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

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, I would agree with the hon. member that I am concerned that as deficits mount for a Liberal government, it does look to cutting programs eventually as a way to make up for that shortfall. That is why we have proposed that it look at raising the corporate tax rate and closing tax loopholes for CEOs, and we have seen them starting to backpedal somewhat on that commitment, so I do share some of the member's concerns.

I would say that if we are to offer good and sustainable social programs that support families, we do need to ask that revenue question. That is something that the NDP has been willing to do. It is a harder conversation than promising the moon and then getting elected and sorting it out later, usually to the dissatisfaction of most Canadians. That is a conversation we are willing to have. I would urge the government to look at raising the corporate tax rate in order to make up for some of the shortfalls in its plan, and I look forward to further discussion at committee.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, I am pleased to stand today to speak on behalf of my constituents and Canadians across the country who have great reservations about Bill C-2 and the ballooning deficit agenda of the Liberal government.

My riding of Yorkton—Melville is strongly representative of the highly educated and talented workforces the Minister of Finance confirms exist in Canada, from young successful entrepreneurs and professionals to small- and medium-sized businesses in the real estate, retail, agriculture, manufacturing, and mining sectors, just to name a few.

We are a hard-working bunch who are committed to sustainable growth and prosperity. We value caring for each other and those less fortunate. We value investing in our communities, our hospitals, care homes, and our youth at risk programs. Quite frankly, the people of Yorkton—Melville are second to none when it comes to hard work, compassion, and common sense.

Election promises were made. However, promises made, promises kept, has yet to apply to the government. Instead of helping the middle class, the Liberals' tax cut is most beneficial to the high end of the second highest tax bracket, those who make close to $200,000 a year. In fact, the parliamentary budget officer says that the reduction of the second tax bracket will benefit the top 30% of income earners in the country.

Based on the Finance Department's own estimates, the new Liberal tax plan amounts to an average $6.34 a week for those who qualify. These facts reveal that this tax cut does not in any way uphold the Liberals' campaign promise. They promised that the tax cuts would be part of a plan holding the deficit to $10 billion.

The Prime Minister promised a $3 billion tax cut for the middle class, paid for by a $3 billion tax increase on high-income earners. The middle-class tax cut would be revenue-neutral. By the Minister of Finance's own admission, there will be a revenue shortfall of over $1 billion on this issue.

The Institute of Research on Public Policy has said that the shortfall will be even greater, creating a revenue debt up to $1.5 billion. The C.D. Howe Institute, which the Minister of Finance once chaired, said the Liberal plan will fall short by nearly $2 billion, that will not be revenue-neutral, but a tax cut that will cost the treasury a minimum of $1 billion.

I have to say that ordinary folks in my riding are shaking their heads, wondering how election promises were made, either with poor research and poor advice, or with no clarity other than that hope that “This could work. It sounds good. Let's go for it.”

Another related promise has been made that in the upcoming budget a new Canada child benefit will be introduced, plainly to target those who need it most by replacing the universal child care benefit, which was not tied to income.

The UCCB was given to every family, true, regardless of income. In addition, the Canada child tax benefit was also available for parents who needed and were eligible for more support. Here, I totally agree with the member opposite that my own family, when they were in challenging circumstances, were very thankful for that support that lower income folks need, and especially since, in many cases, the amount of tax they pay is minimal to begin with.

While I was door knocking during the election campaign, one gentleman complained to me that his daughter and son-in-law would have to give it all back when submitting their taxes and that it would not be of any benefit to them. As we talked, he did share that they were both good income earners who had qualified for their mortgage, and whose children were well cared for and that they had a little bit of savings. Since they knew they were likely to have to return the money, I suggested that perhaps they could put it in their tax-free savings account and at least make a little tax-free interest in the meantime.

As well, I suggested that it was probably good to know it was there in case the unexpected happened, an illness or who knows what, such as a downturn in the economy that could mean a temporary or permanent loss of employment, in which case an unexpected change in their family income could suddenly mean that the UCCB would be there for them because it is readily available and not tied to income.

This new Liberal child benefit tied to income would not be adjustable until after one's income tax has been filed and a difficult year is in the past, like the year that many of our oilfield workers in Saskatchewan and Alberta and those from the east coast are experiencing right now.

Then there is the decision of the government to eliminate the increase in the tax-free savings account to $10,000, declaring that this action is consistent with their objective of creating a tax system that is fair and helps those most in need.

As a result of the TFSA being designed to be cumulative, it encourages young Canadians to invest what they can, knowing that it is a savings account to be used for the future when they are economically able to put more away in the knowledge that they had that choice. These accounts were an enormous step forward for the middle class to support a wide range of their financial goals, including saving for school, their children's futures, a home, or a comfortable retirement.

When the money is withdrawn it carries no tax penalties. Unlike the RRSP, money in a TFSA can be used as collateral, while at the same time investments are not counted as income to qualify for government benefits or pension supplements that carry a means test. They are not to penalize the most vulnerable people in society but to add to the free choice of how Canadians can save.

The argument that keeping the limit at $10,000 would have helped Canada's wealthiest save more while costing the federal treasury hundreds of millions of dollars over the next five years is truly telling. It says that the government cannot afford people putting away for their own futures, saving for their own retirements, so they can continue into their golden years self-sufficient and continue to contribute to the economy. It says that when the government goes into deficit to the tune of at least $50 billion in the next four years, it will need to claw back the hundreds of millions of dollars Canadians would be saving for themselves and their families' futures over the next five years.

The new government's approach to retirement savings is counter-intuitive. On the one hand, it supports the Government of Ontario's ideology to force all workers into new government-sponsored pension schemes that would cut take-home pay and force employers to cut jobs and/or have less to invest in the very businesses that are the backbone of our economy. On the other hand, the Liberals want to deter Canadians from using a revolutionary savings tool designed to support Canadians in whatever their own unique goals might be.

Eleven million Canadians opened tax-free savings accounts. People earning less than $80,000 a year accounted for 80% of those holding those accounts, and 60% of the individuals contributing the maximum amount had incomes of less than $60,000.

I personally encourage all young Canadians to open tax-free savings accounts now, in the midst of the challenges of getting their post-secondary education, raising their young families, facing increased unemployment and rising housing costs, including higher down payment expectations from the government that will hurt their ability to get into the housing market. I urge them to do it now so that the accrued potential for their future savings gives them hope and the incentive to plan and take hold of their future, and certainly not depend on a government that says on the one hand that it wants to invest in the middle class while on the other hand stifling their saving options and growing a national debt that will ultimately fall on their shoulders to repay.

This legislation does not recognize the fact that the tax break for the middle class is not revenue-neutral and would not make a significant difference in the ability of the middle class to grow or stimulate the economy in a significant way. This legislation would place a higher priority on federal revenues to offset the government's intentions to go significantly further into deficit than on empowering Canadians. When the Minister of Finance introduced the bill he said that “the government's job is to help Canadians succeed”. Sadly, the bill does not meet that objective.

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

Mr. Speaker, there are a lot of problems with this legislation, the most glaring of which the member highlighted in her remarks, that those who would benefit the most from the government's tax changes are those making over $90,000 a year, but that most of those who use tax-free savings accounts make less than $60,000 a year. On the one hand, the government is talking about the middle class but on the other hand it is helping those who are doing better than those making less than $60,000 a year.

Could the member talk a bit more about the value of tax-free savings accounts specifically for middle- and low-income Canadians, which really illustrates why the government's rhetoric does not match the reality of the bill?

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, there is no question in my mind that the tax-free savings accounts, which our government encouraged be raised to $10,000, were significantly appreciated across the board by lower-income families as well as middle-income families.

This has an impact my own family, which is in the circumstances that I talked about. Right now it is in the midst of the challenges of family members upgrading their education and their families growing. Saving for their future is challenging at this point in time. Knowing that the ability was there for them to add that significant amount to their tax-free savings accounts in the future was significant. It is truly a disappointment to them because it will no longer be the case.

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

Mr. Speaker, for the record, let us talk about the tax-free savings accounts. They were doubled for one reason, and that was to pander to the Conservative base. I wonder if the member opposite could tell me how many middle-income or low-income people would benefit from the Conservative Party's doubling of the tax-free savings account.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, the majority of people with tax-free savings accounts have incomes of $80,000 or less. Sixty per cent of those individuals contributing the maximum had incomes of less than $60,000. I am not sure what the member opposite is calling the middle class. These are folks who do not have the potential right now to invest in their future.

This younger generation of Canadians understand that that will very much be their responsibility and are excited and hopeful when they hear the government say, “We're going to make sure our economy is strong.” That would have been the case if the government were not planning on going into significant debt and there were still growing employment opportunities and these young Canadians were not facing the circumstances they are facing right now.

[The Assistant Deputy Speaker, Anthony Rota]

Before I continue to questions and comments, I just want to remind members that I am trying to listen from up here and with members' comments starting up on the side it really makes it hard for me. Therefore, if members do not mind thinking about me and my aging ears, I would appreciate it.

The hon. member for Elmwood—Transcona.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Speaker, Canadians made it very clear in the last election that there is an appetite for government to invest in infrastructure, whether physical or social infrastructure. However, I wonder about the wisdom of cutting government revenue to make those investments. Canadians are getting some money back in their pockets, but it is money the government is spending anyway and Canadian taxpayers then have to pay interest on it.

We saw that a little with the previous government too, where big deficits were already being run and taxes were being reduced. Taxpayers end up paying for the money they are getting back with interest. I just wonder about the wisdom of that.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, I am proud to stand today as a Conservative who was part of a government that saw our country through one of the worst depressions the world has ever seen. It required going into some debt to survive that. However, our country is not facing that kind of a dynamic right now and it is very important that we make sure our economy is very robust by investing in Canadians, Canadian businesses, entrepreneurs, and innovators who can make the difference for Canadians.

Yes, we need the infrastructure. We were prepared to invest in that infrastructure in a way that would be doable.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak on Bill C-2 today. It is an initiative that New Democrats support going to committee. The reason we are doing so is because there are so many issues related to the incomes of Canadians.

The debate itself is healthy, because we have seen in society, during the years that I have been here, a movement away from the middle class, in two directions. One direction has been that some have become more affluent and are able to take advantage of certain government changes in laws, like the tax-free savings account and other types of measures put in place over the last decade. In the opposite direction, there are people with challenging circumstances, such as their wages being frozen, having their working hours reduced, a reduction in benefits taking place as collective agreements have been stretched to the limit, or benefits staying the same and cutting the workforce. That has very much been a priority of unions across this country, because they want to keep the same benefits and wages. However, there has been a stagnation with that.

We have also witnessed, on the other end against personal income taxes, massive corporate tax reductions that were supported by the Liberals originally, and then later by the Conservatives. That has left our economy without a lot of the tools that we normally would have had. There are a number of different industries, like the banks and so forth, that have benefited from a lot of tax reductions. Their response to those tax reductions has been historic layoffs and closures of facilities that actually cost Canadians more. There has also been a reward for them related to the products and services that they provide to customers on the other end. Therefore, there are those who are less affluent and cannot take advantage of their different circumstances.

Before I get into the connection to Bill C-2, I will take, for example, my bank, which I will not mention the name of; I also deal with a credit union. My bank allows its customers free banking services if they maintain a minimum of $1,000 in their accounts. It continues for the duration of a month. If customers go below that amount, then they pay a series of charges. In the riding I represent, Windsor West, there are a lot of people who do not have $1,000 in their accounts, especially if they are students or working-class families. They pay those additional fees, whereas people with the money do not have to. We have lost the income stream from the government's tax reductions and a whole bunch of dead money in our economy, and then, on top of that, service charges continue to grow.

The tax-free savings account, in Bill C-2, is something that New Democrats are happy to see the eventual reduction of. The parliamentary budget officer and others have raised the caution flag with regard to the way that this expanded. I know from representing my area and travelling to other parts of Canada over the years, whether it be for my seniors charter of rights bill or other initiatives on auto fairness, that there are a series of things I have run into. The common thing is that a lot of people do not even have enough money to save for their current school year, let alone the next one.

There is a fine college, St. Clair College, in my riding, as well as the University of Windsor, that have done their part in expanding services and competitiveness, and attracting international students and other Canadians to go there. In many respects, it revitalized some of our innovation. However, the reality is that most people who go to school there are just getting by or taking out loans to get by, let alone putting money in a tax-free savings account. Perhaps some of their family members are doing so with their help, but the ordinary Canadians I represent do not have that luxury.

The squeeze is on the middle class and those who are unemployed. As I mentioned, in the job service sector many people are moving to part-time or precarious work and basically just getting by. Unfortunately with this bill, we know from third-party experts and economists that 60% of this plan for a reduction in taxes for Canadians will not be enjoyed by the middle class or people with less earnings. Therefore, there is a series of Canadians who will be left out. Because of the way this scheme works, the wealthiest will have the benefit. That is a real problem that New Democrats want to address at committee. It is an issue that we have raised before.

There will be a vote later tonight on employment insurance, where there are many people paying into a system that does not provide them with any benefit whatsoever. In the example that I used in speaking about this issue earlier in the House, there are persons with disabilities. They only have a certain number of hours to do their jobs because of health restrictions. They pay into the system, and to my knowledge would never benefit from it because they would not qualify at the end of the day.

We have to be careful. People are still getting their heads around it. To this day, I run into people who say they do not want to go on employment insurance because they do not want to feel they are taking taxpayers' money. They like to get by on their own. However, what people forget is that employment insurance is their money that comes off their paycheques, and the companies' money. That has nothing to do with the government, aside from the government deciding how that is disbursed, how it is actually given back to workers.

We set rules that disadvantage those who are in more precarious and part-time positions, and that includes women. We have a systemic issue within our culture and our society, even on the government programming side. We make lots of noise about being equality driven, but we still have rules in place that do not allow that to happen.

Who would not benefit from this bill? It is important for Canadians to realize some of the comparisons and who would not benefit whatsoever from this plan in terms of tax reductions. They are office workers who make an annual salary of less than $40,000 per year; they would receive nothing under this scheme. They are hairstylists, who in Canada basically earn around $28,000 annually. They will get zero. They are social workers, which I used to be in my previous working life. I worked for two organizations, on behalf of persons with disabilities and on behalf of youth at risk. Their annual salary today is around $44,000. They would get nothing. Some people in the process of trying to buy a home, who are trying to raise families and trying to get forward, would not be able to benefit from this plan.

We have cashiers. When we go to stores and see the people working there, they work hard doing what they need to do. In our economy in some places, we have had challenges with the retail sector and so forth. They earn $21,424 on average. Cashiers would get nothing back. That is a classic example. All of the people working in department stores, in retail shops, in drive-throughs, in fast-food chains, and all of these different businesses, would receive zero from the plan. To me, they are the people we should be rewarding with a tax reduction. These are the people who do not have the equity to easily afford some of the tax deductions that wealthier Canadians get. They do not earn income at the level to take advantage of some of the policies that have been put in place over the last couple of decades.

Waiters and waitresses earn less than $22,000 as an average wage. They would get zero. That is another group of individuals I would argue would not benefit from this tax reduction. They would get nothing at all. Nannies are another good example, and chefs and assistant chefs as well. They would not get anything.

Who would get income from this legislation? Our bank managers, who earn around $82,000 a year, would receive $555 in their tax season from this. They would receive that and also be eligible for the tax-free savings account. They would be in an income stream where they might be able to take advantage of it. It would be beneficial for them and their families. A lawyer, earning around $108,000 a year on average in Canada, would get $679. Members of Parliament in that same wage amount would get the cap, at around $680, as well.

I know my time is running out, but I want to hopefully create an opportunity at committee so we can work on some of the measures to ensure that all Canadians are included in this proposed tax reduction. We know it is going to come from the cost of borrowing, as the Liberals do not have the money coming in that they thought they had for this bill. Interest and payments on that money in the future are paid for by all Canadians, so all Canadians should be part of a tax reduction.

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

Mr. Speaker, what the member does not realize, or he did not state, is that there are millions of Canadians who will benefit. I also did not hear him make reference to the tens of thousands of manufacturing jobs, and those workers who would benefit by the bill. This is why the NDP have chosen to support the bill.

The member did not talk about the tens of thousands of teachers from coast to coast to coast who would benefit in tax relief from the bill before us. There are nine million Canadians who would benefit from the bill.

The NDP asks about those on very low income. Never before have we seen such a progressive national child care program, which we are going to be hearing a lot more about in a week or so, that would lift hundreds of thousands of children out of poverty.

These are the types of progressive initiatives that the Liberal Party talked about prior to the last federal election. What we are seeing today, through Bill C-2, is a piece of legislation that would help to implement the Liberal platform. It would lift children out of poverty and support Canada's middle class.

I appreciate that the NDP will be supporting the bill, but will the member not at the very least acknowledge the benefits that tens of thousands, if not millions, of Canadians, would receive by seeing this legislation pass?

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, apparently I excited the hon. member with my speech. I do not know how he knows what I do or do not realize, and I will not get into it, but it is a presumptuous argument to take in answer to a question being proposed.

However, I do argue in the House of Commons that when there is an inequity to be faced here and there is a social justice aspect to it, I will raise those issues, and I will be confident in doing so, to bring the truth to Canadians.

The member can cherry-pick who he wants, as I did. I found some examples that got it and some that did not get it. However, the harsh reality at the end of the day is that most Canadians will not benefit, and that is unfair.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Mr. Speaker, I am trying to understand the NDP position.

I know that NDP members will be supporting the bill to go to committee so that it can be thoroughly reviewed by the finance committee. However, I want to know if they are against larger tax-free savings accounts and that is why they are in essence for the bill, or is it because they agree that people in those upper incomes, up to $199,000, who will benefit the most from this is the proper plan to go forward.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, we do want to work at the committee level to get more information.

However, like a number of organizations, including the parliamentary budget officer, we believe that the current system for the tax-free savings account, which the Conservatives brought in, becomes a drag on everyone else who cannot contribute to it. It is at their expense for those who can afford it. It is a significant tax reduction, but others pay for that tax reduction, especially in deficits when we have to borrow for that money.

It is similar to the Conservatives' economic policies where we have actually had deficits in borrowing for large corporate tax reductions. It is similar to when we brought in the HST in Canada, which cost $6 billion. We actually had to pay interest, and are paying interest, on that $6 billion. The independent commission that studied this showed that with the interest rate, it would probably be up to $8 billion in total cost. We were borrowing money to bring in a tax on Canadians.

Therefore, we support returning the tax-free savings account to its previous level and going from there, and making sure that all Canadians can enjoy it in a tax benefit or tax credit. We are borrowing this money. If we are borrowing this money, then it is unfair that all have to pay for it and only some get the benefit.

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

Mr. Speaker, I share the member's principal objection to the bill in terms of the lack of genuine progress in the tax changes, but I do want to ask him about corporate taxes. The evidence shows that as business taxes have been reduced, corporate tax revenue has gone up, presumably because of the relative elasticity of business investment.

Could the member comment on how the NDP plan to raise business taxes would actually reduce tax revenue?