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

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Mr. Speaker, I am pleased to rise today in the House, on behalf of the people of Sherbrooke, who put their trust in me for a second time. Since this is my first official speech in the House in 2016, I want to thank them for their renewed trust in me. It is a privilege to represent them here. I am also pleased to speak to Bill C-2, as national revenue critic for the progressive opposition, the NDP. I will provide a brief explanation of how our opposition to the current government is a progressive and constructive one, unlike the other oppositions in the House.

Bill C-2 amends the Income Tax Act, an extremely important and complex piece of legislation. It deserves all the attention we are giving it today. Earlier, I heard some government members talking about topics that are not in Bill C-2. I will try to stick as much as possible to what is in this bill.

I will start off by saying that my colleagues and I will support Bill C-2 because it has some good things in it. It does have some bad things though, and that is what I will focus on in my speech if the government does not mind. I will spend more time talking about the worrisome aspects of this bill.

The two main points I want to talk about are changes to income tax rates—the tax brackets that will be in effect if the bill passes—and changes to the savings plan known as the TFSA, the tax-free savings account. The bill introduces a change to reduce the limit, making it somewhat lower than what the Conservatives brought in last year.

Let me begin with the new income tax rates. Unfortunately, I had high expectations about these changes, and I was hoping to see some help for the middle class, but that is clearly not what we have here. Wealthy Canadians will benefit from the cuts, but 60% of Canadians will get nothing. That is disappointing. Canadian voters expected a lot from the government, as did I with respect to this first bill. The government promised that the middle-class tax cut would be the first item on the agenda right after the election. It is now clear that our definition of the middle class is very different, which is very unfortunate for Canadians who were so hopeful. They put their faith in the Liberals. They expected a lot from them, but unfortunately, it is clear from this bill that things are well below their expectations—and mine, too.

There is one other thing I just have to mention, something we have been hearing for a while and not just in today's debate. Since coming to power, the government keeps talking about the future. It keeps talking about a plan. It keeps saying that it will do something in the future and that it is going to tackle this problem or that—soon—and that we should not worry, because everything is coming. However, people need action now. I would have preferred to hear the government begin by talking about right now, talking about what it is doing and bringing in right now.

Unfortunately, in many of today's speeches, the Liberals are still talking about the future, about plans, and about what it intends to do in the future, when people have real needs now and they cannot wait until March or later to see these much-anticipated changes take place.

Why is it that we on this side of the House see that the proposed changes to the tax brackets as less than ideal? The Liberals are tossing around huge numbers, just as the Conservatives did. They are saying that nine million Canadians will benefit from this tax cut. That is a nice number. Everyone watching us at home thinks they are part of that nine million. The Liberals are talking about the middle class. They are saying that nine million people will benefit from a tax cut, but if you look at it a little closer, you see that you have to earn more than $45,000 a year. If you earn $45,000, you get only a $50 reduction. It may bring to mind a nice number when they say they are going to put more money in the pockets of nine million people, but some people might be expecting more than $50.

It is better than nothing, and that is partly why we are supporting this bill. However, many people are disappointed today because those who benefit the most from this measure have the highest tax rates. Accordingly, those who earn the most income have the most to gain.

Luc Godbout, from Université de Sherbrooke in my riding, is a renowned tax expert who often speaks about subjects we are called upon to discuss in the House. To illustrate that those who had the most to gain were those with the most money, he pointed out that with the new changes, a couple with a combined income of $250,000 would get up to $1,120 in tax cuts, whereas a couple with a combined income of $75,000 would on average get between $0 and $4 in tax cuts. My colleague mentioned this earlier. The numbers speak for themselves.

I want to be sure to talk about TFSAs because they are another reason we are supporting Bill C-2. I am talking about the change to the contribution ceiling for this somewhat contentious savings vehicle.

Many people use them for the right reasons. However, there have been documented cases of people using TFSAs as a way to avoid paying taxes. That is unfortunate because the primary objective of the TFSA is a noble one. Various studies have shown that some people are putting money that does not necessarily constitute new savings into their TFSAs. People are not always putting new money for their retirement into those accounts. Instead, they are transferring other assets into their TFSAs. They are simply transferring assets that they already have from one place to another to try to avoid paying taxes. It is unfortunate that some people have been using the TFSA that way. As many members have said today and as is quite obvious to everyone, only a very small number of people make the maximum contribution to a TFSA, and it is usually the wealthiest people who do.

When the Conservative government announced that it was going to raise the limit to $10,000, I had a hard time accepting it. I thought it was a bad decision. I am pleased to see that the Liberals are reversing that decision, and that at the very least, they are going to minimize the cost for future generations. It is important to mention that future generations would have had to pay exorbitant amounts if the government had kept the limit at $10,000. The parliamentary budget officer estimated that the fiscal cost could have reached approximately $130 billion by 2080. When we talk about future generations, I try to include myself in that. I would like to think that I will still be around in 2080. As a result, this increase in the limit really bothered me because it would have had a direct impact on tax revenue for future generations for years.

We must be careful and look at studies that also ask us to carefully consider what will happen with TFSAs, because this is a recent savings vehicle and it could have rather significant consequences for the tax system. Jonathan Kesselman came up with the idea for the TFSA in the early 2000s and together with a colleague whose name escapes me—I apologize for that—studied the possibility of a tax-free savings vehicle. In the article “Tax-Free Savings Accounts: Expanding, Restricting or Refining?”, which appeared in an issue of the Canadian Tax Journal in 2015, Mr. Kesselman presented some options to help the government realize the impact the TFSA could have and ensure that it will be a sustainable program for future generations.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Mr. Speaker, before I start, I want to quickly wish my eldest daughter a happy 16th birthday today.

In the member's speech, I did not hear a lot about Bill C-2. He talked about consultation with Canadians and going around the country. We know that the bill benefits 40% of Canadians, those who earn over $45,000. Those who do not earn $45,000, which is 60% of Canadians, were they consulted about this tax? If they were, I have a hard time believing that they would support this tax break.

The government has talked about setting its priorities and pushing those forward in the first 100 days. When are 60% of the taxpayers going to become a priority of the government?

[Erin O'Toole, Conservative, Durham, ON]

Mr. Speaker, I would like to welcome another new friend to this place and thank him for his question. To him as a member of the New Democratic Party, now that we are talking about the tax-and-spend concept, I would say that nothing underscores the difference between the three parties in this place better than this question. He looked at the TFSA changes and our increase causing a hole in revenues.

On this side in this party we do not see that as the government's money. Tax and spend decisions to us should be made in a way that takes the minimal amount possible from Canadians to give us the opportunity and the great services and quality of life we have here, while recognizing the trust that we are held to spend that wisely and only take what is needed. This is not a hole in our revenue. This is Canadians' money. TFSAs are an example where we are saying,“You have made this money, you can save it and earn some income from investments without our taxing it again”. Or in the RRSP option, we defer that taxation.

That is what was so exciting about the TFSA. The fact that we have Bill C-2 and the fact that I have this question about holes in revenue underscores that only the Conservative Party really looks at this as Canadians' money that we were entrusted to spend on priorities and make decisions to make sure that we do not take too much.

[Erin O'Toole, Conservative, Durham, ON]

Mr. Speaker, I am proud to answer that question from someone who indeed is a friend. We were all very happy to see him get through a difficult personal challenge with his health and return to the last Parliament and then get re-elected. I have a lot of time for the member and, as I said, nicknames are often terms of endearment. It is because we like Liberals that at the end of the day the tax-and-spend nickname is a nickname, but my goodness, with Bill C-2 they are confirming tax-and-spend as their strategy.

When it comes to the global recession of 2008-09, out of which Canada led the G7 in job growth and recovery, certainly we did run deficits. No one has hidden that at all, but we set a course to balance the books by fiscal year 2014-15, which takes decisions. As I said, leadership is not about always saying yes. Tony Blair was famous for saying that leadership is at times about saying no. My father who was a provincial member at Queen's Park coined that phrase long before Tony Blair, that sometimes it means saying no and saying why by setting priorities.

I hope with subsequent bills that come before this place that my friend and my friends will bring forward a plan that is more than just taxing Canadians, more than just reducing their ability to save for retirement. We need a vision that includes resources, that includes new Canadians, that includes a diverse economy to make sure that Canada stays on top.

[Erin O'Toole, Conservative, Durham, ON]

Mr. Speaker, it is a pleasure for me to get up after my friend, the long-serving MP for Malpeque, who never lets the facts interrupt his rhetorical flights in this place.

I enjoyed the fact that he said, mere days after the revenue department confirmed a $1 billion surplus for November, that he still thinks that is fiction, even though the parliamentary budget officer has confirmed that the previous government certainly left a surplus. It was so good in a tight global economy that despite the Liberals' best efforts, they are still accruing the surpluses in their first few months of government. The facts state that quite clearly.

I am very pleased to rise here today in relation to Bill C-2, an act to amend the Income Tax Act.

It is Bill C-2 for a reason. Probably the majority of members of the House are new members of Parliament. They may now know that the first bill, “an act respecting the administration of oaths of office”, is a formulaic standard bill that starts off a session. Therefore, Bill C-2 represents the top priority of a new government coming to office.

Bill C-2 would codify what the Liberals brought Parliament together for six days after they won the election in October of last year, which was to raise taxes on Canadians. Nothing suggests the priority of the current government better than Bill C-2, which is why I thought I would rise in the House.

What I find most ironic about Bill C-2, an act to amend the Income Tax Act, or an act to raise taxes, is that it confirms the age-old nickname for the Liberal Party in this place. A nickname is a term of endearment. I respect anyone who comes to Canada's Parliament, doing their best for the country, but Conservatives for generations, long before my colleagues or I have been here, have accused the Liberal Party of being the tax-and-spend party. What has happened is that the Liberals' early record in their first few months of government confirms that.

My friend from Malpeque confirmed that. He tried to suggest that it was fiction that the last government, the Conservative government, left Canada in a surplus position, but that is exactly what the Parliamentary Budget Officer confirmed last fall. In fact, the Finance Department confirmed the numbers from November of another surplus month. Therefore, the country was left with a modestly growing economy and a surplus.

The two things the government did in the short period of time it governed in 2015 were to make massive commitments for deficits, well above what the Liberals spoke to Canadians about during the election, and they raised taxes. This is one of those occasions for the pundits who often ask why the Conservatives call the Liberal Party the tax-and-spend party. It is because in the first three months of government, the Liberals are raising taxes and spending out of control. That is just the record that we are debating here today with their first bill coming to the House of Commons.

Why I think this is important is that it is setting a tone. This is not a bill that debates assistance or investments in a resource sector that needs some help, as well as the families affected by the downturn in resources prices. They desperately need help, and see mortgage payments on the horizon that scare them. It is not a bill about that.

The bill is about taking more from Canadians in the form of creating a new tax bracket in an already fairly complex tax code by taxing Canadians in the highest bracket more for income over $200,000. It is also a procedure to lower the amount that Canadians can shield from tax through the tax-free savings account by reducing the amount that people can contribute to that very popular device brought in by our previous government and my friend, the late Jim Flaherty, who was finance minister. This vehicle not only allows families of all income levels to save free of tax, but it is also very helpful for people approaching retirement. I heard that and still hear that daily. These are the two measures that are before us in Bill C-2.

Nothing concerns me more, not just as a Conservative but as a member of Parliament who came out of the business community before I was elected to office, than the new government's apparent lack of direction for our economy, even in its first few months.

Many of the members who were elected in October did not get a chance to see their Prime Minister when he was a third party leader. About a year ago, he refused to ever commit to running deficits. In fact, he took a position that was somewhat similar to what the government had adopted, because Conservatives worked hard over the course of many years, following the global recession, to balance Canada's books. Doing that requires decisions by government. Government is not intended to just say yes to everything, increase every budget line, and hire more people in every department. It has to set priorities, make decisions on spending, and look at the tax base to determine if Canadians can afford higher taxes in order to pay for more people in a certain department. These are the decisions of government.

A year ago the Prime Minister, then the third party leader, was committed to running a balanced budget, as was, of course, the Conservative government at the time, and it was not until an election campaign that it changed. For a few years, the fundamental economic position of the Liberal Party was one of fiscal prudence. In the middle of an election, there was a change in direction, a considerable change, perhaps for election advantage, perhaps because of a philosophical change, but it changed to running a $10-billion deficit. That was the commitment that the party talked about with Canadians. It was a temporary deficit of only $10 billion so that the government could fulfill some commitments and add some additional infrastructure money on top of the already substantial building Canada plan that the previous government had put in place.

Within the first few weeks of government, before the House was even called back in session and before you had the honour of occupying that chair, Mr. Speaker, that $10-billion commitment was already $20 billion. If we read the papers, as many members of the House did, a week or so ago, we now see the finance minister hedging perhaps two years of $25-billion deficits. Did Canadians vote for that? Did Canadians vote for the first two moves of the new government to go from a probably improper $20-billion deficit commitment to a $50-billion deficit commitment?

The new government's first act in this place was to raise taxes on Canadians, a tax increase that Liberals told Canadians would be revenue neutral. That is yet another promise that appeased people during the election campaign but was not met and has already been abandoned. Ironically, it was the C.D. Howe Institute, a think tank that the finance minister once chaired, that said that these tax increases would not be revenue neutral for a variety of reasons. From a public policy standpoint, those in the higher tax brackets are more mobile, so there could be a risk of driving more people out of Canada, out of our system of taxation.

I was reading just this morning in The Globe and Mail the great column by Konrad Yakabuski, who identified this tax increase as a risk to a lot of the tech entrepreneurs and growing sectors, as well as the fact they are going to treat stock options as income, which is another thing. Compounded with the fact that our dollar is going down, the government seems to be set on driving talent out of this country at a time when a lot of people are looking for an economic plan that is far more than a Keynesian tax-and-spend approach, with no strategic direction and at a time when it is actually hampering the increased revenues that are possible if we could get our resources to tidewater with energy east. There was a debate in the House last week when the Prime Minister seemed to be putting in place a system and series of consultations and reviews that would essentially mean that capital leaves Canada because of the uncertainty of our business climate.

It is with sadness that I rise today to say that Bill C-2 confirms the nickname of the Liberals as the tax-and-spenders of Canada. I certainly hope that subsequent bills start showing some real direction for the Canada of the future.

[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, 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.

[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.

[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, 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.

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.

[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.

[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.

[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.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, of course we in the progressive opposition will always stand and agree with conclusive measures to help those who are most vulnerable, whether it is children, the elderly, or poverty overall.

However, we are debating Bill C-2 today. That is why I am not talking about future plans in the budget. With all of the problems that Canada is facing, Bill C-2 could have been an opportunity to introduce some very worthwhile legislation to tackle problems.

Why did we not have the introduction of legislation to tackle the Employment Insurance Act? Why did we have legislation to reverse some of the harmful legislation of the previous Conservative government?

We could have done something to lift seniors out of poverty. Instead, a tax bill has been introduced that will help wealthy Canadians, not middle-class Canadians.