This bill was last introduced in the 42nd Parliament, 1st Session, which ended in September 2019.
Bill Morneau Liberal
This bill has received Royal Assent and is now law.
This is from the published bill. The Library of Parliament often publishes better independent summaries.
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.
All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.
The Deputy Speaker Conservative Bruce Stanton
I wish to inform the House that because of the deferred recorded divisions, government orders will be extended by 28 minutes.
Order. I would like to ask all hon. members who want to carry on conversations to make their way to their respective lobbies at this time.
The House resumed from March 8 consideration of the motion that Bill C-2, an act to amend the Income Tax Act, be read the second time and referred to a committee.
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
Mr. Speaker, I am rising for two reasons. The first is personal, and the second is to talk about Bill C-2
I would like to inform the House that this morning, my wife and I became new grandparents. Our first grandchild was born, and we are so proud. My daughter, Chantal, and her husband, Mathieu Hayley, are the proud parents of a beautiful little girl named Maëlle.
Mr. Speaker, I am extremely proud and happy to rise on Bill C-2, the law that talks about benefits for the middle class. That is what was so important about our election campaign. This was a promise that we made throughout our campaign platform, and this will make good on it.
I was very happy to hear our Prime Minister indicate that this would be the first priority of our government in this 42nd Parliament. This was a platform promise that we felt was essential because over the last 10 years the middle class has been struggling. That has been extremely difficult for many people across Canada, in many communities.
This idea is not something that came from within. This is something we heard throughout the campaign, because we were listening to and consulting with Canadians during door-to-door visits. We heard clearly that the middle class were in need of some type of tax relief for them, as they were struggling. Many people were telling me that they were working extremely hard and yet did not seem to be getting ahead because the cost of living was rising, because of the challenges of paying for personal family needs, for day care, etc. After 10 years of what I would call a low-growth economy, Canadians were looking for real change.
Our Minister of Finance has been hard at work as well, consulting with Canadians for the upcoming budget. He has consulted from coast to coast to coast. He was in Nova Scotia and had great attendance by youth at the university, and as well at the chamber of commerce. This allowed many Canadians to be engaged in this process of sharing some innovative and creative ideas. This is another sign of what I call a government that is open, transparent, and accessible. Our minister displayed that throughout that process, and I am very pleased with that.
The reality is that people have to pay the mortgage, as well as for groceries and other essentials, like child care and so on. It is very difficult for the middle class. This formula is not good for the economy, that is for sure. The bill we are debating today will allow us to shift the tax burden, so that those who have a little more will get a little less and those who have a little less will get a little more.
In my riding, over 30% of the citizens will gain from this tax reduction. Over nine million Canadians will also be taking advantage of this tax reduction. This means that a family of four will have about $540 more in their pockets for spending on things that are essential for the family.
It is also important to note that this is only part of the plan. Our plan is much more horizontal, if you will; in other words, many other initiatives that were set out in our platform will be rolled out over the next four years. What we want is to support the middle class. Our government will also be investing in infrastructure and transportation, which is absolutely crucial to stimulating the economy.
In my riding, which is Sackville—Preston—Chezzetcook, public transit and transportation are extremely important. One has to understand that there are both urban and rural parts of my riding, and I am working closely with my colleague from Dartmouth—Cole Harbour on the construction of the long-awaited Sackville-Burnside expressway. It is essential and must move forward as soon as possible.
In addition, our government is committed to creating a Canada child benefit. This will help families with day care, a fairer system, one that would see Canadians who have a little more get a little less, and those who have less getting more. That is a fairer system. There are nine out of ten Canadians who would benefit from this. Over 315,000 children will be pulled out of poverty. That is the type of plan that will be effective for Canadians. That means about $2,500 more per year for families, tax free. Add that to the $540, and it is over $3,000 per year per family. That is a very important aspect of taxes for Canadians. There will be more money in their pockets.
Our government has focused on fairness. We want to support the middle class by ensuring they have money in their pockets and that they are able to prosper.
I would like to make one final point regarding Bill C-2. We made some changes to tax-free savings accounts. The Conservatives had increased the contribution limit to $10,000. We dropped it back down to $5,500, given that 93% of Canadians were not taking advantage of the increase, because they could not afford to. The only people who will not benefit from this measure are the wealthy, not the middle class. In fact, the $10,000 limit was giving more money to those who already had the most, and the Canadian government was having to pay millions of dollars more over five years, and billions more in the long term. This will mean less spending, but it will go to those who need it most.
For the last 10 years, like I said, the middle class has been ignored. This government is putting the middle class at the forefront. This government will ensure that our policies reflect what is important for middle-class Canadians.
Ziad Aboultaif Conservative Edmonton Manning, AB
Mr. Speaker, I have a question for the member opposite. We have been hearing about the middle class all along, and my understanding is that 75% of Canadians are middle class. However, what we heard just now is that only 30% of Canadians will benefit from this new tax system. What happened to the other 45%? I would ask the member opposite to advise us, please.
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
Mr. Speaker, when I made reference to 30%, I was talking about 30% of the people in my riding who will benefit from that tax cut.
What is important to keep in mind is that nine out of ten Canadians will benefit across Canada. That is what is extremely important, that nine out of ten Canadians and over 315,000 children will be pulled out of poverty. Those are the types of programs and laws that this party wants to bring forward.
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Mr. Speaker, what the member just said is totally false. It is not true that nine out of 10 people are going to benefit from the tax cut.
We just learned, and the parliamentary budget officer has confirmed this, that only 30% or so of the population will benefit from this tax credit. A person who earns $45,000 or $50,000 will get a small reduction. A person who earns less than $45,000 will get nothing at all. A person who earns $200,0000 will get the maximum $800 reduction.
How does this member define middle class? People like us, members of Parliament, will get the maximum reduction, but someone earning $40,000 or $45,000 will get absolutely nothing from the tax cut.
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
Mr. Speaker, I appreciate the question. However, I must say that this is another reason why the NDP did not succeed in the election on October 19.
The NDP only looks at what happens on an individual basis. As I said in my speech, they do not see that the Liberal government strategy is horizontal. We are providing tax relief, but we are also making major investments in the child benefit to help young families. This benefit will put another $2,500 in the pockets of middle-class families. Our government has a comprehensive vision for its full four-year term.
Julie Dabrusin Liberal Toronto—Danforth, ON
Mr. Speaker, I want to extend my best wishes to my colleague on the birth of his granddaughter.
My colleague explained very well how these changes will help middle-class families. However, can he tell us what his constituents are saying about all this?
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
Mr. Speaker, it is funny. As the Liberals were laying out their strong platform, it was becoming more and more evident throughout the campaign, and the closer we got to October 19, that Canadians had made up their minds that this platform would ensure the middle class, young families, youth, seniors, all Canadians, would have opportunities to improve and would have many more opportunities in this country to prosper.
That is what good government is. That is why I am proud to be a Liberal member in this governing party.
Cheryl Hardcastle NDP Windsor—Tecumseh, ON
Mr. Speaker, it is a pleasure to speak to Bill C-2 today. I will begin by saying that, while the NDP members have issues with some elements of the bill, we are pleased to acknowledge that there are parts of the bill that we believe would be beneficial to Canadians. We have decided to support the bill going forward to committee, where some of these can be more meaningfully considered. There are some clarifications and some rationalizations that I am going to take advantage of during my time here today.
Let us talk about some of the more positive aspects of Bill C-2
Bill C-2 would include tangible measures to collect a fair tax from the rich. Specifically, it would increase, by 4%, the top income tax rate on incomes over $200,000.
As the hon. member for Regina—Lewvan pointed out when the bill was first debated, this increase is entirely consistent with what the NDP has achieved at the provincial level.
In Nova Scotia, the NDP government increased, by 4%, the top rate on incomes over $150,000.
In a minority legislature in Ontario, the NDP amended a budget to add two points of income tax on incomes over $500,000.
The NDP government in Alberta has, quite correctly, gone from a flat tax to a progressive income tax system.
As part of our election platform in Saskatchewan, the NDP is proposing an additional percentage point of tax on incomes over $175,000.
The other positive aspect of this legislation is to restore the TFSA contribution limit to $5,500 per year. I think it is important to note that the previous Conservative government's proposal to increase that limit to $10,000 would only affect people who have extra money left over after 18% of their income has been contributed to RRSPs and after the $5,500 that can still be contributed to the TFSAs.
In 2013, fewer than 7% of eligible Canadians made the maximum TFSA contribution. It stands to reason that probably only up to 7% of Canadians would stand to gain anything from a higher limit on TFSA contributions. Therefore, restoring that limit to $5,500 is clearly a progressive move.
Let us face it. Given the unemployment rate, the skyrocketing cost of food and rent or housing, and the rising precariat, there are far too many people who will not see benefit from the bill. Consider a family of four living off minimum wage with a total monthly income, including benefits and credits, of $2,882. By the way, I get this information from the local Windsor anti-poverty organization, Pathway to Potential. Of this fixed monthly income, 62% goes to rent and food, leaving only $1,082.70 for remaining expenses, such as utilities, phone, transportation, medical costs, and dental costs. People face precarious situations when their rent exceeds 30% of their monthly income. When income is low and rent is high, there is not enough money left for food. This helps explain why so many are forced to use food banks. In 2015, 80,865 individuals were served by Windsor and Essex County food banks, and 41,942 of this number were children.
I think it is safe to say that, when we have a situation this urgent, this dire, we should be drafting legislation to help these people. Yet, these are precisely the ones who are left out of the bill. When families must choose between paying rent and feeding their children, they are not going to have a spare $10,000 to hide away in a tax-free savings account.
Let us consider students. In the Windsor area, we have St. Clair College and the University of Windsor. The reality is that most people who go to school are just getting by or taking out loans to get by, let alone putting money in a tax-free savings account. Perhaps some of them are doing so with the help of family members, but the ordinary Canadians I represent do not have that luxury.
As I alluded to earlier, in the 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 would not be enjoyed by the middle class or those with low incomes. Therefore, it is a sizeable section of Canadians who would be left out. Because of the way the scheme works, the wealthiest would benefit the most. That is a real problem, which New Democrats want to address at committee. It is an issue we have raised before.
Who would benefit from this bill? It would not be the office workers who are making an annual salary of less than $40,000 a year, or the hair stylists who basically earn around $28,000 annually in Canada. They would get zero. It is the same with social workers who make an annual salary totalling around $44,000, and with our friends in the retail sector who earn $21,424 on average.
Cashiers would get nothing back. That is a classic example. All of the people working in department stores, retail shops, drive-throughs, fast-food chains, and all of these types of businesses would receive zero from the plan. 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 in the past couple of decades.
Waiters and waitresses earn less than $22,000 on average. They would get zero. That is another group of individuals who, I would argue, would not benefit from this reduction. They would get nothing at all. Nannies are another example. Chefs and assistant chefs would get nothing.
Who would get a benefit from this legislation? Bank managers who earn around $82,000 a year would receive $555 in their tax season from this. They would also be in an income stream where they might be able to take advantage of tax-free savings account. It would be beneficial for them and their family. Lawyers earning around $108,000 a year on average in Canada would get $679. Members of Parliament with the same wage amount would get the cap of around $680 as well.
It gets worse. Bill C-2 also includes a so-called middle-class tax cut that would not actually help the middle class. I think the Liberals might be a bit confused between cutting the middle-class tax bracket and changing taxes in such a way as to help people with middle incomes. What the bill proposes is a tax cut that applies to incomes above $45,000 a year, which is more than the median Canadian income. To receive the maximum benefit, someone would need to have an income of more than $90,000 per year. To put that into perspective, someone working as a nanny for the Prime Minister would receive nothing from the middle-class tax cut. However, the Prime Minister himself, and indeed all members in this House, would get the maximum benefit of about $700. However, we do not need the money.
What are the alternatives? We in the NDP have proposed to reduce the first tax bracket, which applies to everyone. We also propose a boost to the working income tax benefit, which is better targeted to lower incomes. It would be extremely easy to design and implement a middle-class tax cut that would actually go to the middle class. However, in all of the discussion we have heard with respect to this bill, I have not heard a coherent explanation from the Liberals as to why they are pushing ahead with a tax cut that would only go to incomes above $45,000, rather than enacting a tax cut that would include all taxpayers.
Moreover, it has been revealed that the bill would not pay for itself. It would cost more than $1 billion a year in lost federal revenue. In effect, what the government is proposing is to borrow money to fund a tax break for people who do not really need it.
In conclusion, there are a enough positive elements in Bill C-2 that the NDP is prepared to support it on second reading. However, there is a huge amount of room for improvement in targeting the so-called middle-class tax cut to those who really need it, and in collecting the revenue that would ultimately be needed if the government is ever going to balance the budget—
Ken Hardie Liberal Fleetwood—Port Kells, BC
Mr. Speaker, the member opposite is focused only on the tax cut. Would she agree that cutting taxes for people who are earning below $45,000 a year would have limitations, because in general the lower one's income the less one pays in taxes?
A tax cut by itself might have only a limited benefit for those people. The complete plan, including the Canada child benefit, would tilt the balance of the benefits to the people with lower incomes. It seems that if a tax cut really would not deliver a great deal of benefit to people in the lower income bracket, then we must look at another mechanism to help those people, as well as the people in the middle income.
Could the member flesh out some of her ideas and the alternative ways we could help people who earn lower income and would not benefit from any kind of tax cut?
Cheryl Hardcastle NDP Windsor—Tecumseh, ON
Mr. Speaker, I just want to reiterate that the Liberals were vehement during the election campaign about relieving the middle class. What we are saying is that they have to identify who the middle class really is. In Canada today the median income is $31,000. What is the definition of middle class if it is not that?
It is not realistic to look at someone who has a lower income with limited discretionary funding and is making choices that someone in the higher income class does not even have to worry about. We have to apply a bit of empathy here, to see where the effect would be, so that we would be targeting the middle class. That was aggressively pursued by the Liberals during the campaign.
Was that all rhetoric, or can we really have some meaningful action? The median income in Canada is $31,000. Like it or not, that is the reality.
Marilyn Gladu Conservative Sarnia—Lambton, ON
Mr. Speaker, I definitely agree that Bill C-2 would do nothing for seniors on a fixed income and those with lower wages who are counting on maybe CPP, OAS, and GIS to get through.
Does the member think a $600-a-year middle-class income tax break would really make a big difference to those making up to $200,000 a year?
Cheryl Hardcastle NDP Windsor—Tecumseh, ON
Mr. Speaker, I explained that in my speech. I expressed a bit of frustration with the shortcomings of this legislation.
What we are seeing with Bill C-2 is a token response to the Liberal platform and to what Canadians saw. There was something in that platform that resonated with Canadians. That is why they were elected, the Liberals claim, so they should do something with it. It is a token response. As a matter of fact, it is insulting to people living in that median income range, because $600 can go a long way toward nutrition and bills.
Not providing that well-being for all Canadians puts a burden on all of us as a country. One would think the Liberals would want to maximize this tool. That is why it is a bit frustrating.
