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

[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.

[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, 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.

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

Mr. Speaker, I would like to thank my colleague from Louis-Saint-Laurent. I found his remarks very interesting. He is a good speaker. It spices up the debate.

I would like to begin my question by pointing out a comment that he made at the beginning of his speech. He said that when the Conservatives were in power, they made responsible tax cuts. He mentioned the GST. According to the data that I have, the lowering of the GST from 7% to 5% over two years and the corporate tax cut cost over $16 billion, which completely eliminated the surplus that the Conservatives inherited, even before the recession hit.

The member should be careful about making comparisons that are not quite accurate.

However, one thing he did not mention in his speech that is in Bill C-2 is the TFSA limit. We know that the previous Conservative government wanted to increase the limit to $10,000. One thing we do agree with in this bill is the decision to bring the limit back down to $5,500, but to index it. We support this measure because many people think a TFSA is meant to be a place to put money that will generate interest, which will not be taxable. However, the tool can be used for many other purposes, including purchasing shares and all kinds of other financial tools. Capital gains on these tools would ultimately not be taxed.

The parliamentary budget officer estimated that this measure would cost about 0.7% of Canada's GDP in the medium term. I would like to hear my colleague's thoughts on why the Conservatives always wanted to increase the limit to $10,000, even though that would have had disastrous consequences for the Canadian economy.

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

Mr. Speaker, on behalf of my political party, I am pleased to speak in the debate on Bill C-2.

As we have seen just now, Bill C-2 contains the initial application of the new Liberal government’s financial measures. We recognize that Canadians spoke last October 19. We are true democrats. We respect the choice made by Canadians, and we want the government to respect Canadians.

The first thing that the government and any politician must respect is the commitments made during the election campaign. Unfortunately, in that regard, the least we can say is that this government got elected by saying one thing and is now doing exactly the opposite.

Bill C-2 is the first manifestation, if we needed one, of this sad reality. I said so just now in the question that I asked the Parliamentary Secretary to the Minister of Finance. Of course, we are all members of Parliament. However, he spoke as a parliamentary secretary, and I am happy to repeat publicly what I said before: this guy should be in cabinet and not just a parliamentary secretary.

What the member said just now is that, unfortunately, election promises could not be kept. With all due respect to the Parliamentary Secretary to the Minister of Finance, he did not answer the question. The Liberal Party made a commitment to bring in tax changes that, it said, would benefit the greatest number of Canadians. It is a point of honour, because it is a cornerstone of its platform. Those tax changes were supposed to be revenue-neutral. However, now reality has caught up with the Liberals: this government is making tax changes that are not revenue-neutral, but rather create a deficit.

That deficit is $1.7 billion. The parliamentary budget officer also says so, the very one quoted by the President of the Treasury Board just a few minutes ago as saying that everything is hunky-dory. I presume that the government has great respect for this institution, but this institution says, in black and white, that the tax changes made by the government in Bill C-2 will generate a deficit of $1.7 billion.

Not long ago, I heard the member say that families are content and that people are happy that money is being put in their pockets. I am quite sure people are happy, but can we afford that? No. When we do that, we must do so realistically, responsibly, and in a balanced way. Let us remember that our government, under the leadership of the right hon. member for Calgary Heritage, put forward measures to reduce taxes, at zero cost. There were 140 such measures in all.

Let us remember the most spectacular measure, taken in the first term: we lowered the GST from 7% to 6% and then from 6% to 5%. We promised to do that, and we did it. Need I also remind the House that years ago, the predecessor of the member for Saint-Maurice—Champlain, the Right Hon. Jean Chrétien, made an election promise in 1993 to abolish the GST? He never did abolish it, which led to a by-election to replace the minister, who left.

Sure, tax cuts are nice and changes to taxation are nice, but they have to be made realistically and responsibly, which is not the case with Bill C-2.

This is not the only time the government has made a promise about finances but done the opposite. Changes to the tax structure will cause a $1.7-billion deficit, and the same goes for changes to family benefits. The Liberal government is acting the same way. It promised that its changes would be revenue-neutral, but reality is catching up with it.

Changes for families, represented by the hon. member for Québec, the Minister of Families, Children and Social Development, my colleague and neighbour, were not supposed to cost anything. However, they are causing a $1.4-billion deficit.

Need I remind the House that the financial cornerstone of this government or any government is, without doubt, the budget? What did the Liberal Party say about the budget during the election campaign? It said there would be little wee $10-billion deficits for three years followed by a balanced budget and that everything would be fine.

The fact is that there will be a $24.9-billion deficit this year. That is the reality of this government: it says one thing but does the opposite. It promises a balanced budget but ends up in the hole. It says we will have small deficits but ends up with big ones. How are we supposed to trust this government? How can we believe a thing it says?

How can people not be even more cynical about politicians when, unfortunately, the government stands out so distinctly for promising one thing and then doing the opposite?

I am appealing to the government's common sense, and I am inviting it to make some changes and stop living beyond its means. A deficit is a burden for our children and grandchildren. Some will say that this is good for families and children. As I understand it, we are passing the burden to families and children. That is not a responsible approach.

Some colleagues opposite will say that when the Conservatives were in power, they ran up deficits. When we were in power and the right hon. member for Calgary Heritage led Canada, the country faced the worst global economic crisis since the Great Depression of the 1930s. Despite this terrible situation, we won the G7 triple crown because we were in power and because the Conservatives had a prudent and rigorous approach to managing the country. We are the best in the world with respect to the three fundamental aspects of the economy. We like to compare ourselves to the best in the world, because that is how we get good. We won the G7 triple crown under the rigorous management of the former government led by the right hon. member for Calgary Heritage. We had the best debt-to-GDP ratio, the best job creation record, and the best economic recovery. That is our government's legacy.

I want to emphasize the best debt-to-GDP ratio. We often hear the people currently in power say that they have the best debt-to-GDP ratio, which makes it possible for them to incur a deficit. It is because of the Conservatives that Canada has the best debt-to-GDP ratio. Had we used the Liberals' approach to managing the country during the economic crisis, we would not be the best. We would be the worst. They are making bad decisions.

I would like to remind Canadians that we left the House clean. We won the G7 triple crown. We had the best debt-to-GDP ratio. We left a surplus. We are not the only ones to say so. When the current government came to power, in November, what was the state of our finances? We had a $1-billion surplus. I am not the one saying so; the Department of Finance said so.

I got a document out of my desk, but I cannot show it. Why do I have it? I keep it close by because it is crucial to always remember what is fundamental to our political action. We are here to vote on legislation and budgets, but we must always have accurate information.

The Department of Finance indicated in the “Fiscal Monitor”, which is published by that department, that there was a $1-billion surplus for the period from April to November 2015. That has the Conservative government's signature all over it. That is how we left things financially. Unfortunately, the current government is living beyond its means.

I would like to say one last thing about the document I cannot exhibit. I think we have asked for this official document to be tabled at least 50 times. Unfortunately, the government systematically refuses to table a simple document that confirms our sound and good management.

In our view, the best thing for the Canadian economy is clearly wealth creation and job creation. However, wealth and jobs are not created by the government, but by private businesses, our entrepreneurs, our men and women who, through their intellect, enthusiasm, determination, and community leadership, create jobs and wealth. The government needs to be there to support them.

With deep sadness, our entrepreneurs have realized that there is absolutely nothing in the budget to help them. That is our vision.

The Conservatives believe that to help our businesses grow, markets need to be opened up. I have the great privilege of sitting next to my hon. colleague from the Vancouver area, who was the minister of international trade. For four years, with honour, dignity, and success, he conducted the negotiations on the trans-Pacific partnership, which is providing Canada and Canadian business people with access to a market of 800 million people. It is fantastic.

We are asking the government for assurance that this treaty will actually be ratified and the guarantees offered to our workers across Canada will be honoured, particularly regarding the famous issue of supply management.

In Bill C-2, we see that, unfortunately, that vision is not the right one, from our perspective. That is where the heart of political action lies. What vision do we have for the future of Canada? For us, the Conservatives, it is clear. It must also be said that for the Liberals too, it is clear. In our view, it is not the right one.

We believe that we have to live within our means, that we should not run a deficit in times of prosperity, which is in fact what was said by the Right Hon. Paul Martin, the former prime minister of Canada, but more importantly, the former minister of finance in the Chrétien government. In fact, his memory was honoured, not in the funereal sense, but for his historical importance to our nation, our country, when his portrait was unveiled just a few days ago.

Paul Martin said that in times of prosperity, the deficit must be eliminated and, above all, the debt paid off. That was a vision that we share and that, unfortunately, seems to have faded over time in the Liberal Party. To us, it is clear: you do not run a deficit when the country is prospering. The Liberal government has quite a different vision.

It is crystal clear. With Bill C-2, we see a government that shares not exactly the same vision, point of view, attitude, or policy as we had under our former leadership for the last 10 years. Let me be clear, in the last 10 years, our former prime minister was very strict on public funding, but first and foremost we left the House clean. There was a $1 billion surplus at the end of our mandate and also the big three of the G7: the best ratio of debt to GDP; the best at creating jobs; and the best in getting back our economy after the crisis. That is the Conservatives' signature. This is how we left the House. It was a really clean, good House left by the former Conservative government.

However, today what we see is a government that spends too much. It is a government that does not respect the fact that we have to live on what we have, instead of what we wish to have. When we create deficits in that situation, we send the bill to our children and grandchildren, even to those who are not born today. They will have to pay for the fact that today the current government is doing it all wrong and making bad decisions for the future of this country.

It is not too late. Maybe the government will open its eyes and make some modification, maybe. It is not too late. The bill is not yet passed. I can dream. I am a dreamer; not all the time, but I am a dreamer.

We strongly disagree with this attitude. Every party wants to give money to the people. We did that 140 times when we were in power. We reduced the debt, reduced the taxes, reduced income tax, and all that stuff. We did that 140 times in our government, but we did it very responsibly, which is not the case in this bill.

I hope that this House will reject Bill C-2.

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

Mr. Speaker, I wish to acknowledge my friend from Shawinigan. I am sorry, I mean the hon. member for Saint-Maurice—Champlain. When I see him I think of the Right Hon. Jean Chrétien, who of course was the member for that riding for many years.

I want to assure the hon. member that I hold him in high regard. He is a new parliamentarian, an intelligent, articulate man who works hard. He does not have any good ideas, but I have the utmost respect for him nonetheless.

I want to repeat what he said a few moments ago. He said, “We are going to do what we said we would do.” With all due respect, that is not exactly true because that party was elected on a promise that the tax changes announced in Bill C-2 would be revenue-neutral. Unfortunately, it turns out that there will be a $1.7-billion deficit. It is not the Conservatives that are saying so, but the parliamentary budget officer, whom the President of the Treasury Board was quoting earlier.

Could the hon. member explain why he says he is going to do what he promised to do, when in fact there is a deficit where the cost should have been nil?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Mr. Speaker, I would like to thank you for your wise remarks. We are talking about respect in the House and listening to one's colleagues.

I will come back to the important Bill C-2. As I was saying, during the election campaign, we promised to help the middle class because it drives our economy. When we consulted Canadians from coast to coast, they asked us to help them and their families and to grow the economy.

The first thing we did to help the middle class was to lower taxes, because we strongly believe that that is how we can help Canada's economy. That was the first thing we did, because Canadians told us that they wanted more money in their pockets in order to help their families and to grow the economy.

The second measure we are implementing, which was a key component of the latest budget, is the Canada child benefit. Members will understand that this is probably the most significant social measure since the introduction of universal health care in Canada. This measure will help nine out of 10 Canadian families and allow for simpler, tax-free benefits. This will truly help the families who need a bit more money. For example, it will help families send their kids to summer camp this summer and buy back-to-school clothes. This is exactly the kind of measure that Canadians want.

The second thing people asked us for was to grow the economy. In our budget, we included significant measures for infrastructure. We committed to investing $11.9 billion in infrastructure. When we travelled across the country, people told us that public transit was a big part of what we had to do. In our society, moving people and goods is essential to economic activity. It not only costs more money when people cannot move freely, but it also has a significant impact on our economy. We therefore made a historic commitment of $3.4 billion to be invested in public transit.

Now, let us talk about the important topic of water and waste water. We are also making around $5 billion in investments in this area. These investments will make it possible to rebuild wastewater systems or invest in infrastructure, so that we can take charge or work with the provinces and territories to improve our country's wastewater treatment systems.

There are some very flagrant cases. We know that some communities still discharge sewage without primary treatment. We know how damaging that can be to the environment. The case involving Montreal, with Mayor Coderre, was quite clear. We have seen the impact that can have, and that is why we decided to make a historic investment in this area.

I would like to talk about social infrastructure. Historic investments are being made in what is known as affordable housing for Canadians. Such investments will help us move forward, just as our historic investments in innovation will help to achieve the kind of economic growth in this country that Canadians expect.

As far as Bill C-2 is concerned, I can say that people have had more money in their pockets since January 2016 and they have realized how important that was. The Conservatives often tell us that, from their perspective, promises have been broken, but I can assure the House that investing in middle-class Canadians and reducing their taxes was what had to be done. That is what Canadians really wanted.

I have the privilege to be here today and to take part in this important debate on Bill C-2, An Act to amend the Income Tax Act, at third reading, with a view to providing Canada’s middle class with a long-awaited tax break.

Since January 1, 2016, no fewer than nine million Canadians have been benefiting from this tax break. It is very important to understand that nine million Canadian men and women have been benefiting from this tax break since January 1.

The Liberal Party of Canada made this commitment during the election campaign. Since January 1, people have been benefiting from this tax break, which will enable us to invest in the economy. Canadians in every part of the country were asking the government to make investments and help their families. That is what we are hearing more and more, and that is exactly what this very important measure will enable us to do. The government was elected on the basis of a plan to grow the economy, and these changes are an important first step.

Personally, I made business and the law my career. I saw this investment as important, because it is exactly the kind of investment that helps the economy grow: putting more money in the pockets of Canadians.

The bill in question amends the Income Tax Act to reduce the second personal income tax rate from 22% to 20.5% and introduce a new personal marginal tax rate of 33% for taxable income in excess of $200,000.

During our campaign, we clearly stated our intention to help the middle class. It was the key point in our campaign. However, we also expected people with higher incomes to do more. Helping one another is part of the Canadian spirit and our identity. It was in the context of that promise that we announced our intention to Canadians. Today, I am happy to speak in the House about the fulfillment of that promise through Bill C-2.

This bill also amends other provisions of the act to reflect the new rate of 33%. It contains a number of rather technical measures. Obviously, when you change the top marginal tax rate in Canada, that entails a number of changes in the Income Tax Act. A number of provisions in the Income Tax Act are based on the marginal tax rate, which will now rise to 33%.

It also amends the act to reduce the annual contribution limit for tax-free savings accounts from $10,000 to its previous level, which, with indexation, will be $5,500 for 2016, effective January 1, 2016. We proposed to reduce this amount because we saw that only 6.7% of Canadians had taken advantage of the cumulative total that they could contribute to a tax-free savings account.

We told Canadians that our government would be based on science and facts. This measure was good public policy because, in its previous form, it benefited only a small group of Canadians.

We were elected to take measures that would benefit our economy, the middle class, and those who are working hard to join it. In December, at the first opportunity, the Minister of Finance introduced a tax cut that will put more money directly into the pockets of the middle class. I think Canadians realize that. On October 19, people made a wise choice. People wanted a government that would work for them, for the middle class, for those who are working hard to join the middle class, and for Canadian families.

As I said previously, some nine million Canadian men and women will benefit from this extremely important measure for equity and fairness in our country. The middle class has waited too long for an improvement. Despite the difficult economic situation, we have helped the middle class. We made a promise, and today I can say that we have kept that promise. Income tax has been reduced.

After this bill was introduced, our government tabled the 2016 budget, which is an essential step in ensuring economic growth and revitalizing the Canadian economy. Canada was built on optimism, often in the face of challenges that seemed insurmountable. However, the promise of a better life was broken over the past 10 years.

The confidence of many middle-class Canadians in the economy was shaken, and we wanted to restore it. For once, Canadians have a government that is standing up for them by taking measures that will promote economic development, while at the same time taking into account the most vulnerable people in our society, those who are in the middle class, and those who want to join it.

As I was saying, Canada was built on optimism, often in the face of challenges that seemed insurmountable. Even though our economy is still growing, middle-class Canadians are having difficulties.

Since I was elected, one of the most edifying things I have had the privilege of doing is to meet with those Canadians, from Moncton to Yellowknife. I went to small towns and meetings around the kitchen table where people explained their economic problems and the ways we could help them.

For once, we consulted people who had never been consulted before. It was the first time they had expressed their opinion on the federal budget and told people from the Department of Finance and the Minister of Finance, obviously, or me about their desire to see the Canadian economy grow and the need for inclusive growth.

For too long, middle-class people, families, and our young people were excluded from that growth. We had to restore such measures to benefit families and middle-class people.

Many Canadians are working harder and longer, while the cost of living keeps climbing. I remember meeting a family in Quebec City who asked for our help because they were no longer able to make ends meet. People told us that they needed a government that would listen to them, and that is exactly what we have done.

Middle-class families simply do not feel as if their lot has improved in the last 10 years, and the facts bear that out. That is why we took resolute action on January 1 to put money back in the pockets of middle-class people. The time has come to look to the future once again with the hope and optimism of the generations that came before us.

Mr. Speaker, you have often said, in your wisdom, that the privilege of being a member of this House lies in understanding the great institution of which we are part and always keeping in mind the people who sent us to Ottawa to work for them. That is precisely what we did when we listened to them and took action in this area.

We must embrace the spirit of our country’s founders and build on that legacy by creating opportunities for advancement and mobility that are as vast as those that existed in the past. We have to do so in a way that enables Canada to realize the enormous potential for growth that can come from switching to a low-carbon economy, where clean technologies and economic growth go hand in hand. We already have the keys to that future.

This week, the Minister of Finance had his first meeting with the Advisory Council on Economic Growth, which is composed of eminent experts from around the globe. That committee will work hard to put forward measures designed to promote inclusive, long-term growth in Canada.

That morning, I had the opportunity to participate in that very interesting meeting chaired by Dominic Barton of McKinsey. I should point out that it is the first council with gender parity. I am pleased that our advisory council has as many women as men from all sectors of the economy who talked to us about growth and innovation.

Let us imagine the Canada of the future and identify our strengths, but let us also be conscious of our country's demographic challenges and the fact that the Canadian economy accounts for 2% of the global economy. We must draw inspiration from best practices employed elsewhere in the world if we want to understand how to promote a stronger economy.

We are going to do what we said we would do. As we said with respect to the advisory council, we already have the keys to the future. Yes, we have challenges here in Canada, but we also have tremendous opportunities and a highly educated population.

Our country has vast natural resources. We can count on stability, predictability, and the rule of law. Those features will attract investment here.

As I said, Canadians are among the best-educated people in the world. We rank first among members of the Organisation for Economic Co-operation and Development, the OECD. More than half of all Canadian adults have a post-secondary degree, and everyone here knows that education is the foundation. No society has experienced strong economic development without having made education a priority. That is exactly what we are doing, and Canadians have one of the highest levels of post-secondary graduation.

We are world-renowned for our research and scientific discoveries. We are often on the cutting edge of clean technology, which is becoming increasingly prevalent internationally.

This is important because Canada invests a great deal in research and development. We now realize, however, that we need to do more in the way of marketing. We have to move from research and development into producing a product. Once we have a product, we need a customer, and once we have a customer, we can hope to export our product. That is how we will successfully create economic growth in Canada.

We have an abundance of natural resources that are surpassed only by the ingenuity and diversity of our people. That is also important. I often say that our greatest resource is human capital. We know, and I am sure that all my colleagues on both sides of the House will agree, that the greatest capital we have in Canada is human capital. Canadian men and women have achieved extraordinary things that have advanced humanity.

My colleague, the Minister of Transport, is a great example. He has done extraordinary things for this country. He went into space. He taught an entire generation of young Canadians, myself included, how we could dream big and realize our dreams through excellence. If there is one man who embodies excellence in Canada, it is the Minister of Transport, because not only did he give young Canadians a glimpse into space, but now he is serving his country with distinction as a member of Parliament, like all my colleagues.

Given that we have one of the lowest debt-to-GDP ratios in the G7, we know we can make these wise investments for the middle class. The Minister of Finance has been applauded by the Financial Times and the Wall Street Journal, by Ms. Lagarde of the International Monetary Fund, and by officials at the OECD. They have said that Canada is building its future on a solid foundation.

I will use my last few seconds to say how proud I am to have worked with my colleagues on both sides of the House, listening to Canadians. We drafted a budget that not only works for Canadians today, but also builds on a solid foundation to ensure that the Canada we have today will continue to prosper for decades to come.

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

Mr. Speaker, first of all, I am pleased to speak today to Bill C-2, which would lower taxes for the middle class.

The House proceeded to the consideration of Bill C-2, An Act to amend the Income Tax Act, as reported (without amendment) from the committee.

Excise Tax Act

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Yes. We are going to see real change, Madam Speaker, with the new government, I can assure the member of that and I will talk a bit about that real change.

I suspect, if we would have had a dialogue with the Conservative minister of finance at the time, the types of arguments he would have been bringing forward would have been something to the effect of, “What is the actual cost?” and “Where are you going to get the money to replace it?”

We are talking an estimated $200 million a year, in terms of lost revenue. An hon. member has just indicated that it is less than $100 million.

I think we should take a look at the percentage difference, because it is important for us to recognize, and I do believe the member did, that there are current rebates. When we talk about the actual dollar amount, my understanding is that it is closer to $200 million over the years.

If we take a look at those selected boards where there are rebates, and we are talking about the municipalities, as has been pointed out, in I believe 1994 the rebate was raised to 100%, recognizing through our municipalities the important role they play. There were different types of stakeholders at the time that articulated why we needed to move in that direction, and it was 2004. I believe it was a Liberal administration back then that recognized that this was something that had some value to it.

We also give exemptions to universities and public colleges of somewhere in the neighbourhood of 67%. If we take a look at our school authorities today, and this is what the member is trying to enhance, it is estimated at about 68%. Then for hospital authorities, facility operators, and external suppliers it is based on 83%.

What we are really talking about is that gap between 68% and 100%, and this is what the member is advocating for.

I know a question was put forward to the member with respect to the type of consultation or representations that might have been made to the member. I am not too sure in terms of exactly where the provinces themselves might be at.

We also need to take into consideration, when we talk about school boards or school entities, that there are public entities and there are private entities. I am not 100% clear, but I believe that the member across the aisle, by his actions, is implying that it would apply to both private and public. I do not know to what degree there would be an additional cost, but I can assure members that there would be an additional cost factor to it if we have both private and public.

I think the current government has been very clear in terms of what our taxation priorities are. We do recognize the need for reforming our taxation. We have seen some of the most significant changes probably in the last 15 or 20 years in terms of taxation policy with an underlying theme that what we want is for taxation to be fair. We want people to be paying their fair share.

That is why one of our government's first initiatives back in December was Bill C-2 which provided a middle-class tax break which will ultimately benefit all Canadians indirectly and nine million directly. That was a very important priority of this administration. Along with that particular tax change, we saw a tax increase for Canada's most wealthiest, those who have an income in excess of $200,000 a year, again with the idea that Canadians expect a fair taxation policy.

The Government of Canada has not given up. We recognize there are many inequities within our taxation policies. That is one of the reasons we made a commitment to strengthen the middle class and grow the economy in the long term. The government made a commitment for the coming year to undertake a review of the tax system as a whole to ensure all tax measures are fair, efficient, and fiscally responsible.

It is very important to recognize that the federal government has a responsibility to work with the different stakeholders and get a sense from them where they believe the inequities are and how we might be able to assist in trying to cure some of those inequities while at the same time establishing some priorities as to where we might be able to act.

Would it not be wonderful if the Conservatives had left us in a better situation as opposed to a deficit? Would it not be wonderful if they had provided us with a better situation? Would it not be wonderful if we could just wave a wand and see if we could deal with all tax inequities and deliver the types of tax breaks that we on the Liberal side would like to deliver? It might take a bit of time in order for us to do that.

Do not underestimate the commitment of this government and our ability to work with others to deal with issues that come before the House of Commons, like the member opposite who brought forward Bill C-241. We recognize that is an issue which we will have to look at.

I would suggest to the Parliamentary Secretary to the Minister of Finance or the Minister of Finance that in the negotiations and the consultations that will take place going forward, one of the agenda items could very well be the issue of our school divisions both public and private.

I would encourage the member across the way to continue to lobby any way he can. I know through consultations with the Government of Canada what we have seen is a genuine commitment to work with Canadians, consult with Canadians on the very important issues of tax fairness. I can assure members as we witnessed even in that small window from the moment in which we took office to the time we presented legislation on tax fairness to the presentation of the budget, that thousands, and if we factor in the Internet, hundreds of thousands of Canadians were brought in to the circle of consultation in the hope of improving our system.

The good news to the member across the way, even if he does not get what he wants within this legislation, that at the end of the day, he is looking across the way at a government that is genuinely concerned about reforming our tax system. We will do our work in terms of talking to the many different stakeholders, because we want what all Canadians want, and that is a higher sense of tax fairness.

[Trevor McGowan]

No, they're separate measures.

This is actually more closely related and is a purely consequential amendment to the introduction of the new top marginal rate. The proposed amendments that you mentioned that deal with the donation of proceeds from the sale of real property or private company shares to a charity were announced in budget 2015, and two were to have become effective in 2017. They've not been included in the bill and they were never enacted. In budget 2016, the government announced its intention to not proceed with those proposed amendments.

The proposals in Bill C-15 are unrelated to those. What they relate to is, as I said, further consequential refinements to the charitable donation tax credit that followed from the introduction of a new top marginal rate. Individuals can obtain a charitable donation tax credit in respect of their gifts. Currently—and this is not proposed to be changed—it's 15% on the first $200 of gifts. Previously, and previous to Bill C-2 and this, it's $29% on gifts in excess of that.

Those sets of proposed amendments provided, back in December, a set of rules that—to the extent you're an individual and you have income in the top marginal bracket so it's now taxed federally at 33% instead of the 29%— effectively, given the old rates, gave you a deduction. For people who are taxed at lower rates, it provided an incentive.

For people who have income in the top marginal bracket that is subject to the top 33% rate, the Bill C-2 amendments would provide a 33% tax credit. Following up on the government's announcement, those amendments that are in Bill C-2 provided further refinements to that policy, specifically for trusts. As I mentioned before, most trusts are actually subject to flat taxation, so all of their income is taxable at the top marginal rates.

What these amendments would do—as well as, in fact, replace what is in Bill C-2—is provide that, if you have a trust that is subject to top flat-rate taxation, it can access the new 33% tax credit to offset its income that's taxed at the top rate. It doesn't have to be income in excess of $200,000, because their first dollar of tax is taxed at 33%. It ensures that trusts have the same incentive to donate as high-income natural individuals.

Second, it provides that, in situations where you have a trust, a taxation year can straddle the end of 2015. It starts in 2015 and ends in 2016. It, for that year, can be subject to the.... That might be the case for a graduated rate estate where an individual dies mid-year. It can be subject to the top marginal rate of 33% on its income for the year. This would provide that gifts made before 2016—in the first part of that taxation year that straddles the year-end—can qualify for the new higher 33% tax credit as well, so that they get an effective deduction against their income taxes for those gifts.

[Phil McColeman, Conservative, Brantford—Brant, ON]

I am still not 100% clear. Perhaps I might ask you about the best way for most people who are in the situation of having set up trusts for their disabled children and would like to know the consequences this tax increase may have for their families.... When the beneficiary, who is disabled, stops receiving it because they are deceased, what happens in the case of the rest of the family members, who are left to close things up in terms of that trust?

I would like more clarification, if you could, with real examples from you, as to how this tax treatment changes for typical, average families who have set up these trusts—and there are many of them across this country.

I will move on, because I know we are limited in time, so if you could provide that—maybe two or three examples, if there are variables in there that I haven't hit on—I would really appreciate it.

Second, the same section of the notes we were given talks about the charitable donation tax credit in Bill C-2. This is where the government has moved to take away the ability that was previously put in for persons with real estate and such giving those to charity.... I don't totally understand the description you have given me here.

Again, in a situation where a person bequeaths to a charity assets in real estate, the previous government put into place rules that they could do that without taxation, and now there is going to be taxation on those, or this whole provision is going to be removed. Is this what that speaks to?

[Trevor McGowan]

The general rule for trusts is they're subject to taxation at the top marginal rate on all of their income. The two exceptions to that rule are qualified disability trusts and graduated rate estates that arise when an individual dies.

For qualified disability trusts, as you pointed out, the policy is that these are trusts that are set up to support a disabled individual. They are therefore provided access to the graduated rates and not the top rate of tax, which was 29% last year. Under Bill C-2, that would be 33%.

The access of a qualified disability trust to the graduated rates is predicated on the income of the trust being paid to an eligible beneficiary, someone eligible for the disability tax credit. If ultimately there has been income accumulating in the trust that has been taxed at these lower rates, and income is later paid to someone who would not be entitled for it to continue as a qualified disability trust, then the rules have what is called the “clawback” of the graduated rates. This essentially provides an additional tax in respect of the lower rate in previous years, where an amount has ultimately been paid out to a non-qualifying individual.

This would prevent, for example, a qualified disability trust from being set up notionally in support of someone who is actually disabled and who would normally qualify, but then, after earning income in the trust for a number of years and taking advantage of the lower graduated rates, ultimately being paid out to someone else—perhaps the settler of the trust or whomever—who doesn't qualify. That's the policy underlying the qualified disability trust recovery rules. That's why, with the amendments that are consequential to the introduction of a new top marginal rate, it follows. The existing rules reference the previous top marginal rate of 29%, and the new rules would reference or be built upon the new top marginal rates. That policy actually remains consistent.

[Pierre LeBlanc, Senior Chief, Quantitative Analysis, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

There is a stat that nine out of 10 families will be better off under the Canada child benefit than under the current system of benefits.

If you were to take other measures, the middle-class tax cut that was introduced on December 7, in Bill C-2, the elimination of income splitting for families with at least one child, the elimination of the children's fitness tax credit, and the children's arts tax credit, and took those together, you'd still be better off. One piece of analysis we did do is that about nine out of 10 families would be better off, so it's the net of all those measures.

[Trevor McGowan]

Part 1 implements certain income tax measures that were proposed in the March 22, 2016, federal budget. I'll go through each in order, as I'm aware of the time constraints.

It would eliminate the education and textbook tax credits.

It would exempt from taxable income amounts received as rate assistance under the Ontario electricity support program.

It would maintain the small business tax rate at 10.5% for the 2016 and subsequent taxation years, and make consequential amendments to the dividend gross-up factor and dividend tax credit rates.

It would increase the maximum deduction available under the northern residents deduction as well as eliminate the children's arts tax credit, and eliminate the family tax cut credit. It replaces the Canada child tax benefit and universal child care benefit with the new Canada child benefit. It would eliminate the children's fitness tax credit and introduce a new school supplies tax credit.

It would extend for one year the mineral exploration tax credit.

It would restore the labour-sponsored venture capital corporations tax credit for purchases of shares of provincially registered labour-sponsored venture capital corporations for the 2016 and subsequent taxation years.

It would introduce changes consequential to the introduction of the new 33% individual tax rate that's in Bill C-2 currently.

Part 1 also implements other income tax measures that were announced by the previous government, but had not been enacted. The current government's intention to proceed with these was announced as well in the March 22, 2016, budget.

These include: amendments to the anti-avoidance rule in the Income Tax Act that prevents the conversion of capital gains into tax-deductible intercorporate dividends; a measure qualifying certain costs associated with undertaking environmental studies and community consultations as Canadian exploration expenses; rules ensuring that profits from the insurance of Canadian risks remain taxable in Canada; amendments ensuring that the dividend rental arrangement rules under the Income Tax Act apply where there's a synthetic equity arrangement in place; rules providing specific tax rules in respect of the commercialization of the Canadian Wheat Board, mainly including a tax deferral for eligible farmers; a measure permitting registered charities and registered Canadian amateur athletic associations to hold limited partnership interests; rules providing an exemption to the withholding tax requirements for payments by qualifying non-resident employers to qualifying non-resident employees; rules limiting the circumstances in which the repeat failure to report income penalty will apply; amendments permitting the sharing of taxpayer information within the Canada Revenue Agency to facilitate the collection of certain non-tax debts; and lastly, amendments permitting the sharing of taxpayer information with the office of the chief actuary.