is why we are focused on implementing concrete measures that will help everyone. That is why we want to implement measures to grow the economy. That is why, when we spend money, we will make sure that every dollar is invested wisely.

For example, in the 2016 budget, we will create a Canada child benefit that will help nine out of 10 Canadian families. For the typical family of four, that means an extra $2,500 in help, tax-free, every year. The new Canada child benefit will be tax-free and tied to income. It will also provide more help to those who need it most, such as single-parent and low-income families.

Thanks to our plan, 315,000 children will be lifted out of poverty. Those who do not need it will not receive the Canada child benefit. This measure will mean real change.

Passing Bill C-2 is an important step that will help strengthen the middle class by implementing a tax cut that will benefit millions of Canadians every year.

We are asking those who have been lucky enough to succeed to contribute a little more. We will lower the TFSA contribution limit because it is the right thing to do, especially for the next generation. Of course, we believe in this investment tool, but raising the limit does nothing for 93.3% of Canadians.

I am very proud to support this bill because I know that the people of my riding, Glengarry—Prescott—Russell, will benefit a great deal from it. I encourage my colleagues across the aisle to think about the nine million Canadians who will benefit from this tax cut.

We did not close the door to TFSA holders. We simply set a reasonable limit that will allow their children and grandchildren to contribute to a TFSA and benefit from that tool. There are always limits in life. All we have done with TFSAs is set a reasonable limit.

I also urge my colleagues to take a look at the overall picture of what we are trying to accomplish and to take a look beyond Bill C-2.

We will reduce income tax for the middle class, and we will ask those who make $200,000 and more to contribute a little more. We will introduce a new Canada child benefit, which nine out of 10 families will benefit from.

Recognizing that we are in challenging economic times, we will invest in infrastructure. Of all the mayors that I have spoken to in Glengarry—Prescott—Russell, not one of them has told me that they have sufficient financial capacity to fulfill their infrastructure needs over the next 10 years. I know other mayors across Canada feel the same way.

Now, with the tax measures announced in Bill C-2 and the infrastructure plan that we will be announcing in the next budget, the overall plan to grow the economy makes sense for the middle class. The vision makes sense for our towns and our families. Bill C-2 is a pillar of that vision, and that is why I am supporting it.

I look forward to discussing any issues that I have raised in my speech with my colleagues in the House.

[Guy Lauzon, Conservative, Stormont—Dundas—South Glengarry, ON]

Mr. Speaker, I want to welcome my colleague and my neighbour from Glengarry—Prescott—Russell to the House. I am not sure if this is his maiden speech, but it was certainly a good speech, and I appreciate that. I welcome him, and I am sure that we will be doing much business together.

As members know, we have been debating Bill C-2 all day. We on this side have been looking for the definition of middle class. It seems like a rather simple question, and we have asked it a number of times to some of my colleagues on that side, but we have not really gotten an answer.

As a good neighbour and hopefully becoming a friend, maybe my colleague opposite could tell me exactly what his party means by “middle class”.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, the member for Stormont—Dundas—South Glengarry is a good neighbour, and it seems like today is the day of neighbours. The member for Malpeque is my office neighbour here in Ottawa.

I thank the member for the middle class question. As he understands, it varies from city to city. The cost of living varies and so the impact is different from city to city.

However, what is important in my riding is the fact that nine out 10 families will benefit from this Canada child benefit. A lot of families in my riding will also benefit from the middle-class income tax cut.

I urge the member and all members across the aisle to support the measures of Bill C-2. For the life of me, I cannot understand how a Conservative member of Parliament can be against a tax cut.

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

Mr. Speaker, I thank my new colleague from Glengarry—Prescott—Russell. My question is similar and has to do with the definition of the middle class, which is very important. It is the focus for the new government.

Is someone who earns between $48,000 and $62,000 part of the middle class? I think so. Under the Liberals' plan, this person will receive just $50. However, someone who earns more than $200,000 a year will receive more than $800. Is this person part of the middle class? I have no clue. Perhaps so in the Liberals' world. However, in the rest of the world, the first example I gave is more representative of the middle class.

My question is simple. The Liberals have not given a definition of the middle class, but we have heard a lot of references to it and a lot of spin. Is this example fair for someone who earns that amount of money?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I thank my colleague for his question.

He mentioned the middle class, and I often hear the New Democratic Party talk about the middle class. I have yet to hear the NDP's definition of the middle class.

As he knows, the cost of living varies quite a bit from city to city. It costs much more to buy a home in Vancouver than here in Ottawa. I hope he understands that reality.

[David Tilson, Conservative, Dufferin—Caledon, ON]

Mr. Speaker, the government is changing the tax-free savings account and this is discouraging residents of Canada from saving. Is it not a problem when we are discouraging residents from saving by changing the tax-free savings account?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, from what I recall we did not cancel TFSAs, we just put a reasonable limit on them so that the children of our children can benefit from them.

The member would understand that the last minister of finance said that because the limit was increased the prime minister's grandchildren would be responsible for the lack of revenue to the federal coffers.

I would caution the member. Does he not want his children or his grandchildren to participate in TFSA accounts?

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, it gives me great pleasure to share my time with the member for Glengarry—Prescott—Russell, who is my new neighbour in our offices in the Valour building.

It is really great to be able to speak on Bill C-2, an act to amend the Income Tax Act, which is really the first plank as we move to implement the commitments upon which we were elected. That plank was outlined in our platform of growth for the middle class. Our key message was real change, a new plan for a strong middle class. That platform specifically stated, as it relates to Bill C-2:

We will give middle class Canadians a tax break, by making taxes more fair. When middle class Canadians have more money in their pockets to save, invest, and grow the economy, we all benefit.

Bill C-2 follows through on that commitment.

However, I will say this. Having listened to the discussion thus far today, it is only one plank among many. It is the first plank, in terms of a package that will assist the middle class and assist prosperity in this country.

As stated in the summary of the bill:

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.

What does this mean?

What it really means is those with a taxable income of between $45,282 and $90,563 will see their current rate of taxation of 22% drop to 20.5%. That is a considerable saving for those individuals. We are targeting that group because they are a part of the middle class.

On the other hand, those with taxable income of over $200,000 will increase from the current rate of 29% to 33%.

In essence, what it really does is bring better fairness to the taxation system. It tries to lessen the income disparity and the tax advantages and disadvantages throughout the income tax system to bring better balance and ensure that those who are in the wealthiest sector of our society, who have the means, can contribute more to the fiscal coffers in a way that those monies can bring better balance to Canadians throughout society.

The second major part of the bill from the summary is:

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.

This is extremely important as it brings greater tax fairness to our taxation system and ensures greater effort is made by those with the economic means to support our economic and social programs as a whole.

I will speak a bit more on that aspect of the bill if I have time.

However, it is important to note that members have already voted in support of a ways and means motion, which allowed these changes to come into effect on January 1. Bill C-2, now before the House, would formalize that motion, and it would give members and the public the opportunity to both criticize and praise the bill, and we have seen some of that here today, and maybe even find ways to further improve the bill, either through this act or through future legislation.

As others have said before me, there will be more legislation coming forward that will continue to build on our commitment to income security for the middle class.

The government, beyond these measures today, will introduce proposals in the budget to create a new Canada child benefit payment system under the new Canada child benefit, which will begin in July 2016. The proposed Canada child benefit will simplify and consolidate existing child benefits, while ensuring that help is better targeted to those who need it most.

It is important because one of the difficulties in this place is we debate one bill at a time. In order to look at our package as a whole, this is just one plank in that package, and the Canada child benefit is an extremely important part of our ability to ensure fairness in the system and ensure those who need most and those with families get the benefits we said during the election campaign that we would provide.

Let me come back to the tax-free savings account because there has been considerable discussion in the House on that point. There is no question that the previous government's plan to nearly double the contribution limit to the TFSA would have helped Canada's wealthiest individuals save more. However, we committed to a fairer tax system. We know that only 6.7% of Canadians eligible for the TFSAs contributed the maximum in 2013. The numbers show that a better policy would be to reduce those tax benefits that really only benefit the wealthy, and use those extra monies for other programs to bring greater fairness throughout the system, whether through the new child benefit or through other measures that we laid out in our platform.

We have to look at the 6.7% of Canadians eligible for TFSAs who contributed the maximum. The fact is that most Canadians cannot even contribute $5,500, but those with the means can contribute $10,000, and they are using it more as a tax dodge than anything else. Those monies would be better spent in other ways and bring greater fairness.

There are better ways than the current system of providing income equality for Canadians, and our platform was all about changing that system. This bill gets into two particular areas. It was moved as a ways and means motion in December so the tax changes would be in effect starting this year. This was the intent we talked about during the election. This follows through on that commitment. Again, I emphasize it is one part of our platform among many to make the package complete.

I would encourage members in the House to support the bill and to see it for what it is: a system of tax fairness targeting programs to those who need it most in a way that would help Canada and Canadians gain greater prosperity.

[Sheri Benson, NDP, Saskatoon West, SK]

Mr. Speaker, I want to note that Bill C-2 would provide maximum benefits to those wealthier Canadians, those earning between $89,000 and $200,000, while six out of ten Canadians would receive nothing. Although I appreciate that this is just one plank within a larger platform, or a first step, I feel it is a first step in the wrong direction.

Would the member comment on why the government does not look at reducing the lowest tax rate so many more Canadians will be helped rather than having a tax rate that helps wealthier Canadians?

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, I should probably not say this in this place, but I always love to get questions from Saskatoon because it is one of my favourite cities. I had an office there for some 11 years. It is a great community.

We are all about fairness in the taxation system. Those people in the low-income bracket that the member mentioned will be handled in other ways, as the Parliamentary Secretary to the Prime Minister mentioned earlier, through housing programs and other means within our total package. That will target those people in the less than $45,000 tax bracket.

Let me go through the tax brackets. Those at $90,563 to $140,388 would stay at the rate of 26%. Those at $140,388 to $200,000 would stay at the tax rate of 29%. The rate for those with an income over $200,000, as is proposed in the bill, would change from 29% to 33%. We would bring better balance to the tax regime within Canada.

[Bob Saroya, Conservative, Markham—Unionville, ON]

Mr. Speaker, I asked the same question earlier today and I hope I can get an answer this time.

I have heard the term “middle class” 10,000 times in the last four weeks. What is the definition of middle class? Is it an individual with an income of $40,000, $50,000 or $60,000 a year? What is the simple definition of middle class? Who does the member consider to be middle class?

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Speaker, the income levels of the middle class varies across the country, whether in my province of Prince Edward Island or in the province of B.C.

What the member of the Conservative Party should understand and support is that the Liberal Party is supporting the average Canadian in the middle class. He is a member of a party that in the last four years supported the wealthy in our country. His party put a burden on our children and grandchildren going forward into the future.

I heard some of the questions coming from members of the Conservative Party earlier. They were talking about their government ending up with a surplus, which is just a fictional surplus. All that government had were deficits. The Conservative government had the worst economic record in 80 years, since R.B. Bennett. In the last four years, the Conservative Party added $150 billion to Canada's debt. You, sir, should be standing up and supporting this government in getting our country back on track.

[The Assistant Deputy Speaker, Anthony Rota]

I want to remind members that it is not the Speaker, so when you are talking, you are talking about the hon. member.

The hon. member for Fredericton.