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

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

Mr. Speaker, I thank the member for his passion.

We continually hear fallacies from that side. If we look at the income tax returns, the 1% that are the top earners do not pay their fair share of taxes. They do not need a handout from the government. That is exactly what the economic policy of the previous government was: give handouts to its friends and let the poor get poorer.

We want to reverse that situation.

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

Mr. Speaker, the member speaks very passionately about the issue of income inequality.

Would the member provide her thoughts with respect to how important it is that we get this right? The issue of income inequality is addressed inside this legislation by ensuring that there is a better redistribution through Canada's taxation policy. The middle class will in fact be the beneficiary of this. By voting in favour of this legislation, whether they are on government benches or on the opposition benches, members are saying to Canadians that they support tax reform that gives strength to Canada's middle class.

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

Mr. Speaker, our tax system at the moment is a confusing one. If one is not a tax expert, one has no idea what is going on.

I think it is important that what we are proposing is a progressive tax system, not a regressive system that benefits only a few. Progressive means that on a gradation, those who earn the least pay the least in taxes.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I would like to thank the hon. member for Milton for leading Canada's official opposition on this file as our finance critic.

I can say without hesitation that Bill C-2, as it stands now, would have a significant effect on the lives of Canadians. While the Liberal members opposite would argue that the bill would benefit Canadians by lessening taxes on the middle class and increasing taxes on wealthy Canadians, the bill would in fact hurt Canadians more than it would help.

Do not misunderstand me. As a Conservative, I am very much in support of keeping Canadians' hard-earned dollars in their pockets. Our Conservative government endeavoured to do just that. It let Canadians keep more of their hard-earned money. We have a proud legacy of tax fairness and cutting taxes. While in office, our Conservative government reduced taxes more than 140 times. We did so through targeted measures that were responsible and consistent.

However, there is a significant difference. Bill C-2 would end up costing $8.9 billion over the next six years. Do not just take my word for it. A parliamentary budget officer's report, “The Fiscal and Distributional Impact of Changes to the Federal Personal Income Tax Regime”, says the exact same thing. The PBO made it clear that these changes would lower taxes for a significant number of Canadians and increase them for just 1.5% of the population, which would result in a cost of $8.9 billion to Canadians over six years.

The PBO estimates that the tax changes would cost $400 million this year and $1.7 billion in the subsequent years. Since the government inherited a $400 million surplus, it has squandered the surplus already. I hear jokes already, but it is in the PBO report. This happened in only four short months.

How can the government claim that it is a good idea to commit more money to programs and tax breaks when it is not fiscally responsible to do so? We all know that eventually the money does run out. There is only one taxpayer. I am interested to know what the Liberals have planned at that point. Would they increase taxes on Canadians, or would they cut service levels? Perhaps they would cut some programs altogether. Perhaps they could leave this mess for our next generation to deal with. However, the next time I speak with the students in my riding, whether they be from Lindsay, Kennington, Haliburton, or Millbrook, I guess I should warn them to start saving now since they will be paying not only their bills but ours as well.

Many of my colleagues have gone through the amendments in the bill thoroughly so I will not rehash all of them, except to say that an extra $6.34 a week for those individuals who qualify is not enough income to grow the economy, nor does throwing money at the middle class stimulate growth and innovation. I am suggesting that the government should be less worried about the income tax rate and focus more on creating jobs so more people would be paying in. These modifications to the income tax rate hardly qualify as significant tax relief for Canadians, and come with a much larger price tag. The Liberals promised that their tax plan would be revenue neutral, and clearly it is not. This is yet another example of broken Liberal promises.

A tax hike for the wealthy, they say. The new Liberal plan would raise taxes on higher income earners, those who traditionally create jobs and grow our overall economy. By increasing taxes on these job creators, we are discouraging success, while doing nothing for those making less than $45,000 a year. Many in my riding are in that category.

I will now touch on how the changes to the tax-free savings accounts, or TFSAs, come into play. Tax-free savings accounts allow Canadians to set money aside in eligible investments and watch them grow tax-free. While meeting with my constituents, many of them spoke to me about the value of their tax-free savings account. Whether they used it for saving for a child's tuition fees, a home renovation, opening a small business, or saving for a family vacation, all of these constituents were able to use their tax-free savings account to save their money. Their savings, in turn, stimulate the economy, whether it is paying for the costs associated with university or college, paying a contractor for home renovations, or buying supplies to open up a business.

In my riding, the towns and communities are driven not only by agriculture but also by tourism. Whether it is places like Sir Sam's ski hill near Eagle Lake, Happy Days Houseboat Rentals in Bobcaygeon, or even Emily Provincial Park near Omemee, these and many other small businesses across my riding and across the country could benefit from an increase in tourism.

Giving Canadians a mechanism in which to save money can and will stimulate the economy. I would be remiss not to mention that this bill still leaves $5,500 in contribution room. However, why put such a low cap on a program that not only helps Canadians and their families, but also benefits the wider community?

The members opposite have argued that TFSAs only benefit the wealthy. However, we all know this is not true. The majority of tax-free savings accounts belong to low and middle-income earners. In fact, two-thirds of tax-free savings accounts are held by people with incomes less than $60,000. Why is the government trying to limit the choice of Canadians on how they choose to save their money?

Canadians are taking on a significant amount of debt lately. Instead of trying to help, the government is taking away one of those methods in which they can save. Bill C-2 would increase the national debt, penalize those who have worked hard and prospered, while also limiting the amount that Canadians can save, while doing nothing for those earning less than $45,000 a year.

The Liberal government inherited a $400 million surplus. We, as the official opposition, will continue to protect the hard-earned money of Canadians from the high-tax, high-spend agenda of the government. We all know we cannot spend our way to growth, and we cannot tax our way to prosperity.

I look forward to questions from my colleagues.

[Mark Holland, Liberal, Parliamentary Secretary to the Minister of Democratic Institutions]

Mr. Speaker, I am confused by the zeal with which he talks about never running a deficit, given that the previous government ran so many deficits, including a deficit to run its so-called economic action plan, the efficacy of which could be challenged.

In reviewing the history of where we have come, in 1993, The Wall Street Journal called Canada an honorary member of the third world. It said that our economy was a basket case, that we had the worst debt-to-GDP ratio of any country, and that we had the worst job creation record in the G8. In fact, across almost every economic indicator we were at the bottom. When the Liberal government left in 2004, the party opposite inherited a state that was completely the opposite. It was the envy of the world. It was called “the Canadian miracle”, where we ran a consecutive surplus, while paying down the deficit. Then the member's party ran deficits almost entirely during its time in office.

If the member does not agree, was he against the economic action plan that his own government ran? Was he opposed to the deficits that his own government ran to try to stimulate the economy? I am confused by his contradiction.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, my riding includes the township of Brock. It is part of the Durham region. I look forward to working with the member on the issues facing the region of Durham.

We went through some of the most troubled economic times in a lifetime. Do members remember the economic stimulus package? There were $200 million of infrastructure and permits that went into Haliburton—Kawartha Lakes—Brock in the period since 2008. It created jobs, stimulated the economy, built libraries, and renovated arenas.

A decision was made by all the industrialized countries to stimulate the economy at once. They knew the economy was in trouble, they knew that was the way to do it, and that was the plan they chose. All of the industrialized countries did it. If I remember correctly, the party opposite and the NDP as well were not calling for less spending, but for more spending.

Although we had the building Canada plan, the stimulus package came into effect. The key here was that when the economy started to improve, we turned off the taps and brought things down to the normal infrastructure level, which was the building Canada fund. Governments need to have the ability know when to bring things down so they are not running that credit card even further. I am proud of our government's record. We had the—

[The Deputy Speaker, Bruce Stanton]

Questions and comments, the hon. member for Skeena—Bulkley Valley.

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

Mr. Speaker, I am curious as to my friend's source of pride, only because his government also left more than $150 billion in debt for those future generations he now concerns himself with. One would think, having borrowed that much money over the course of the last government, that we would be left with a robust, strong, diversified economy. Lord knows, the Conservatives spent enough to maybe get us there, but so much of it was misspent. There was $750 million spent on ads. The Conservatives said that was somehow a good use of the public expenditure. That money was all borrowed.

I hope the member also reminds students that the money they will be paying back will also be due to his government's choices when it was in office.

My question is this, though. I represent northwestern British Columbia, primarily resource communities of varied incomes, but a lot of people we would call working-class people, middle-class people, earning somewhere around $40,000, $50,000, $60,000 a year. Under the current Liberal tax plan, those people would receive an average of $50 in benefits, whereas someone making $200,000 would receive more than $800 in benefits.

I am wondering which kind of middle class my friend acknowledges as opposed to the ones the Liberals have actually written into this legislation.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Mr. Speaker, I congratulate the member from northern British Columbia on his re-election. Before I get to his question, I want to thank him publicly. I thanked him during the election of the Speaker for his very eloquent speech to newly elected MPs. I want to congratulate him for that very good speech. It was very inspiring.

As I go back to the point of my answer before, it was the New Democratic Party that was advocating for even more spending. The key is to know when to turn off the taps and go back to the normal. That is what the Conservatives did. We recognized that we were slowly coming out of the economic downturn. We were on our way up. We were starting to have one of the best job-creation records in the G7, with most jobs being full-time, and private-sector growth in high-wage industries. We were on the way up. We had a surplus in the last fiscal year. We had one up to this quarter, in November.

We are watching the deficit spending on this middle-class income tax cut. It only means further spending cuts down the road. It means higher taxes, and it means that future generations are going to start paying for this. The key is to know when enough is enough.

[Matt DeCourcey, Liberal, Fredericton, NB]

Mr. Speaker, it will come as no surprise when I say that Canada is going through tough economic times.

However, along with this real challenge, we also have a real opportunity for establishing the conditions needed for long-term growth, which in turn will create good jobs and contribute to the prosperity of the middle class, the lifeblood of our economy.

First, I would like to elaborate a moment on our government's ambitious economic agenda that sets Canada on the path for economic growth. Our government believes that all Canadians should have a real and fair chance to succeed. Central to that success is a strong and growing middle class, but in the face of this real challenge, there is a real opportunity to put in place the conditions to create long-term growth.

We were elected on a plan to grow the economy, and we have already started by introducing this tax cut in December. From infrastructure investment to responsible environmental stewardship, we are providing needed leadership. Our priority is to strike a balance between fiscal responsibility and delivering on our commitment to Canadians.

Indeed, we fully intend that our plan for economic growth will benefit all Canadians through targeted investments. Let me reassure the House that the government is not daunted by the challenges before us. We are cognizant of our fiscal reality.

Before turning to the content of Bill C-2, I would like to mention that the government's plan will include introducing proposals to create a new Canada child benefit. This new, tax-free, income-tested benefit would lift hundreds of thousands of children out of poverty. In fact, nine out of 10 Canadian families would be better off under this plan. We aim to have payments under the new Canada child benefit begin in July 2016.

The proposed Canada child benefit would simplify and consolidate existing child benefits. It would replace the universal child care benefit, which is not income tested. As we have committed, this new Canada child benefit would be better targeted to those who need it most.

We also recognize that public investment is needed to create and support economic growth as well as job creation and economic prosperity, which is why we will make significant new investments in public transit, green infrastructure, and social infrastructure. We will work together with both the private sector and our provincial and municipal counterparts to advance our shared priorities across a range of fronts.

Here are some of the areas. We will make targeted investments in public infrastructure that would grow the economy, get Canadians moving, and open up more cost-efficient trade options for our exporters with a focus on public transit, green infrastructure, and social infrastructure.

We will also work together with all of the provinces and territories for a cleaner environment and to fight climate change. Canada has a plan to invest historic amounts each year in green technology producers, so they can tackle Canada's most pressing environmental challenges and create more opportunities for Canadian workers. The government will also invest to support innovation and the use of clean technologies in forestry, fisheries, mining, energy, and the agricultural sector.

We will support our communities and our economy by making significant new investments in green infrastructure and clean technologies. Not only will these strategic investments help us tackle climate change, but they will create jobs. Canadian businesses now have an incredible opportunity to be a part of the solution and to help build a low-carbon economy. The government will prove to Canadians and to the world that a clean environment and a strong economy go hand in hand. In fact, we cannot have one without the other.

Protecting the environment and growing the economy are not incompatible goals, and in fact, our future success demands that we do both.

We are committed to a strong and growing middle class, and we want to ensure that all Canadians have a fair and real chance to succeed. This is why our government has enacted legislation to deliver a tax cut to the middle class. This is the fair thing to do and the smart thing to do for Canada's economy.

That is why Bill C-2 is so important for all Canadians.

I would now like to talk about the specific elements of Bill C-2. Our tax cut for the middle class and the accompanying proposals will make the tax system fairer by reducing the second personal income tax rate from 22% to 20.5%; introducing a personal tax rate of 33% on individual taxable income in excess of $200,000; decreasing the $10,000 maximum contribution to a tax-free savings account to its previous level of $5,500; and reinstating indexation of this ceiling.

Recently the Minister of Finance, his parliamentary secretary, and MPs across the country fanned out asking Canadians directly what our government could do to better support them. They met with indigenous leaders, business leaders, and cultural leaders, all with the intent of listening to Canadians and engaging in discussions to find practical solutions to the difficulties we know they are facing. These pre-budget consultations continue online. The response rate and comments received have been absolutely tremendous. With over 146,000 Canadians reached to date, this has been the largest pre-budget consultation on record.

Through these consultations, Canadians confirmed that they want a government that will deliver on strengthening the middle class and that will help those working hard to join it. This legislation would help do just that, and that is why it is a priority for the Government of Canada.

During the pre-budget consultations, it also became increasingly clear that Canada's economic outlook has changed since the election. This only reaffirmed the government's commitment to the path we were elected to follow. More importantly, by engaging with Canadians, we have been able to consider new perspectives and refine our plans that will be included in the federal budget.

The government's approach to consultation recognizes that collaboration is essential to delivering real change. The government has committed to, and has already demonstrated, its willingness to listen, engage, and collaborate with members from all parties to identify ways to find solutions and to avoid escalating conflicts unnecessarily.

Given that we have already heard from Canadians and many members of the other parties, I look forward to discussing and debating how best to serve Canadians.

There has never been a better time to make targeted investments to support our country's economic growth. We are confident in our plan to achieve that goal. That is the main reason why I am optimistic about our future prospects. I therefore encourage all members to support this bill.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Mr. Speaker, I have a hard time squaring the government's rhetoric on helping the middle class and the reality of how its tax plan would actually work. It would be of absolutely no benefit to people making less than $45,000 a year.

The government is going to do away with the $10,000 limit for tax-free savings accounts, when in reality more than half of those who max out their tax-free savings accounts make less than $60,000 a year.

How does the member compare those realities, in terms of how his government's tax plan would affect ordinary Canadians, with some of the high-minded rhetoric?

[Matt DeCourcey, Liberal, Fredericton, NB]

Mr. Speaker, my colleague across the way must have missed the part in my speech where I mentioned how we are going to lift hundreds of thousands of children out of poverty with the new Canada child benefit that will support nine out of ten Canadian families, giving them more each month than what they currently receive under the former Conservative government's scheme.

The member opposite will know that we have taken action to provide opportunities for students and graduates to secure employment by doubling the allotment in the Canada summer jobs program. This is going to help students with their debt loads and help graduates move into the workforce, something we sorely need in this country, certainly where I am from in New Brunswick. This is a need of students graduating with crushing debt loads from the University of New Brunswick, St. Thomas University, and our New Brunswick Community College.

By helping hard-working teachers, nurses, soldiers, and public servants who contribute so much to our community, this tax break will be a worthy endeavour and will be just one of the many things we will do to deliver real change right across this country.

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

Mr. Speaker, I thank my friend for his speech and welcome him to the House.

One of the tenets of good government is to never over-commit and under-deliver. We looked through this piece of legislation about the upcoming help for the middle class because it was lauded and repeated ad nauseam in the campaign. While middle class was never defined and remains undefined by my Liberal colleagues today, definitions matter when it comes to things like the tax code.

I would like my friend to comment on this. We find that, under this plan, 18 million Canadians who file taxes would see no benefit whatsoever. Further to that, a lot of Canadians watching or listening to us would see people as middle class when they earn between $48,000 and $62,000 a year. That sounds kind of middle class to me, and where I live in northern B.C., it would be solidly middle class. Those folks would get a benefit of $50.

We now look up to the higher end of the tax spectrum, which may include Liberal middle-class people—I am not sure; again, the Liberals remain unwilling or unable to define it. We see that people who earn $200,000 would receive 16 times more benefit than somebody earning $50,000. People earning $200,000 are the middle class that the current Prime Minister and the Liberals were talking about.

However, I wonder if he does not run the risk of raising those expectations and hopes only to dash them upon the rocks of those tax returns that are coming, for all those middle-class Canadians who are wondering where the help is for them when somebody making $200,000 is getting upward of $800. That is 16 times more than the average middle-class Canadian would receive.

[Matt DeCourcey, Liberal, Fredericton, NB]

Mr. Speaker, I would like to thank my colleague from Skeena—Bulkley Valley.

I think it is okay that expectations are high. After 10 deplorable years, certainly in my region of the country, people made a decision on October 19 that they had had enough. I think the member would agree that he had had enough of those 10 years as well.

What I will say for the member is this. What really matters is action, and this side of the floor is ready to deliver upon the ambitious agenda that we put forward in the campaign, which Canadians put their trust in us to deliver. I look forward to working with everybody here, and in fact all parliamentarians, to help provide more opportunity for those working hard across Canada and those in more vulnerable situations who need a bit more help and attention from their government.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Mr. Speaker, we have heard the parliamentary budget officer referred to many times in this House today. I would like to note that, with respect to the TFSA, the PBO reviewed the previous government's doubling of contribution limits to this savings vehicle and noted that it primarily benefited well-off Canadians and made the tax break “much more regressive”:

By 2060, gains for high wealth households project to be twice the median and ten times that of low-wealth households.

I would like to ask my friend how this measure would play a role in bringing fairness to our tax system and how this measure could in fact help the middle class.