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

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

Mr. Speaker, as per usual, the NDP is long on thought and short on detail. Those members started first in the election campaign and fell quickly to third, because Canadians did not buy what they were saying. Canadians did not buy their platform or their policies. As parliamentary budget officer Kevin Page said, the NDP policy was like Swiss cheese because it had so many holes.

My question to the member opposite is this. Why did you support the UCCB that gave the same amount of money to millionaires and people who need it? Why did you support that policy?

[The Speaker, Liberal, Geoff Regan]

I would remind the hon. member to always direct his comments to the Chair. Again, we do not use the word “you” in here, unless you are talking about the Speaker, and I get a little nervous when that happens.

The hon. member for Windsor—Tecumseh, a short answer.

[Cheryl Hardcastle, NDP, Windsor—Tecumseh, ON]

Mr. Speaker, the NDP has proposed a number of realistic measures to provide assistance for a national child care benefit, guaranteed income supplement, and a national affordable daycare plan. To suggest that we have not done our due diligence and our homework, we came out with a fully costed plan. We can argue where some of the resonations were during the campaign, but it certainly was not with the stats and facts, because we have those here.

The Liberals are missing an opportunity if they do not accept those facts and move forward with the well-being of middle-class Canadians, as was aggressively put forward in their platform.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, what I like best about Bill C-2 is the tax hike for the richest 1%. In my opinion, the income gap is too wide and that is the most glaring problem in our current capitalist society, together with the extreme pressure that our economic system is placing on the environment.

Over the past 30 or 40 years, income inequality has grown steadily and has now reached unacceptable levels. Paying a CEO ten times what his employees are paid can be justified. However, when the CEO is paid 200, 300, or even 400 times as much, that is a sign that there is something seriously wrong with our society, and that the state has failed to do one of its main jobs, namely to ensure an acceptable redistribution of wealth.

The government is sending a strong message with Bill C-2 and it is headed in the right direction. It has been a long time since Ottawa increased taxes for the rich. Lowering the TFSA limit is a measure in the same vein and I will applaud if it actually shows up in the budget.

On the other hand, my enthusiasm for the tax cut for the so-called middle class is somewhat lukewarm. In my opinion, it misses the mark. This tax cut will benefit the wealthiest one-third of taxpayers. People who earn an average or median income will not benefit at all. The government is saying that anyone who earns $45,000 or more will benefit. However, if gross income is used in the calculation, people actually have to earn $51,000 to save money on their taxes. The reason for this is that other tax deductions reduce the gross income to a net income of $45,000, which is taxable. As a result, a worker who earns $51,000 a year will not save any money on taxes under Bill C-2.

By way of example, I would like to inform the parliamentary secretary that 80% of the people in his region of Mauricie report an income of less than $50,000. Only 4% of the people in his region, including himself, will see their taxes reduced by the maximum amount. People who earn $52,000 will not even save $20 with this measure. It is far from a solution. Those who earn $100,000 a year will save $680, and those who earn a gross income of $240,000 will not have to pay a penny more in taxes.

In short, the tax transfer in Bill C-2 will help the rich save money on their taxes by making the richest 1% pay more. In other words, the Bentley owners will have to pay to help BMW owners. Bill C-2 will not help Focus, Civic, or Corolla owners and will do even less for Accent owners, even though they are the ones who need help the most.

Nevertheless, this bill sends a strong message to the richest 1%. This is a step in the right direction. The proposed change is obviously symbolic and is not enough to correct the inequalities that exist. We need to go further.

The government should also target the problem of tax avoidance and tax havens as a priority. While the middle class and the poor are struggling and coping with austerity policies, receiving fewer services, and paying more for existing services, white collar criminals are ducking their social obligations. What good is it to increase their taxes by 1% if they are diverting their income? The KPMG scandal is the most recent example of this. The issue of tax havens is the elephant in the room. Canada's has one of the worst records among OECD countries. It is time for that to change.

This government can take action right now to deal with Barbados because we moved a motion to deal with this very issue. Barbados is Canada's tax haven. That is where Canadian banks and financial institutions, as well as wealthy Canadians, send their money. We can tackle Barbados as a tax haven right now. We do not need agreement from other countries to take action. I hope this will be done. It is a matter of fairness and justice.

The government of the Quebec nation is currently looking at the issue of tax havens. It will quickly see that it has little latitude on this matter and that it is largely dependent on the decisions that are made and voted on here in Parliament.

Since Quebec is not a country, it is subject to the tax treaties and laws negotiated, voted on, and ratified by Ottawa.

Quebec suffers when this government gives amnesty to white collar criminals. Quebec suffers yet again when Ottawa allows banks to move money to their branches in Barbados.

This lax attitude causes serious shortfalls for Canada and also for Quebec. When white collar criminals shirk their responsibilities, the rest of the public loses services, pays more in taxes and fees, and sees its debt balloon. This must change. We must do much more than what is in Bill C-2.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, the hon. member for Joliette said that we must stop corporations from using tax havens.

Another big problem is that the Liberals and Conservatives cut the corporate tax rate in half.

Will the hon. member for Joliette also lend his support to the proposal to increase the corporate tax rate?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for the question.

Yesterday, the Bloc Québécois expressed what it would like to see in the budget, and we also presented our expectations to the Minister of Finance.

We held more than a hundred consultations throughout Quebec to meet with different players, and one of the recommendations that came out of the consultations is to increase the tax rate for Canadian banks.

In 2007, the Canadian bank tax rate was 28%. It is currently 15%. We are proposing that it be gradually increased to 20%. Canadian banks do not compete with foreign banks. We are in a market protected by the Bank of Canada, thanks to the regulatory system. The banks are making immense profits, while we are up to our eyeballs in austerity measures and the middle class and the less fortunate are struggling. The banks have to do their part.

Our priority is to increase how much the banks have to contribute.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Mr. Speaker, I appreciate the comments of my colleague about driving Civics, Hondas, and Corollas. I drove a Neon in the past, an entry-level vehicle. Being a mechanic, I have also worked on a lot of those types of vehicles.

One of the things I would like to point out for my colleague is this. Generally, early on in life, we start out driving these kinds of vehicles, but we work hard, we get an education, and we move on. I no longer drive a Neon. I now drive a Dodge Durango. Through my education, I got a mechanic's ticket, then I went off to university and got a business degree, and now I am standing here.

I am on a trajectory with my life. I have worked hard and made money. That has given me the ability to enjoy these kinds of things in life.

There are incentives. When we tax people, there are incentives one way or the other. Does the member not see that there is a negative incentive when people are taxed greater, at higher tax brackets?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for his question. I am pleased to learn that he is a mechanic because he probably found that very helpful as the owner of a Neon.

I am well aware that higher taxes on the very wealthy can have a negative impact, and that is something we always have to take into account in developing fiscal policy.

However, my analysis of the situation suggests that there is a problem because the wealthiest individuals do not absorb enough of the tax burden. They were given too much.

I think that increasing their contribution will not have a negative effect on stimulating the economy. On the contrary, it will help the economy. There is an impact, but it is limited. The same applies to the difference between generations. It exists, but it is hardly the only factor that explains the wealth gap.

[Lloyd Longfield, Liberal, Guelph, ON]

Mr. Speaker, does the hon. member see the gap in income as a problem in Canada that might be addressed by increasing the tax on people earning more than $200,000 and decreasing the tax on people making between $45,000 and $90,000?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Mr. Speaker, I thank my colleague for his question.

We support Bill C-2. Yes, it will have an impact, but we feel it should have gone much farther.

Let me go over the numbers. This measure will apply to incomes between $45,000 and $90,000 or more, but the gross income must be $51,000, which means there is no direct tax measure for two-thirds of taxpayers. This measure will do nothing for the least wealthy two-thirds of the population. The middle class will derive no direct benefit from this program.

[Tom Lukiwski, Conservative, Moose Jaw—Lake Centre—Lanigan, SK]

Mr. Speaker, it is a pleasure and an honour to participate in the debate on the government's Bill C-2, also known as the Liberal giveth and the Liberal taketh away bill, because that is exactly what the bill would do.

Bill C-2 would give some modest tax relief to some Canadians, but it would also take away from all Canadians the ability to contribute $5,000 more to their tax-free savings accounts. That is real money we are talking about here. For a young person perhaps just starting out, aged 25, that could be 45 years or more that he could be contributing an additional $5,000 to his tax-free savings account, but which would now be denied to him because of Bill C-2.

I will explain in greater detail what Bill C-2 would do.

For a Canadian earning between $45,000 and $100,000 a year, he or she would receive some modest tax relief. If a Canadian is earning less than $45,000, there is no tax relief. If a Canadian is earning more than $200,000, he or she will be paying more taxes rather than less. However, every single Canadian eligible to open up a TFSA, that is to say every Canadian of the age of 18 or over who has a valid social insurance number, has the opportunity to open a tax-free savings account.

A tax-free savings account is a relatively new savings vehicle introduced by our previous Conservative government several years ago. It has proved to be incredibly popular. To date, over 11 million Canadians have TFSAs, and that number is growing steadily and quickly day after day.

When we first introduced the TFSA, we set a contribution limit of $5,000. Again, that is to say that all Canadians who opened a TFSA could contribute $5,000 as a maximum each and every year. The money in that account, as it grew over the years, could be withdrawn at any time tax-free. It was so popular, in fact, that most Canadians felt it was a far better savings vehicle than the RRSPs themselves, because, as everyone knows, with RRSPs one gets a tax break when putting money in, but has to pay taxes when taking the money out. TFSAs are just the opposite. One can put after-tax money into an account, and in that account, whether one had stocks, bonds, mutual funds or any other investment, that money could grow tax-free during the life span it was in the TFSA, and when a Canadian took that money out, it could be taken out tax free.

What a wonderful vehicle for Canadians who wanted to save for the future. When someone is approaching retirement age, they are quite rightly concerned about their retirement years, their so-called golden years. Will they have enough money to sustain themselves comfortably in their retirement? The TFSA went a long way to ensuring that all Canadians could do exactly that. However, Bill C-2 would deny Canadians the ability to put an additional $5,000 into their account.

As I mentioned earlier, when we first opened the TFSAs, the contribution limit was $5,000. We increased that a few years later to $5,500, and then a few years after that we put the limit up to $10,500 a year. Out of the 11 million current TFSA holders, over two-thirds of those contribute the maximum, and of those maximum contributors, about 60% have modest to low incomes. Therefore, this was a great tax savings vehicle for all Canadians, particularly those of modest and middle incomes.

The argument presented by the government as to why it reduced the level from $10,500 to $5,500 is that this was a vehicle simply for the rich. However, the statistics prove that simply is not the case. I suspect that the real reason the Liberals have chosen to reduce the ability of Canadians to put an additional $5,000 into a tax-free savings account is simply that the current Liberal government needs more tax revenue.

Why does the government need more tax revenue? It is because the Liberals are going to be spending like drunken sailors, and we have already seen evidence of that. We know now that the first year's budget, which we will be seeing on March 22, is anticipated to come in at about a $30 billion deficit. Most bank economists and people who have been analyzing the promises made by this Liberal government are anticipating that this figure of a $30 billion deficit will grow over the years.

I know that the government's Keynesian theories about putting money into the economy to stimulate it and create jobs simply do not work. Keynesian theory has never worked and will not work today, but the reality is that because of the government's wild intent to go into deficit, all Canadians ultimately will have to pay the price. Why? It is because deficits in real terms are borrowed money. Borrowed money means that someone has to pay that money back. If it is not me, it will be my children and my grandchildren.

This is not new. This is something that the Liberals have done throughout the history of their years in government. This is in their political DNA. In fact, the majority of Canada's debt as we know it today was incurred by the current Prime Minister's father, Pierre Elliott Trudeau. Figures will show that in the last year of the former Trudeau's government, the Government of Canada was spending $1.03 for every $1 that it took in in revenue. It does not take an economist or a rocket scientist to figure out that a few years of that means that the tax load and tax burden on Canadians will have to increase, because there is no way any government can sustain that type of spending.

It seems that the apple has not fallen far from the tree, because this Prime Minister seems to be taking the same approach as his father, going into massive deficits when the government does not have to do so.

Keynesian theory is for when we are in a recession, and then, perhaps short-term stimulus spending or short-term deficits could create jobs and help the economy recover. That is only a theory, and as I mentioned earlier, I believe it has not been well thought out. It certainly has not been proven to be accurate in all of those jurisdictions worldwide that have attempted this type of economics, but one thing is certain, in a jurisdiction that is not in recession, the government should not put money into the economy as stimulus because it has no need to do so.

There is one way the government could get additional tax revenue without raising taxes, and that is to look for private sector investment, private sector projects that might be able to create jobs and create tax revenue for the government. There is such a project in front of the government today. It is called the energy east pipeline, a shovel-ready project that would create literally thousands of jobs and bring in billions of dollars of tax revenue to the government, and yet, what has the government done? Has it embraced the energy east pipeline project? No, it has not.

In fact, there are several members of the Liberal government, mainly sitting on the backbench, who have won seats in ridings from provinces that would most benefit from the energy east pipeline, including Alberta, Saskatchewan, and New Brunswick, yet not one member has stood up in this place and defended the the pipeline. Not one of those members has stood in this place and said, “I endorse energy east”. Quite frankly, that is shameful, because their home provinces know the benefits that the pipeline could bring to Alberta, Saskatchewan, and New Brunswick.

Quite frankly, that does not matter to the government. The government is anti-oil and anti-pipeline, as we have seen time and time again. Instead, it has penalized average working Canadians. It has penalized Canadians by not allowing them to put more money into a tax-free vehicle, and when I ask, when did it become a bad thing to allow Canadians to save more of their money tax free, I have an answer. It occurred on October 19 of last year, when the government decided to penalize hard-working Canadians and prevent them from saving their money tax free.

Bill C-2 is a bad bill, and I will vehemently oppose it, as everyone on this side of the House will as well.

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

Mr. Speaker, where do I start my defence against that? Some 6.7% of Canadians maxed out their TFSAs, yet the party opposite deemed it proper to double the contribution amount. What will that do?

The rhetoric from the party and the member opposite, quite frankly, is unbelievable. Canadians made a decision on October 19 to throw out a party that was tired and outdated. The Conservative Party was asked to take a back seat, and people moved forward with a Liberal government.

Would the member not agree that Canadians made the right choice on October 19?

[Tom Lukiwski, Conservative, Moose Jaw—Lake Centre—Lanigan, SK]

Mr. Speaker, not only will I not agree with that, but I think the people of New Brunswick would agree they made the wrong choice on October 19.

We have a member who finally stood up in the House to make comment on a government bill. Was it to support energy east? No, it was not. I would ask the member to go back and take a poll of the constituents in his riding to see how many constituents who voted for him on October 19 now wish they had never done so, because they have a member of Parliament who does not stand up for the interests of his province. He does not stand up for energy east.

One thing is clear. On October 19, Canadians made a choice, but increasingly they have discovered in the first 120 days that they made the wrong choice.

The House resumed 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.

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

Mr. Speaker, I would not turn down the opportunity to ask a friend a friendly question of sorts.

This legislation would do something positive for Canada's middle class. If the bill were passed, it will give substantial tax relief to Canada's middle class. If members vote in favour of it, they will be voting in favour of a tax cut for the middle class.

Would my friend not acknowledge that many Conservatives in the past would have voted in favour of tax cuts? This is one that Canadians could truly get behind. Over nine million Canadians will benefit if this legislation is allowed to pass. Is my friend seriously looking at supporting the legislation?