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

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

Mr. Speaker, I want to thank my hon. colleague for his speech this afternoon, and I really respect and honour his parliamentary experience.

I do not have enough confidence to speak or ask a question in French.

I will do it in English, if members do not mind.

I want to focus on the debt and the deficit situation. My home province of Ontario is currently experiencing $313 billion in debt. In fact, the third-largest department in the Ontario government is the payment on that debt.

Of course, we all know that many in the former Ontario Liberal government are now running the PMO, so we are just transferring that debt and deficit ideology into the federal government, and obviously access to a bigger piggy bank.

I want to ask my hon. colleague, given his experience in government, what impact significant debt and deficit can have with respect to the impact on middle-class Canadians going forward.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Speaker, I thank my colleague for his right and very important question. It is a real issue when we are talking about public money, and we are here to do that. People pay taxes and they want to know what we are doing with them.

When we create deficits, we create debt, and we are shifting the bill to our children and grandchildren, even those who are not born today, and they will have to pay for the fact that we live over budget today.

He talks about his own province. I can talk about my home province too, Quebec. This is a very important bill that we have to pay, a very huge debt. That is why I have been involved in politics for the last eight years. I was elected in 2008 in the National Assembly, and it was one of my cardinal issues for which I fought in the National Assembly and for which I want to fight here in the House of Commons, to be very careful with the debt and especially with the deficit.

My hon. colleague from the Liberal Party talked about our result when we were in office. He said we raised the deficits so high. Yes, but he forgot that in this House we faced the worst economic crisis since the thirties.

That is why we had to make difficult decisions, especially in a non-majority government. In a minority government, we had to make some deals with the Liberals and the NDP, and this is why we had to make that difficult choice. However, the result at the end of the crisis was that we were the best, thanks to the Conservative government.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, as the NDP finance critic, I am pleased to rise at third reading stage of this bill, which has been debated at length in the House.

From the outset, I want to point out that during the debate and discussions in committee we reached out to the government to ensure that the tax cut promised in this bill was truly for the middle class.

As I said in my question, the middle class is not very well defined. The Department of Finance refuses to define it. We have varying definitions depending on the groups. On the other hand, we can agree that when half the people earn more than us and half the people earn less than us, we are in the middle class. I think that makes a lot of sense.

Those people, who earn roughly $31,000 or $32,000 a year, are not getting one cent from the so-called middle-class tax cut promised in this bill. I find that extremely problematic. I mentioned this in my question, but it bears repeating. As parliamentarians, parliamentary secretaries, or even the chief government whip, we are going to benefit the most from this tax cut. We are absolutely not part of the middle class, but we will get a maximum reduction of nearly $700 because of this promised tax cut.

Someone who earns $30,000, $35,000, $40,000, or even $45,000 a year will not get one red cent from the tax cuts in this bill. Therefore, when the government says that this bill will help the middle class as promised during the election campaign, that is not entirely accurate. Yes, that was in their election platform, but we all know that people rarely consult election platforms online when deciding how to vote. They tend to rely on what is said in the media, on television, in the news, and sometimes in the newspaper. What people kept hearing from the member for Papineau, who was the leader of the Liberal Party, was not that he would lower taxes for people earning over $45,000 a year, but rather that he would lower taxes for the middle class.

Those who earn less than $45,000 a year and consider themselves part of the middle class feel cheated, and rightly so. I am convinced that during the Canada-wide consultations held by the Parliamentary Secretary to the Minister of Finance and the Minister of Finance, they probably heard comments about that from people who are not eligible for the tax cut. People have been able to tell from the beginning of this year, since the tax cut took effect on January 1 and can therefore be seen on people's pay stubs.

Since the bill does not really apply to most middle-class Canadians, what could be done? That is where we reached out to the Liberal government at committee. We proposed a measure that would cost roughly the same, but would help a lot more Canadians. Instead of changing the tax bracket beginning at $45,000, which is more representative of the upper middle class, we suggested lowering the first tax bracket, the lowest level at which everyone starts paying taxes.

Accordingly, instead of lowering the rate from 22% to 20.5% for the second tax bracket, we are proposing to lower the rate from 15% to 14% for the first tax bracket. That will have a significant impact because the same person who sees half the population earning more than they do and the other half earning less, will receive a $200 tax reduction, whereas they are receiving nothing now. Thus, someone who earns $210,000 a year and now gets $200 of the proposed reduction, would instead pay $70 more.

We have to be careful with slogans. There is no doubt in my mind that, after all the debate, the desire to help the middle class that is constantly being trumpeted by the government is more of a slogan than something real.

If the government really wanted to help the middle class, it would have accepted the proposal, the olive branch that we were extending to the Liberals, in order to ensure that everyone could benefit.

I am sorry to say that this proposal was rejected by the Standing Committee on Finance. It is regrettable because I believe that it could have been debated and probably would have been agreed to. What the government promised during the election campaign, or the spirit of the promise, would have been kept. The whole of the middle class would have received a tax cut. That is not the case at present. It is unfortunate that the government is still trying to make us believe the opposite.

As a parliamentarian, I have to admit that I do not need a tax cut. I want to pay my fair share. I consider myself to be privileged. Why are they insisting that my colleagues and I receive the largest possible reduction? That is a very problematic aspect of the bill, which only has 10 clauses.

We are not fundamentally opposed to the measure to introduce a new tax rate of 33% for income in excess of $200,000 or to the measure to lower the TFSA contribution limit from $10,000 to $5,500. We have supported these measures from the beginning, even before the Liberal Party decided to include them in its election platform. I remember some debates that were held here, in the House, against increasing the limit to $10,000, and those arguments still hold true today.

The parliamentary budget officer conducted a very important and specific study on this topic. Once again, my colleague from Louis-Saint-Laurent did not fully answer the question, because he tried to imply that the TFSA is just a money-saving tool. TFSAs are indeed used for this purpose. After people pay their taxes, they deposit money in a TFSA, which then grows with tax-free interest. However, with the limit increased to $10,000, the TFSA would become a significant tax-avoidance tool for people who have the means to contribute the $10,000 maximum, as proposed by the Conservatives.

What is the result? The result is that not just money will be deposited into these vehicles. People can also put stocks, bonds, and other financial tools that would often be subject to capital gains tax into those accounts. That money can grow tax-free in these vehicles. We have here a situation where we started out with a savings vehicle and ended up with a significant tool for tax avoidance, which allows the wealthiest members of our society to shelter their money from taxes. That is why the parliamentary budget officer described this measure as potentially dangerous for the public purse.

He estimated that in 20, 30, or 40 years, the money that would no longer be paid to the Canadian government in taxes as a result of this measure could be equivalent to 0.7% of the GDP. The government feels that 0.7% of the GDP is too much to allocate to international aid. However, it does not seem to be too much to give away primarily to the wealthiest members of society, who would use the TFSA to shelter their investments.

That is why we think that the limit of $5,500 is entirely appropriate. In fact, only 17% of those who contribute to a TFSA and 7% of the entire Canadian population reach that limit. We agree with that measure.

We are not opposed to the creation of another tax bracket, which explains why we voted in favour of the ways and means motion that could not be debated or amended. It has a major financial impact.

However, there is now another important factor to consider and that is the tax cut for the so-called middle class. We are in a situation where that could be changed.

That is the path we chose. We voted in favour of Bill C-2 at second reading specifically because we wanted to try working in committee to get a clearer picture of what this measure as a whole means for the middle class.

Evidence from Standing Committee on Finance meetings shows that, systematically, almost every time I asked a question, it was about this issue. Most of the answers I got were pretty vague with respect to the impact. Some said that, basically, we were right: we would reach many more citizens and taxpayers and help many more people.

The government argues that this is part of a suite of measures that must be taken as a whole. This bill is not a suite of measures. It contains three distinct measures, one of which is very problematic.

If we look at the government's proposed measures as a whole, including the child tax benefit in the budget implementation bill, we see that many members of the middle class will not get a tax cut or any help from this government.

Single people with no children earning $40,000 a year, which is a fairly large portion of our society, I would say, will get nothing, either from this income tax cut or from other measures proposed by the federal government. An elderly couple earning $30,000 to $35,000 in pension income will get nothing, either from this income tax cut or from measures proposed by the government in the budget implementation bill.

A large part of the Canadian population will get nothing, but those people can clearly and accurately define themselves as being part of the middle class. I do not understand that, and the Liberal Party has not provided any explanation, apart from the fact that people elected them because of that, for refusing our offer to work together to help as many Canadians as possible, to help the entire middle class and not just those who are earning up to $217,000 a year. Those who are earning between $45,000 and $217,000 a year will benefit from the bill.

When I go to my constituency, how can I meet with the head of a banking institution, who may be earning $215,000 a year, and with someone earning $30,000 a year and explain to them that the former will benefit from it and the latter will not?

I do not know how the Liberal members feel when this question comes up. I suspect they will not be in a hurry to answer it. They are well aware of what kind of reaction they will get from those citizens.

We are in a Parliament that we hoped would be collaborative. I will not rehash yesterday’s events, but while the government says that it is willing to listen to our amendments and that it wants to gain our co-operation by working with us, we really feel that it just wants to push its ideas through as quickly as possible, without necessarily paying much attention to the positive effects that an opposition proposal might have.

I would like to have seen Liberal members ask more questions on this issue in the Standing Committee on Finance. However, their questions seem mostly to have been designed to elicit witnesses’ agreement with the government’s position. The Standing Committee on Finance plays a special role in this Parliament, as do all committees, in fact, which is quite different from the role of the House of Commons.

It is different because, here, we have a somewhat adversarial system, with the government on one side and the opposition on the other. However, committee is the only place where we can call each other by our proper names. We are not members for certain ridings, but rather members, period. Our role, whether on the government side or opposition side, is to make sure that the government is held to account and that the government's proposals are studied, scrutinized, and analyzed in order to ensure that they really contribute to the common good of the country.

We are talking about the current government, but I am not saying that the previous government did not do the same thing. Government members act like cheerleaders to applaud their government's proposals, rather than paying close attention to the detailed consideration of what is before them. Not only does the committee's work suffer, but so does Parliament as a whole, and so does Canadian democracy. This situation does not appear to be getting any better as time goes by, despite this government's commitment to do things differently and ensure that Parliament works more collaboratively.

There are measures that we support, including lowering the TFSA ceiling, which will still be indexed to $5,500. Combined with the other savings tools, this measure seems good to us. There is also the creation of a tax bracket for higher incomes. Despite the fact that it applies to incomes over $200,000, it will not be enough to ensure that people who earn $210,000, for example, pay more taxes, because they will pay less.

We feel that this other measure in Bill C-2 is problematic and fundamentally unfair. Contrary to what the government would have us believe, this measure does not meet a need of the middle class and does not apply to all those who belong to the middle class.

The member for Louis-Saint-Laurent makes a valid argument, even though we did not present it: when people voted for a tax cut for the middle class, they did not necessarily know where the middle class began according to the government's definition, and the government did not dwell on that either. However, if there is anything that was mentioned more often than the $45,000 threshold from which the cut would apply, it is the fact that this measure would not cost anything.

When the Liberals say that Canadians voted for this measure, we must realize that Canadians voted for their perception of this measure. That perception quite often was created by the Leader of the Liberal Party, who extolled the virtues of a tax cut for the middle class. Unfortunately, this measure excludes a lot of the middle class.

I can assure the House, that I hear my constituents talk about this and that every one of my colleagues has talked to me about it. This has been discussed by committees and also by our caucus.

Although we support the two measures, we fundamentally disagree with the third one, which we tried to amend. The government chose to ignore us. We debated this issue because it is important and it is being talked about in our ridings. We would have liked the government to listen more and co-operate with us. It did not. This morning, we were not expecting to debate Bill C-2 in the House this afternoon. However, we are discussing it again and we will have the opportunity to meet as a caucus to bring this discussion to a close.

Unfortunately, I do not think that was a very good thing for the government to do. People have rather strong opinions in this regard, even though there is still opportunity for discussion. I think that the debate at third reading will be the government's last chance to consider our demands and those of our constituents.

If the government members have suggestions or if they want to make amendments to initiatives other than this bill, which cannot be amended, our door is always open. With regard to this measure, unfortunately, we are being forced to seriously consider voting against the bill at third reading because the government has failed to listen to or show an interest in a large portion of the middle class.

[Anthony Housefather, Liberal, Mount Royal, QC]

Mr. Speaker, I would like to thank my colleague for his speech.

I completely agree with him about the role of committees, and I am proud that the members of the Standing Committee on Justice and Human Rights were able to work together to make 16 amendments to Bill C-14. I hope that that will also happen in other committees.

I understand the demand being made by my New Democrat colleague, who wants to offer a tax cut to a bigger group of people than the one provided for in Bill C-2. However, during the election campaign, the NDP did not put forward any proposal to reduce taxes for those who will benefit from Bill C-2 or for anyone else.

How is it that the New Democrats did not propose any tax cuts for the middle class during the election campaign and now they are demanding that sort of tax cut before they will support Bill C-2?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

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

I have been asked this question before, and I answered it when we were debating this bill at second reading. I agree that the government was elected on a platform of tax cuts for the middle class. That was a measure that made headlines throughout the campaign. The public elected the Liberal government. No one can deny that.

Now, if the Liberals promised a tax cut for the middle class, they should truly cut taxes for the middle class. Here in the House, we accept the public's choice, so we should work to improve the proposal that was made during the election campaign. Many more people shared our understanding of this proposal, which is not what has been imposed by the government.

I cannot deny that the platform on the Liberal Party's website proposed lowering the tax rate for the second tax bracket from 22% to 20.5%. However, if you ask people what the Liberal Party promised them, they will say that they were promised a tax cut for the middle class, not a tax cut from 22% to 20.5% for income above $45,000.

Since the public made its choice on October 19, we wanted to help the government achieve what Canadians were expecting, which was a tax cut that would benefit everyone, starting at $11,000 in income, and that would have essentially cost the same to the treasury as the measure the government proposed.

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

Mr. Speaker, the hon. member touched on a really important part of what the budget is about. We on this side of the House have often said that it is actually a Liberal shell game that says the middle class is going to be getting more than what it will. There is no definition of what the middle class is.

In fact, when it was broken down in a recent Maclean's magazine article, David Macdonald, who is with the Canadian Centre for Policy Alternatives, said that there are roughly 1.6 billion families making $48,000 to $62,000 that will see their tax bills trimmed by, on average, just $51, and as the income goes up, those earning $62,000 to $78,000 will only see a $117 saving, and there will be a $521 saving for the average family making $124,000 to $166,000.

What is important to understand is those making $166,000 to $211,000 will get a tax break of about $813. That benefits what I would classify as the upper middle class. Everybody in the House is going to be getting a bigger tax break than what I would truly classify as a middle-class family.

I want to ask the hon. member how he feels about this Liberal shell game.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I agree with the member for Barrie—Innisfil's statement.

David Macdonald also said that those who will benefit the most from the Liberals' tax proposals are families that earn between $166,000 and $211,000 a year. According to his estimates, these families would receive about $813, on average.

Stephen Gordon is a respected economist and is not known for being partisan. We do not always agree with his positions as an economist, but he is respected. He said that people earning $50,000 in taxable income would benefit much less than those who earn $150,000 in taxable income, which is not far from what we make here. He even admitted that the NDP is correct. Those with a higher income will receive many more benefits under the Liberal plan than those supposedly in the middle class.

The Liberals do not seem to understand what Canadians truly expect. They said that the second tax bracket, for income between $45,000 and $90,000, would be changed. They would be surprised to hear that Canadians thought that would exclude people who earned more than $90,000, but that is not the case. Those who benefit from the tax cut are all those whose income is above $45,000, including those whose income is above $90,000. In fact, in spite of the new tax rate of 33% for income in excess of $200,000, people who earn up to $217,000 will be getting a tax cut. However, there is still nothing for someone who earns $44,000 a year.

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

Mr. Speaker, I certainly appreciate my friend's speech. He is doing an incredible job for the NDP as the finance critic. I certainly appreciated listening to his exchange with the member for Louis-Saint-Laurent earlier, where he decisively explained why we are opposed to keeping the TFSA contribution limit so high.

I know the Conservatives are champions for lower taxes, but by going the route of giving more savings room, they might be forcing a future government to either drastically cut services, which usually hurt the most vulnerable in our society, or actually raise taxes. Therefore, it would have a converse effect.

I want to touch on the subject of where the middle class sits. One of the privileges of being a member of Parliament is that we get to meet people from all walks of life. It really is a fantastic privilege to get to meet people from the community. In my area of Cowichan—Malahat—Langford, I would say that most of the people I meet would fall into the range of income of around $30,000 to $40,000. If they do not have children, they are not going to get anything from this plan. Several of them have correctly noted that, as a member of Parliament, I would get the full tax cut out of this plan. I was not sent to Ottawa to give myself a tax cut. My job was to come here to make life easier for those who do not have as many means.

My colleague has already illustrated the mechanics of this in trying to find the definition of the middle class. I think we exist sometimes in an Ottawa bubble, and I was wondering if he could inform the House of some of the feedback he has directly received from some of his constituents on this matter.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I thank my colleague, who is also doing an excellent job in his first session in Parliament. He has really impressed his colleagues so far.

This is an important issue. The questions people ask me most often are about this and the proposed changes to employment insurance. For example, people have asked me why their waiting period has not yet been reduced from two weeks to one. I have explained that the measure is not yet in force. Since the government's platform said that would happen in 2017, that is what I tell them.

However, when they tell me they are still waiting for less tax to be withheld from their paycheques, knowing that this measure is in force, and they want to know why they are not seeing a difference, I am forced to ask them what their income is. In many cases, they earn $30,000, $35,000, or $40,000. I tell them that they do not qualify. Then I ask them if they have children to see if they will get the new tax benefit. Unfortunately, I have to tell single people that they will not benefit.

The problem with making big commitments and big promises is that it creates great expectations. Those great expectations can lead to disappointment for people who thought they would be included. That is what happened to a significant segment of the population with Bill C-2.

The House resumed consideration of the motion that Bill C-2, An Act to amend the Income Tax Act be read the third time and passed.

[David Graham, Liberal, Laurentides—Labelle, QC]

Mr. Speaker, I will be sharing my time with the hon. member for Mount Royal, who, like me, spoke in French during Monday's debate on Bill C-10. I wanted to make that correction since the hon. member for Outremont misinformed the House about that on Tuesday. In fact, I speak French more than he does in the House. He would contribute more to the quality of the debates in the House if he checked the facts before making unfounded accusations.

I rise to speak to one of our key election promises: the 7% tax cut for the middle class, whose tax rate will go from 22% to 20.5%; the tax increase for wealthier Canadians from 29% to 33%; and the reduction in the TFSA annual contribution limit from $10,000 to $5,500.

I commend the Parliamentary Secretary to the Minister of Finance and my riding neighbour, the hon. member for Saint-Maurice—Champlain, on his maiden speech. Our ridings meet along a provincial gravel road, Parent Road, where government signs strongly advise the use of CB radios. This border is located more than 300 kilometres north of Montreal, not far from the community of Parent.

Bill C-2 is important to the growth of the middle class. It includes crucial changes to Canada's tax system. The legislative summary of the bill is quite clear:

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.

These changes will benefit Canadians, so naturally, they are looking forward to them.

I also want to congratulate my colleague from Louis-Hébert on his speech. I rose to reply to him a couple of times, but better members were recognized before me. The life of an MP is complicated.

I would like to point out that the member for Louis-Hébert alluded to the fact that budget 2016 provides for a deficit. He also said that his government was responsible for all of the good things that came out of the last term of office. He is very happy to take credit for all of the positive results, while saying that his team had nothing to do with anything that went wrong.

Investments in the middle class and economic growth for ordinary Canadians are very important to me, the government, and the millions of Canadians who will benefit.

The member for Louis-Hébert also said that the Conservatives left the House clean. That is not completely true. The Conservatives sold the house to pay off the mortgage. They waved the cheque from the sale in the air for all to see before giving it back to the bank to pay the mortgage. The house was not really clean. It was gone. There are now deficits in the middle class, in infrastructure, and in all levels of government.

My colleague from Rimouski-Neigette—Témiscouata—Les Basques is a bit more reasonable. He presented fact-based arguments about our policies. I really enjoyed listening to his speech. I do not agree with him when he says that these tax cuts do not help the middle class. I agree with my colleague from Mount Royal, who asked why the New Democrats did not promise to cut taxes in their platform but did promise to balance the budget.

With the exception of the members of the former government, who still think that they left a massive surplus, even though that is not quite true, I think it is clear to all of us that it would only be possible to balance the budget this year if we used extreme measures, such as austerity, which is a very unpopular policy in any country.

In short, I am not worried about these deficits because they are investments. That is the case with Bill C-2. I would like to give my colleague from Louis-Hébert a little bit of background on deficits. Almost 100 years ago—

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Speaker, on a point of order, I am the member for Louis-Saint-Laurent, not the member for Louis-Hébert, who is a Liberal MP.

[The Assistant Deputy Speaker, Anthony Rota]

Of course. Thank you. We will continue debate.

[David Graham, Liberal, Laurentides—Labelle, QC]

Mr. Speaker, I greatly appreciate the correction made by my colleague from Louis-Saint-Laurent.

I want to tell him that it has been a very long time since the Conservatives managed to balance a budget. They had surpluses in or around 1871, 1912, 2006 and 2007. They left surpluses, but they always inherited them from the Liberals. They have not balanced a budget in about 140 years. When he talks about deficits, he is not being quite honest.

I will stop there, but I am interested in hearing the questions from the member for Louis-Saint-Laurent.

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

Mr. Speaker, I am pleased to have the floor.

I would first like to thank my colleague for his excellent speech. He is very attached to his community. I had the opportunity to campaign with him, and I know that he has a good understanding of the concerns of the people in his riding.

In the speeches given earlier, we heard members ask whether this measure affects the middle class. In fact, this measure affects nine million Canadians. Approximately one third of all Canadians will benefit from this positive measure. We are proposing a 7% tax reduction for nine million Canadians. Therefore, I am quite shocked to hear that it is not an important measure that will help all Canadians. More than one third of the population will be affected by a key measure in the last budget.

I would like to ask my colleague from Laurentides—Labelle, whom I consider a good friend, to explain the meaning of the phrase “help the middle class”. How can these people invest in their family and send their children to school or to a summer camp? I would like him to provide concrete examples. I know him, he is a caring man who is really attached to his community.