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

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

Mr. Speaker, when we became the government about 10 years ago, we cut taxes in a very specific way. We cut the GST from 7% to 6% and, eventually, to 5%. We also reduced the lowest marginal tax rate. It was important for us to do that because these tax reductions benefited all Canadians, but they focused the benefit particularly upon low-income Canadians.

We did what the government has said it would do but did not do, which is help those who need the help the most: those who are looking to join the middle class.

I know that we disagree about business taxes, but I wonder if the member would reflect upon the differences between those changes to the lowest marginal rate and the GTS compared with the way the current government is proceeding.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, I was here during those Conservative years, and without a doubt, in all of the Conservatives' so-called help for Canadians, they missed out a whole lot of people.

They did not help women. They put women at a great disadvantage, and they certainly did not help seniors when they raised the age of eligibility for OAS/GIS to age 67. They did not bring in any kind of socially progressive legislation or policies that really would have made a difference to people in our communities.

There was no national housing program. There was no child care. It was all simply a matter of throwing around money, and most of the money landed in the laps of those who did not need it. I would not call that tax fairness by any stretch.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, I think the hon. member for London—Fanshawe and I can agree that the last 10 years did not address issues of inequality but contributed to a spreading problem, a real crisis in Canada with inequality.

I would like to ask if the New Democratic Party is willing to join the Greens in supporting a guaranteed livable income so that we can end poverty for all in Canada. I have been encouraged to hear the new Minister of Families, Children and Social Development talk out loud about maybe moving to that progressive policy, and I am hoping the NDP is ready to join us.

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, I thank my hon. colleague for her invitation. I would counter by saying that I hope that the Greens will join New Democrats, because we have been talking about the importance of income equality for years and years.

I think that a guaranteed livable income would be a very important step in making sure that those in our communities who have given so much, the seniors, the veterans, the working families, receive the kind of supports that allow them to contribute to our economy.

One of the fallacies in all of this is that somehow these are folks who are simply on the receiving end of government benevolence. They are the backbone of this country and make this country strong. They are the ones who are providing, and we need to acknowledge that.

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

Mr. Speaker, when I look at Bill C-2, it is just one of the many things being done to address some of the existing income inequalities that the previous Conservative government somewhat exacerbated.

An important component is that nine million-plus Canadians would benefit directly. Tens of thousands of workers from every region of our country would get tax money going back in their pockets. I see that as a positive thing.

When we take into consideration issues such as our senior pension programs, for which there will be substantial increases, from what I understand, coming in the March 22 budget that I know Canadians are waiting to hear, there is a movement in the other direction, a direction that empowers Canadians and Canada's middle class, which would be healthier for our economy. Would the member not agree?

[Irene Mathyssen, NDP, London—Fanshawe, ON]

Mr. Speaker, the member from the government caucus talks about all that the Liberals are doing. I do not think so. We are still waiting over here. There has been a whole lot of talk in a chamber filled with thunderous noise and all kinds of assertions, but I have not seen anything tangible.

The reality is that when we look at Bill C-2, we see very clearly that it is rewarding those who have the highest incomes. Those who earn $45,000 or less are not benefiting. How on earth is this construed anywhere as a positive step in helping Canadians?

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, it is an honour to rise today in the House to discuss Bill C-2.

I want to start by clearly stating my premise up front and then speak to it throughout the 10 minutes I have. My premise is that fairness for the middle class and societal inequality cannot stand together. We cannot as a society, and nor can the government, decide that the middle class is the be all and end all of tax policy. I will say this bill misses the mark on delivering for the middle class.

We cannot say that fairness for the middle class is the be all and end all for society, because as long as inequality and poverty persist, every part of society is disadvantaged. Every part of society is disadvantaged by the continuation of poverty.

In the last half hour, I heard a Conservative member say that the people who need the tax breaks the most, the people who need the help the most, are the middle class. No, the people who need the help the most are the homeless. The people who need the help the most are the unemployed. The people who need the help the most are the poor.

In terms of inequality, where does Canadian society stand today? By any measure, we are a fairer and more equitable society than the United States. However, in a very real way, we are not as fair or as equitable as we used to be.

During the election campaign, I was digging all the time for stats and arguments for the few leaders' debates in which I was included. While doing research, I was staggered to come across this stunning statistic: the 86 wealthiest families in Canada have more combined wealth than the 11.4 million Canadians in the bottom of income brackets. Eighty-six individual Canadian families have more wealth than 11.4 million Canadians at the bottom.

Is this a problem? I submit it is a serious problem, and it is a problem that Bill C-2 will not address. I do not imagine that anyone thought Bill C-2 would address it. I will say, in fairness to the new government, that I hope that more is planned if it is serious about addressing income inequality.

Let us just look at this on a higher plane of analysis, namely, in regard to the mania for neo-liberalism, for the policies of Milton Friedman and for the Thatcher-Reagan era, in which no politician would say anything other than that we needed smaller government, that we needed tax cuts, that we needed deregulation, that we needed trade liberalism, as though that mantra would deliver great blessings to society overall.

One of the economists who I think has skewered this most effectively with detailed empirical research, and who does not brook a different opinion because he comes fully loaded with the facts, is Nobel Prize-winning economist and current professor at Columbia University in New York, Joseph Stiglitz. Stiglitz amassed all the information any Parliament would need to decide that inequality is unacceptable for a society that wants to succeed at anything.

Joseph Stiglitz's book, The Price of Inequality, is one that I hope every member of Parliament will read. Stiglitz concludes that:

Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset—its people—is not being fully used.

There are a lot of things one can say about the era of Thatcher-Reagan, neo-liberalism, and the kinds of trickle-down policies that were supposed to deliver benefits for all, but Joseph Stiglitz has pronounced, and I think it is time that we all learned how to say it, that the neo-liberal experiment with tax cuts to deliver wealth has been tried and is a monumental failure. Growth is stagnant. The economy is suffering, not just in Canada but everywhere. In Canada, particularly more than some of our OECD colleagues, we have had stagnant growth for a while now. We are not seeing investment, and I want to touch on what our corporate sector has been doing or not doing.

Trickle-down economics is a joke. The great Canadian economist, the late John Kenneth Galbraith, used to explain trickle-down economics like this. If one feeds a horse enough oats, the sparrows will eventually find a meal in the manure. That is trickle-down economics. In the alternative, as Gus Speth, who used to be head of the United Nations Development Programme, once said, when talking about trade liberalization, a rising tide lifts all boats; we can now fairly say that a rising tide will lift all yachts, not all boats.

We have a real challenge in our society and, boy, do we have a really good opportunity right now. I would urge the new government to actually embrace the idea of tackling inequality in our society. We have seen a foundational shift in our tax system in the last 10 years.

Let me provide this statistic. I am indebted to a great Canadian economist, who I wish had not just moved to Australia, Jim Stanford, for having identified this. Over the 10 years of the previous government, the federal revenues as a share of GDP fell from 16% in 2006 to 14.3% last year. That may be celebrated by some, but tax cuts overall end up with shrinking revenue to do the things that society needs, like make sure the health care system works, deliver child care for all, make sure people are not living in poverty and cannot get adequate housing, because again, I repeat, the empirical evidence is clear that it disadvantages all of society, not just the poor.

If we are going to see a rise in revenue, that means politicians are going to have to get used to saying some words that have been drilled out of our lexicon since the Thatcher-Reagan era began, and that is to ask where we are going to find the taxes to increase government revenue. It is clear that this tax cut modestly, moderately readjusts a tax bracket for our highest income earners. The top 20% basically see $3 billion removed from the very highest taxpayers, so that the next highest taxpayers get a slight benefit. It is not bad in itself, but it is not, on its own, tax relief for the middle class, nor does it strike any significant blow against income inequality. It is a small step, but tepid, and it fails to address the needs of the middle class, nor does it address the needs of the poor, nor does it really deal with the complicated tax code we have.

I would like to propose to the Minister of Finance that we need root and branch tax reform. We need to step back from all the fashionable pandering to individual sectors of a voting electorate, the boutique tax cuts of the previous 10 years. We need to review all of the complications that work against a tax code, that frankly, the fiscal conservatives say they want, and that people in Canadians for Tax Fairness argue we absolutely need. We need to simplify our tax code by taking out the special rewards: for people who happen to have kids who are already in hockey and can get a prize for that, for people who are already taking the bus and can get a prize for that. That is not good tax policy.

We also need to look for where we should be increasing taxes. I would suggest we need to look no further than what happened to the tax code for the corporate tax rate in the previous 10 years. It used to be 28% in the year 2000. By 2006, when the previous administration took over, it had dropped from 28% to 20%. It now stands at 15%. People might be interested to know that, in comparison, the U.S. corporate income tax rate stands at 35%. Other than Ireland, which is at 12%, Canada has the lowest tax rate in the industrialized world, and certainly right now we stand with the lowest tax rate in the G7.

I draw members' attention to the fact that Canada's corporate tax cut has resulted in about $700 billion to date being considered as dead money, as the former governor of the Bank of Canada described it—$700 billion sloshing around as available cash and not being reinvested in our economy where we need it. We may need to look at other tax measures. Down the road, we may need to look at the GST. The Green Party is not advocating raising that tax. We are talking about increasing the corporate tax rate. I believe it should be set where it was in 2008. We really need to look at a guaranteed livable income, because the bottom line is that Canada's society is middle class. All of Canada's society will not experience well-being and prosperity as long as poverty persists.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, you are doing a great job. I really enjoy being in the House with the member who just spoke. I have a great deal of respect for her. She, along with the Prime Minister, is one of the long-time movers of civility in the House, and I really appreciate that.

I appreciated the topic of the member's speech today on equality. It is very interesting that a lot of research has been done on this. It shows that it does not matter whether a country is very wealthy or very poor, but what determines its success is the disparity in income groups and the disparity among various people from the highest range to the lowest range. It is certainly an admirable goal that would lead to profitable economic and social results by reducing income inequality.

The member referred earlier, in a question actually, to the guaranteed annual income. I wonder if she could expound a bit on her vision of that, because it is a very interesting concept, where we would take all of the various supports and put them into a guaranteed annual income. Would she see that going to every single citizen, or would there be a limit so it would be affordable and the lower-income people could get a higher amount? How might that system that she is contemplating work?

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, I thank my hon. colleague from Yukon. If he is pleased to see me here, I cannot tell him how happy I am to see him here, back again.

The premise of the guaranteed livable income was embraced once by Reverend Martin Luther King as the only true solution to poverty. It must apply to everyone. That is the way it works. Some people describe it as a negative income tax. The essence of it is that every single citizen receives an income from the government. It would replace quite a lot of other programs, and that is why it is a saving. For instance, it could replace welfare and employment insurance, and would be a phenomenal benefit for students in school.

It would be set at a level that would alleviate poverty in its extreme form but would not create a situation where someone did not want to work. In other words, it would not be a sufficient income to induce people to stay home.

What it would do is say to a woman who is a single mother that she should declare her income and that there would be no clawback, whereas the welfare system penalizes a single mother for going back to work or encourages an underground economy. People would keep earning money until they became a taxpayer. That is where it becomes a negative income tax. Higher-income earners of course would have all of their guaranteed livable income taxed back; lower-income earners could work their way out of poverty.

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

Mr. Speaker, I want to congratulate the member for her speech. She talked about reducing inequality.

Is the bill in front of us not doing exactly the opposite by increasing inequalities? We are seeing in this bill that 70% of the population would not get a tax break. Those who need it the most would actually carry the burden of the deficit created by this measure that would provide a tax break for those who earn more, and those who earn less would be left with a deficit.

My question for the member is this. Is the member supporting the bill? If so, how can we support such a bill that would increase inequality so dramatically for those who need it the most?

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Speaker, I do not see how this bill would increase inequality. I do not think it does enough to attack inequality. However, the increase in tax paid by the highest-income earners, over $200,000, which would be roughly $3 billion, would pretty much offset the small tax break that would go to the higher upper end of the middle class.

Here is one piece that I found in a paper I like. John Geddes' column described it as how the current Prime Minister's plan “takes from the rich and gives to the almost-as-rich”. I think that captures it about right, but it would not increase inequality, nor would it increase deficits, as much as the hon. member might like to wish it would.

[John Brassard, Conservative, Barrie—Innisfil, ON]

Mr. Speaker, it is a great pleasure to rise in the House today to speak to Bill C-2.

I realize that we are near the end of the debate and the vote is coming tonight. Oftentimes when we prepare for these types of things, a lot of what we want to say has already been said. We have heard some good arguments from both sides of the House, but I happen to think that the arguments from this side have been more persuasive.

I have tried to break this issue down to its simplest form, and its simplest form is this. If I were standing in a Tim Hortons in Stroud or Alcona or if I were at Big Bay Point or in Huronia, in Barrie, how would I explain Bill C-2 to the residents of my riding? I would simply start by saying that it is a shell game. I have often used the term “liberalnomics”. If one were to define “liberalnomics”, it would be accurately reflected as a fiscal policy of saying that things will add up when they do not; a fiscal policy that equates to playing pin the tail on the donkey in the dark, where a government keeps missing its targets; and a fiscal policy in which, if government members made decisions using their own money, they certainly would not make the same types of decisions they are making, including those that appear in Bill C-2.

Who is going to pay for this? That is the question we need to ask. The Liberals said they were going to give middle-class Canadians a tax break by making taxes fairer. They said they would cut the middle-class tax bracket to 20.5%, and they certainly have done that. However, they also said that this plan would be revenue-neutral. All of the speeches that have been presented by members on our side, even information that has been presented to us by the parliamentary budget officer, have indicated that a $1.7 billion deficit will be created by this plan this year and effectively an $8.9 billion deficit over six years. This plan would benefit the top 30% of wage earners. How would I explain this to the people of my riding if I were standing in Tim Hortons?

This may not be a great example for this side to use, but it is an example nonetheless and it comes from Mr. David Macdonald, who is senior economist with the Canadian Centre for Policy Alternatives. In an article in Maclean's magazine Mr. Macdonald, through a study, said that 1.6 million families making $48,000 to $62,000 a year would see roughly $51 a year in tax savings; and for those families making $62,000 to $78,000 a year, they would be making $117 in tax savings. I would define those figures as the middle class, and Mr. Macdonald did as well.

Then Mr. Macdonald moved into an interesting category that he defined as the upper middle class, and I think most of us would agree with his definition. Those Canadians who make $124,000 to $166,000 a year would see a benefit of this middle-class tax decrease of about $521 a year, while those making $166,000 to $211,000 would see a tax saving of $813 a year.

How would I explain that to my residents if I were standing in Tim Hortons? I would simply say to them that this middle-class tax decrease would benefit every single member of the House of Commons more than it would affect those who need it the most.

We have heard the finance minister stand up many times in the House during question period and say that nine million Canadians are going to benefit from this. If the parliamentary budget officer's estimates are correct—and there is no reason to think that anyone in the House would discount them—that means for those nine million Canadians, the amount of deficit that they would have to pay is equal to about $164 each. If I were to explain to my residents in Barrie—Innisfil, with an average median household income of $69,000 in Barrie and $66,000 in Innisfil, that the maximum amount they would get as a result of this middle-class decrease would be $51 but the expectation would be that they would have to pay $164 for the amount of this deficit, not one of them would think this is a good deal.

Yet the Canadian government is running around, because of this election promise, saying that nine million Canadians will actually benefit from it, when in fact, every member of the House knows that it is Canadians who pay the price.

Based on Finance Canada's estimates, the new Liberal tax plan amounts to an average of an extra $6.34 a week for those who qualify, merely a head of cauliflower with the way the prices are today.

The other thing Bill C-2 talks about is the reduction of the TFSA from its current amount down to $5,500. In fact, 11 million Canadians took advantage of the TFSA. My wife and I, who I would classify as middle-class Canadians, and my kids who are in university have used TFSAs as a savings and investment vehicle. It is a tool that lessens the dependence on government. It gives people options. To reduce it just does not make sense because it puts Canadians in control of their future if they choose to do so.

Recently, my financial planner talked about TFSAs and he was quite concerned about the fact that we would see a reduction in them. He told me the story of a 22-year-old student who had invested the maximum amount in a TFSA, which was now worth $220,000. That individual will be able to take that out tax-free and use it for whatever purpose he or she chooses to use it for. The purpose of the TFSA was all about that.

About a century ago, American author and journalist H.L. Mencken wrote that complex problems had simple, easy to understand wrong answers. He may as well have been referring to the idea that budgets balanced themselves or that the Government of Canada could foster economic growth by simply injecting mountains of taxpayer money into the economy.

Government stimulus spending and workers alike can succeed. However, bad public policy, one based on pin the tail on the donkey approach, Liberalnomics, sees companies rushing for the border and everyone else heading straight to the unemployment line. That is exactly the road that the people in my home province have found themselves travelling on over the past 13 years and Canadians are sadly following the same disastrous route under the current government.

Tax breaks that do not help those who need it the most and they create deficits that are not needed. That is Liberalnomics. That is how I would explain to the residents of my riding why I am not supporting Bill C-2. It does not help those who need it the most. It gives members of Parliament a bigger tax decrease than most Canadians, and I will not support it.

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

Mr. Speaker, we are giving these tax breaks to hard-working middle-class Canadians. It was an increase in last year's fiscal budget under the former prime minister that took the TFSAs from $5,000 to $10,000. This legislation rectifies the wrong and it brings it back down to $5,000.

In discussions with my constituents, they do not have that extra $5,000 or $10,000 after paying their mortgages and loans, having to provide food and necessities for children or even on their own. This was a policy decision of the previous government and it did not address the needs of Canada's middle class. This legislation goes a long way in addressing those needs, especially when it is part one of another part that will come with a child tax benefit. Would the member not acknowledge that?

[John Brassard, Conservative, Barrie—Innisfil, ON]

Mr. Speaker, I think all members on this side have acknowledged the fact that the Liberal plan is not what it has been made out to be. I said very clearly in my remarks that those who needed it the most would not actually benefit from it. It will be members of Parliament who will benefit from this tax decrease.

As someone who comes from the middle class, I can say, in contrast to the member opposite, that many people in my riding, such as university students and seniors, use tax-free savings accounts as a vehicle, because it gives them choices for their future. Many people in my riding have used tax-free savings accounts as a vehicle to save for their future. To reduce it is morally flawed, because they do not want to live on government dependence. They want to do things on their own. It is just the wrong thing to do.

[Scott Reid, Conservative, Lanark—Frontenac—Kingston, ON]

Mr. Speaker, I want to thank my colleague for mentioning what is arguably my very favourite quote of them all, which is from H. L. Mencken: “...For every complex problem, there is an answer that is clear, simple and [mistaken]”. The government's plans are just full of these kinds of things.

I want to ask the member about the reduction in the size of the TFSA annual donation from $10,000 to $5,000. Also, one of the things that strikes me is that when one is a senior citizen, the assumption that exists under the old RRSP system is that one is no longer a saver but is now supposed to spend for the remaining period of one's life. It is a policy that may have made sense when the average life span was much shorter than it is today. However, people turning 70 or 71 who have to start taking money out of RRSPs may reasonably expect to be around for two or more decades. That is a big problem which the TFSA helps to overcome.

Does the member believe that it is possible setting aside only $5,000 a year in a TFSA to adequately plan for a decent retirement, or is that amount too small?