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

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Mr. Speaker, it is interesting to hear all the concern about future generations. When Joe Oliver was the finance minister and he was challenged on the increase in the TFSA limit and how that would de-fund governments in the future, he said that was up to Stephen Harper's grandkids to worry about. So much for that.

On financial literacy, remember the income splitting where 65%, $3 billion to $4 billion a year, would have gone to Canada's wealthiest people? At least some know how to read it. De-funding government over 10 years and yet spending us into the ground is the legacy of those guys.

The deficit the Conservatives claim to have eliminated, as close as they got and they did not get all the way, was done on the backs of veterans, on the basis of a fire sale of GM stocks, a one-time only thing, at a loss. Financial literacy, I do not think so.

Now with things going down the tube in Alberta, Nova Scotia and Saskatchewan, the Conservatives want the Liberal government to help after they have done all they can to weaken the government over the past 10 years. Therefore, which is it? Allow the private people to look after themselves and deprive the government an opportunity to help them when they need it, or—

[The Deputy Speaker, Bruce Stanton]

Order, please. We just have five minutes for questions and comments, so I will interrupt the hon. member there. I think we have the question and the comment out.

I would remind hon. members that the right hon. member for Calgary Heritage remains a member in the House. I remind hon. members not to use the given or family names of other hon. members, but to use either their title in the case of parliamentary secretaries or ministers, or the riding names in the case of all other members.

The hon. member for Calgary Shepard.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, I would like to reacquaint the member with the facts, and he may want to talk to the Minister of Finance about this. The “Fiscal Monitor” published by the Department of Finance showed that there was indeed a surplus that was left by our government.

We have no excuses to make on this side of the House. We have a very good record. We have left Canadians with the lowest tax burden in 60 years, and 11 million of Canadians take advantage of the TFSA.

My constituents want the government to get out of the way of private business and workers. Energy workers are good at their jobs and proud of their craftsmanship in their trades. They know how to build pipelines. They know how to work on energy projects all across Canada. They do not need the government putting in more red tape that is completely unnecessary at a time like this.

According to the OECD, Canada has a lower than average tax burden than other OECD countries. That cannot be achieved without practising financial literacy in government and we did just that.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Mr. Speaker, I thank my colleague from Calgary Shepard for his excellent speech. Two things really stood out for me, and I want to ask him a simple question.

The government is racking up debt and penalizing low-income families with increased spending that is going to create deficits. Its tax cut is going to send us $8.9 billion into debt and will help only the wealthy.

It is cutting taxes for the rich and, by reducing people's ability to save in the long term, it is depriving them of a tool that helps them meet their own needs in the future.

Is it not troubling to see the Liberal government creating massive debts for future generations by making these bad decisions and taking away a tool for saving, which puts their future at risk?

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, I thank the hon. member for his question.

I did skip one little paragraph in my speech because my time was running out. I would also like to say that my constituents work hard for their money. Telling them that their tax-free savings account is going to be eliminated is disrespectful.

The marginal tax rate in Alberta is currently over 50% for some taxpayers, including many professionals and skilled workers, such as doctors and dentists.

They are in the trades and they earn a very strong income because they work extremely long hours on very long shifts. They sacrifice time with their families knowing that at the end of the day they can better the quality of life of their families and grow their prosperity. It is important to remember that this has a real impact 10 to 30 years down the line when they will be thinking about whether they will have enough to retire and enough to share with their children to ensure they will have an education, or to buy a car so they can get to school or university. It has a real impact on them and that is who I am thinking about.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, I am pleased to participate in today's debate on Bill C-2, the government's tax bill. I would like to begin by saying that we will vote for this bill.

We will vote for this bill, but not because it is excellent; it is not. It is actually rather insignificant, but it is slightly less bad than the status quo that the Conservatives and the NDP were championing during the recent election campaign.

This bill gives effect to the ways and means notice that was hastily tabled before the holidays as a gift to taxpayers. It implements just one of the tax measures that the government promised, and not necessarily the best one.

Objectively, there is little or nothing to justify separating this tax measure from the other tax measures in the upcoming budget and rushing to introduce it before Christmas, nothing but partisan motives.

The government had to do something, anything, to convince people that it intended to keep its promises. It had to do something, because the Liberals have a long history of failing to make good on promises.

The previous Liberal government promised to abolish the GST. It did not. It promised to tear up NAFTA. It did not. It promised to be the government of honesty and transparency. It gave us the secret national unity fund, the sponsorship scandal, and Alfonso Gagliano as minister in charge of government operations. It promised to be the government of growth. It cut transfers to the provinces so drastically that it practically sent Quebec into bankruptcy.

The government had to do something, anything. That something is Bill C-2, which we are currently discussing.

Taxation should be looked at as a whole. It is only by looking at all the tax measures, tax credits, exemptions, benefits, in fact all tax measures, that we can measure a government's performance when it comes to wealth, the middle class, families, and those who are hurting, struggling to pay their bills and make ends meet.

Here we have a government proposing a measure in isolation that will affect a minority of people. This bill proposes to raise taxes on those who drive a Bentley in order to provide relief to those who drive a BMW.

Above $200,000 of taxable income, the marginal tax rate jumps to 33%. This increase will affect the richest 1.4% of taxpayers. No one can disagree with that. The wealthiest 1%, in particular the wealthiest 0.1%, continue to hold a growing share of our society's wealth. That is a problem. They are holding an increasingly larger slice of the pie, while the middle class and other classes continue to get poorer.

On the other hand, Bill C-2 would drop the tax rate for incomes between $45,000 and $90,000 from 22% to 20.5%. The government claims that this mini-reform will provide relief to the middle class, but the kicker is that this measure does not provide any relief to the middle class. According to figures from Revenu Québec, 74% of Quebec taxpayers earn less than $50,000. These people are the ones who really need a break, but Bill C-2 will not help them. The bill does nothing for most of the middle class, for most of the people who are represented here. Instead, this bill will help the majority of the people here in this chamber, who will be able to take full advantage. All of us here, in the House, will benefit from this bill.

According to Revenu Québec, only 5.2% of Quebec taxpayers earn more than $100,000. I find that this government has a rather strange view of the middle class.

Furthermore, the parliamentary budget officer believes that those subject to the tax increase will take steps to avoid it by changing how they report their income. In the end, the government will lose out. We know that without measures to combat tax havens, Bill C-2 will be ineffective for the most part.

As I mentioned, passing this bill will lead to a slight improvement over the status quo. However, it is not this bill, which is nothing more than a public relations exercise, that will determine whether this government really plans on helping the middle class and people of modest means. It will be the next budget.

The next budget will reveal whether the government really supports families by providing its new benefit, collecting enough taxes from those earning more than $100,000—such as MPs, especially by eliminating certain measures—helping seniors by increasing the guaranteed income supplement or by indexing pensions, and looking after the unemployed by making changes to the employment insurance fund and not plundering it, as has been done over the past 20 years.

There is another problem with taxation. I honestly do not think that the government is going to tackle this problem, and I do not believe that the other parties would tackle it if they were in power. I am referring to the fiscal imbalance. The federal government takes approximately 50% of tax revenue in Canada, but provides virtually no services. Consequently, it needs more money than necessary to assume its responsibilities. There are two consequences.

First, the federal government does not need to manage its money properly because it already has too much. Look at what happens when it starts to manage its services. It costs 150% more to handle an employment insurance claim in Ottawa than it does to deal with a claim for social assistance in Quebec. It costs 100% more to take care of a patient in a Veterans Affairs Canada hospital than it does in a hospital in Quebec. At that rate, we would go bankrupt if Ottawa was responsible for health.

Second, the provinces can barely keep their heads above water. While the federal government is spending $50 billion to build ships, and is also thinking about buying F-35s, Quebec universities are thinking of cancelling their subscriptions to scientific journals just to save a few pennies.

Nevertheless, I am convinced that if we were to ask the people of Quebec to choose between a good education and an F-35, the choice would be obvious. Unfortunately, they do not have that choice because the system for sharing tax revenue in Canada is broken and because the federal government has enough revenue to poorly manage its own jurisdictions and to stick its nose where it does not belong.

Since Canadians control the joint account, they claim the right to decide how Quebeckers will organize their own society even in areas where we are already supposed to be sovereign under the Constitution. That is a serious problem that is only going to get worse.

Since it is Quebec that will have to foot the bill for the aging population, our government, like all other provincial governments, is at risk of crumbling under the weight of the health care system, unless it brings in permanent austerity measures and shrinks the government.

The federal government will not be affected, and it will start raking in an obscene surplus. The parliamentary budget officer and the Council of the Federation have stated that, 20 years from now, Ottawa will have paid back its entire debt accumulated over 150 years, but the provinces will all be virtually bankrupt. It is clear that from a taxation perspective, Canada is not working at all. This is creating tension and pointless quarrels, and it is depriving my people of the freedom they need to grow and flourish.

There is obviously one government too many in this equation. We think the superfluous government is the federal government. We will have to tackle this problem one of these days, and the sooner, the better. We have put off the inevitable long enough. The Bloc Québécois will make sure it happens.

[François-Philippe Champagne, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I enjoyed listening to my hon. colleague, except for his political manifesto. It is time to set the record straight.

To say it in English, we need to set the record straight.

First of all, I applaud my hon. colleague's intervention, since he indicated that the Bloc Québécois plans to support Bill C-2. That is the right thing to do. This bill will help the middle class.

When I heard my colleague use a word like “insignificant” to describe a bill that will lower taxes for nine million Canadians, I found that insulting, especially in this House, to the middle-class people I represent from Saint-Maurice—Champlain, which has one of the lowest per capita disposable income averages in Quebec. When the government shows that it cares about the middle class by proposing a measure that will reduce taxes for nine million Canadians, that is not insignificant.

Furthermore, my hon. colleague must have noticed that the measure set out in Bill C-2, the middle-class tax cut, was merely the first step. The upcoming budget will include the Canada child benefit, which will benefit nine out of 10 families.

While the federal government is taking steps to help the middle class, what would my colleague propose to help the middle class?

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, I thank my colleague opposite for his comments and question, although the question was hard to understand.

He mentioned two things in his comments that I want to address. The first is that this is the first step toward the upcoming budget. As I said in my speech earlier, we do not understand why, with just two months before the budget, the government did not just include the first step in the upcoming budget. Why the smoke and mirrors and the gifts just before Christmas when it could have simply incorporated these measures in the budget? From where we are standing, this is nothing more than a public relations and marketing scheme.

The second thing is the child tax benefit that will be included in the upcoming budget, as the government announced. It is too bad that the benefit the Conservatives enhanced was not made non-taxable. Instead, families having a hard time making ends meet will be taxed on the benefits they received during the year. We think that makes no sense. The government should have eliminated the tax on that benefit.

[Anthony Housefather, Liberal, Mount Royal, QC]

Mr. Speaker, I thank my colleague for his speech. I also thank him for saying that he supports Bill C-2.

I understand that your political party believes that Quebec should be an independent country. In your speech, you said that Quebec did not need the federal government and that our people were trapped in a federation. Twice, in two referendums, our people voted to remain in Canada.

After two referendums and a number of provincial and federal elections in which our people decided to stay in Canada, why do you still believe that the desire and will of the people of Quebec are not respected?

[The Deputy Speaker, Bruce Stanton]

I remind hon. members to direct their comments through the Chair.

The hon. member for Pierre-Boucher—Les Patriotes—Verchères.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mr. Speaker, I want to tell my colleague opposite that, with respect to Quebec's independence, not a single Quebec premier has signed the Constitution since it was forced on Quebeckers in 1982. No one has accepted the situation that Quebec is in. We are in a kind of no man's land. Ottawa continues to impose things on us that we never agreed to. The best example is the pipeline.

A number of studies, which were swept under the rug, have shown that the federal government went well beyond its allowed spending for the 1980 and 1995 referendums. It cheated and did not follow the rules.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Speaker, it is my pleasure to rise today to speak in support of Bill C-2, An Act to amend the Income Tax Act. As stated on January 29 by my hon. colleague, the member for Toronto Centre, Bill C-2 would help strengthen and grow the middle class, as promised in the government's election platform. Bill C-2 would deliver on that promise.

All hon. members of the House have heard about widening income inequality. On January 1, 2016, Canada's highest-paid CEOs had already earned what most Canadians earn in an entire year. With this growing gap between extreme ends of the income scale, the people who are squeezed the most are the people in the middle-income group. They are the Canadians whose real take-home pay packages have been declining, and these are the Canadians who contribute to the economy and pay their taxes and spend money so the economy can keep growing. This is the group that we would like to address with our tax cuts.

My colleagues and I have been conducting town hall meetings for this pre-budget consultation. We have engaged thousands of people and continue to do so. Resoundingly, the people who have attended the town halls have been telling us that the tax cuts we are proposing are a good move. It is the first move toward prosperity for all. However, constituents also know that the rhetoric from the Conservatives is just that. It is filled with fallacy. So they want me to get some facts right.

The Conservatives had the worst job-creation record since 1946, the worst economic growth in G7, and the worst budget deficits, with some eight deficits in a row. According to Mr. Jim Stanford and Jordan Brennan, “it turns out that the economic record of the [previous Conservative] government is actually the worst of any government since World War II—and by a wide margin”.

The first order of business this government therefore undertook, as promised in our platform, was to cut taxes for a majority of Canadians. We promised to invest in infrastructure, in physical and social infrastructure as well as green technology. Throughout the debate today, the Conservatives have been talking about job losses and want the Liberal government to clear up the mess the previous Conservative government created over 10 years. We are not magicians; in 10 weeks we cannot do that. However, there is something that we can all do together. As a person who works in the financial field, I always advise my clients to diversify and not to put their eggs in one basket. This is common sense. Unfortunately, the previous Conservative government did not believe in wider diversification.

The resource industry is an important industry, but it also needs investment in research and development to help it diversify. If the previous government had diversified the energy sector, the creative people who are intelligent would have been able to move to different areas of work, like in the clean-technology environment, and we would have maintained our market share of the clean-energy sector, which was at 74%, but we have lost it.

Canadians are intelligent, smart, and resilient. Therefore, we would like to improve economic growth for everyone by working with everyone. I hope the hon. members opposite will support this because it is a move in the right direction. We said that we would cut taxes for 90% of the people, invest in infrastructure, create good jobs, and invest in children.

Bill C-2 helps these Canadians directly by lowering the income tax rate they pay. The passage of Bill C-2 would reduce the income tax rate from 22% to 20%, and this change alone would benefit approximately nine million Canadians whose taxable income is between $45,000 to $90,000. I personally know many people in my riding of Don Valley East who would benefit from this well-deserved tax cut.

In my riding, the majority of people do not earn more than $50,000. That is what we call the “middle income”. They need the help, and with our tax cuts plus the investment in the Canada child benefit, people will move out of poverty and into economic prosperity, which will help them pay taxes and help the economy grow.

Several international organizations, such as the World Bank, the IMF, and the OECD have concluded that growing income inequality is a hindrance to economic growth. In its report entitled “Alternative Federal Budget 2015”, the Canadian Centre for Policy Alternatives found that the top 1% income earners in Canada pay less in income tax than the poorest 10%. That is unfair, which is why we have created a new category for that 1% earning $200,000 and more.

Our government has taken the bold step of bringing about a progressive taxation system. I have been to many think tanks, and as a tax consultant myself, people have been telling me that the boutique tax cuts that the previous government made deprived the treasury and benefited only a handful of people, and that is totally unfair. It is why we see ourselves in the situation we are in. It is because the previous government lacked common sense or economic sense.

The other aspect of Bill C-2 that I would like to address is income splitting. There has been much misunderstanding on this, and I will set the record straight.

Bill C-2 does not apply to pension income splitting for our senior citizens. The repeal of income splitting will only apply to a small group of families. According to the commentary from the C.D. Howe Institute, only 15% of the population benefits from this, which is why the late Jim Flaherty, the minister of Finance for the Conservatives, did not believe in it.

Bill C-2 contains critical building blocks, which are necessary to restore fairness and progressiveness in our income tax system. It would provide our government with revenues that would otherwise have been hidden from taxes to invest in people and make the economy grow.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Mr. Speaker, young families across the riding are waiting for help. The reality is that child care in my area is well over $700 per child a month, and the lack of spaces leave families struggling.

During my time knocking on doors, I met several women who quit their jobs because they could not find daycare or because they were simply working to pay for the daycare. They shared their concerns with me about saving for a home or saving for their child's education, and they were feeling that they would never get out of poverty. The bill would not help families with concrete child care seats, which is real help.

Will the member share the Liberal plan for real child care seats for Canadian families?

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Speaker, I thank the hon. member for her question, but I believe that she has not been in Parliament long enough to remember that in our budget of 2004-05, we brought in the child care spaces, but that was defeated by the NDP. This would have been progressive, and we would not be facing the problems we are today.

However, we have now tried to make it more equitable by giving the Canada child benefit to those families who deserve it rather than to millionaires who do not deserve it.

[Kevin Sorenson, Conservative, Battle River—Crowfoot, AB]

Mr. Speaker, I was not going to stand to ask a question today, but the member's last comment troubled me when she said that they were going to give it to the poor or middle class who deserve it and not to the wealthier Canadians who do not deserve it.

That seems to be the Liberal philosophy, that if people have worked hard, if they have succeeded, if they have played by the rules, they do not deserve a tax break.

If we take all the workers in Canada and take the top 50% of workers and the bottom 50% of wage earners in this country, the top 50% of earners pay 96% of all federal, provincial, and territorial taxes. They are working hard. They are succeeding.

I would like the member to comment on why they do not deserve it.