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

[Salma Zahid, Liberal, Scarborough Centre, ON]

Madam Speaker, I would advise the hon. member that it is important to look at our government's agenda to support middle-class families and grow Canada's economy in its totality.

These tax changes and the coming Canada child benefit will benefit nine out of ten Canadian families. According to the parliamentary budget officer, more than 315,000 children will be lifted out of poverty.

Historic infrastructure benefits are coming. By investing in transit, we will make it easier for families without a car to get to work. Investments in social infrastructure are coming. New senior centres, community centres, and child care facilities will help ensure families can go to work knowing their children and their elderly parents are cared for.

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

Madam Speaker, I think it is very clear. Never before, at least from my perspective, has a Prime Minister been so committed to assisting the middle class.

Contrary to what the Conservatives and New Democrats might want to talk about, the reality is that the middle class in Canada is a focus of this Liberal government.

The member has already talked about the child benefit program, which will enhance the wealth of the middle class. The tax cut in this legislation will enhance the wealth of the middle class. Would she not agree that the Government of Canada, more so than in the last two decades plus, is actually seeing the middle class as a strong component, and that by enhancing the middle class, we will have a healthier economy in the long run?

[Salma Zahid, Liberal, Scarborough Centre, ON]

Madam Speaker, yes, I agree. The middle class in this country has been ignored for a very long time. We all have to recognize that the middle class is the backbone of any economy. When people in the middle class have more money in their pockets, they will spend that money to invest and grow the economy.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Madam Speaker, it is a pleasure to add my voice to today's discussion on the government's middle-income tax cut, which we introduced in December 2015.

Before I touch on the legislation, I will begin by taking a few moments to extend my congratulations to the Minister of Finance and his parliamentary secretary for pursuing one of the most comprehensive pre-budget consultations in recent history.

The 2016 pre-budget consultations began when the Minister of Finance held a Google hangout with eight Canadian universities on January 6 to get the views of students and faculty on how to best grow the economy. On January 11, the minister and his parliamentary secretary struck out on a six-day tour in an effort to speak to as many Canadians as possible. They hosted upwards of 26 separate meetings and round tables with stakeholders and Canadians across the country, beginning in Halifax.

In addition to these meetings, the minister spoke to full-capacity crowds at the Halifax Chamber of Commerce, the Montreal Council on Foreign Relations, and the Surrey Board of Trade, with a total attendance of well over 1,500 people.

For those Canadians who have not been able to make it out to meet the minister and the parliamentary secretary personally, they can continue to share their ideas and comments through various online channels, such as the Your Money Matters Facebook page and hashtag #pbc16.

Through our pre-budget consultations, we are engaging with Canadians, looking for input on how the federal government can best support the middle class and those working hard to join it, meet infrastructure needs and help grow the economy, protect the environment and meet local needs, as well as ensure that the most vulnerable do not get left behind. It is an ambitious list, to say the least, but one that respects Canadian values of honesty, hard work, and fiscal prudence.

I would like to thank all those who have and will contribute to the pre-budget consultations, whether in person or online. This input will be vital to ensuring that Canadians can direct and focus the decisions that our federal government can make. More importantly, Canadians will be able to see their contributions when the 2016 budget is tabled.

I want to assure Canadians that we are listening and we hope that this renewed interest by Canadians will make a better country for all of us; for our families and for our communities. We are hearing that Canadians want to push forward with our plan to grow the economy, strengthen the middle class, and help the vulnerable.

We have a clear mandate, and expectations are high. First and foremost, we are here to serve Canadians. They expect us to implement our ambitious economic agenda. They want a government that is open to the world. They want a more transparent government.

No one will be surprised to hear me say that the economy is going through a very difficult period. However, in the face of this real challenge, there is also real opportunity to put in place the conditions to create long-term growth that will create good jobs and help our middle class—the lifeblood of our economy—prosper. The plan for growth is more important now than ever.

The good news is that we have a plan to grow the economy, and we have already begun to implement the plan: we introduced the middle-class tax cut in December and tabled Bill C-2.

As of January 1, the middle-class tax cut is putting more money in the pockets of nine million Canadians each year. We are focused on smart investments that promote economic growth while maintaining a commitment to fiscal responsibility. We will improve economic prospects for our middle class, which is the backbone of our economy. We simply cannot call ourselves prosperous as a country if our middle class is struggling. This is why Bill C-2 is so important to Canadians.

I will now touch on the specifics.

Our middle-class tax cut and accompanying proposals would help make the tax system fairer by reducing the second personal income tax rate to 20.5% from 22%; introducing a 33% personal income tax rate on individual taxable income in excess of $200,000; returning the tax-free savings account, TFSA, annual contribution to $5,500 from $10,000; and reinstating indexation of the TFSA annual contribution limit.

We expect nine million Canadians will benefit from the reduction of the personal income tax rates, which are to take effect on January 1 of this year. Single individuals would see an annual tax reduction of $330 per year, and couples would see an average tax reduction of $540 every year. This measure would put more money in the pockets of Canadians to save, to invest, and to grow the economy.

In addition, the government is introducing a new personal income tax rate of 33% that would apply to individual taxable income in excess of $200,000. This means that only Canada's top income earners are expected to pay more tax as a result of the government's proposed changes to personal income tax. As with other bracket thresholds, the $200,000 threshold would be indexed to inflation.

Finally, the government is returning the tax-free savings account annual contribution limit to $5,500 from $10,000 effective January 1 of this year. Returning the TFSA annual contribution to $5,500 is consistent with the government's objective of making the tax system fairer and helping those who need it most. When combined with other registered savings plans, a $5,500 TFSA annual contribution limit would permit most individuals to meet their ongoing savings needs in a tax-effective manner. Indexation of a TFSA annual contribution limit would be reinstated so that the annual limit maintains real value over time.

Finally, let me quickly review some of the other measures that are included in today's legislation.

The bill proposes to change the current flat top taxation rules applicable to trusts to use the new 33% tax rate. It proposes to set the tax on split income to the new rate of 33%. It would amend the charitable donation tax credit to allow higher income donors to claim a 33% tax credit on the portion of donations made from income that is subject to the new 33% marginal tax rate. Finally, the bill would increase the special refundable tax and the related refund rate imposed on the investment income of private corporations to reflect the proposed new 33% personal income tax rate.

There has never been a better time to make targeted investments to support economic growth in this country. We are confident that our plan will accomplish this, and that is one reason why I am optimistic about our prospects going forward. Given that, I encourage all members to support this legislation.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Madam Speaker, the Liberals ran on a promise that there was going to be a revenue-neutral change. They were going to take from the rich and give to the middle class. It has become clear that this revenue-neutral change is going to be anything but. It shows poor math. We are looking at $1.4 billion, give or take—quite a few hundred million dollars. This is not temporary stimulus. It is not something that will happen just one time. It would add to the structural deficit of the government.

Does the member believe it is fair for his grandchildren to pay the Liberals' debt, which they will accumulate, for a tax cut that was given based on poor math?

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Madam Speaker, that is quite interesting coming from a member of a government that ran seven consecutive operating deficits in a row.

The Liberal government ran on a plan to help our middle class. This is the first step of that plan, a middle-class income tax cut. The plan includes an enhanced, more generous, and tax-free Canada child benefit, which would raise 300,000 children out of poverty, which is excellent. The plan includes a 10% increase to the guaranteed income supplement. This would give one million of our most vulnerable seniors up to $1,000 more each year. I am very proud of this initiative.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Madam Speaker, according to the Parliamentary Budget Officer, it is estimated that 17.9 million Canadians who will file income tax returns in 2016 fall within the first tax bracket of $45,282 or less. They are going to get nothing out of this tax break.

What do the Liberals define as the average income for the middle class? How do they classify those Canadians earning less than $45,000? I would like to hear from the hon. member.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Madam Speaker, it is certainly not up to me as an individual to define who is middle class and who is not. However, I can give the member some facts. Canadians who earn between $45,000 and $90,000 in 2016 would receive a 7% reduction on the taxes they pay. Their tax rate would fall from 22.5% to 20.5%, a 7% reduction. That would put $350 in the pockets of nine million Canadians in 2016.

In addition to that, we would roll out a more generous, targeted, and tax-free Canada child benefit that would raise 300,000 children out of poverty, an initiative that the NDP did not support.

[John Oliver, Liberal, Oakville, ON]

Madam Speaker, I want to congratulate the hon. member on his address.

The previous government's plan to nearly double the contribution limit to the tax-free savings accounts would have helped Canada's wealthiest save more, while costing the federal treasury several hundreds of millions of dollars over the next five years—tens of billions of dollars over the longer term—while only 6.7% of eligible Canadians were able to make the maximum contribution in 2013.

Could the member share with us the fairness of the Liberal plan for the tax free savings account?

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Madam Speaker, the member is absolutely right that the range of people who would benefit from the doubling of the TFSA contribution limit was simply not wide enough.

We proposed a plan based on a middle-income tax cut; we proposed a plan based on a more generous, enhanced, and tax-free Canada child benefit; and we proposed a plan that included a 10% increase to the guaranteed income supplement, which would benefit a million older Canadians. On October 19, 2015, Canadians endorsed that plan.

[Kevin Sorenson, Conservative, Battle River—Crowfoot, AB]

Madam Speaker, it is a pleasure to rise in the House to speak on behalf of my constituents in Battle River—Crowfoot. Battle River—Crowfoot is a new constituency. The boundaries changed in the last election, and I am fortunate enough to represent a new northern section. I want to thank them for their support in the last election. I pledge to work very hard for them in Ottawa.

I also want to thank my election campaign team and long-term supporters. In six elections, they were ready to campaign and help out, not just in my riding but around the country. Obviously I want to thank my family. I want to thank my wife Darlene and our children, Kristen and Ryan, and Kristen's husband Matthew for their love and support over the many years of doing this. I know all members know that without the support of their families and those they love most, they would be unable to do this. Whether it is my immediate family, my parents, or others, I want to thank them.

We are debating the Liberal government's destructive tax plan for all Canadians, including the middle class. It tears down many of the efforts that were developed to help families and workers, to ensure that taxes remained low for all Canadians, that there were balanced budgets, and that jobs were created for Canadians. These measures are affected by part of Bill C-2. The former government ensured that economic growth for Canada's economy was a priority.

I neglected to inform you, Madam Speaker, that I will be splitting my time with the member for Renfrew—Nipissing—Pembroke.

Since this bill was tabled in December of last year, we are very aware that the numbers of the Liberals simply do not add up. The Liberals' assault on higher income earners will not work. This is a tax hike on those who traditionally create jobs and grow our overall economy. It is a tax increase on professionals and on the educated. It is a tax increase on those who work hard and succeed.

By increasing taxes on job creators, we would be discouraging their success and jobs for Canadians with the passage of this bill. Canada's higher income earners would immediately launch many measures to protect themselves from paying such high taxes. The Liberals will not realize the rise in tax revenue that they are counting on to finance their small increase in benefits to the middle class on which the bill is supposed to deliver.

Not only are the high income earners going to task their accountants with pursuing and implementing measures that will ultimately prevent them from paying higher tax increases, but some of them will abandon their lucrative endeavours in Canada to reduce their incomes so they do not have to pay the increase. They will move their projects, in some cases offshore, Canadians will lose jobs, investors will follow these business leaders to their new locations, and Canada will lose investments.

We have seen this under former Liberal governments. When I ran in the elections in 2000 and 2004 as a new young MP coming in, like many here today, the top issue of the day was what we called the brain drain. We asked ourselves what we would do to bring back Canada's young, to bring back those who had moved to the states or Europe with their potential futures. What would we do to solve the brain drain? Economists are again predicting significant brain drain from Canada as the result of Bill C-2.

The federal government will not have the tax revenues to fund the schemes put forward by Bill C-2. The worst part of Bill C-2 for my constituents is the reduction of the annual contribution limit for the tax-free savings account, from $10,000 at its previous level to $5,500 starting January 1 this year.

Right now many families are experiencing the pain of unemployment. Many of my constituents work for companies that service the oil patch, and their lives are being disrupted. Households are being disrupted. Savings are being used in an attempt, in some cases, to save family homes, or to make the next payment.

TFSAs have been a very effective tool for all Canadians, young and old. Tax-free savings accounts are being cashed in by many constituents of mine in Alberta right now. Families are using their tax-free savings accounts to try to reduce their economic vulnerability to the oil price and also, in some cases, to their pending unemployment.

Meanwhile, the Liberal government is refusing to help get our petroleum products to seawater ports so we can export our products to our customers who are waiting and wanting to buy our products. When that happens, unemployment climbs. We are seeing that right now.

Any family that is not suffering significant loss of jobs is looking to save whatever amount of money it can. Families are saving now for the coming hard times they know will happen under the Liberal government.

The Liberals have promised numerous budgetary deficits that will expand our nation's debt and ultimately lead to higher taxes. In other parts of Canada, places not yet suffering from the downturn in the oil patch, some Canadians are still managing to put money into their retirement funds.

Many Canadians are saving as much as they can. Many Canadians are simply trying to park their savings, because they know that the downstream effects of the current downturn in Canada's energy sector will soon hit them in their pocketbooks.

We found out just a couple of days ago that Japan adopted a negative interest rate policy. Now where money is being held in the bank, it is now looking at ways of taxing it. In an uncertain climate there, people are sitting on their savings.

The loss in federal revenue from the oil patch in the coming years is going to affect Canada. Make no mistake, it will affect how the Liberal government will operate. It will affect how the Governor of the Bank of Canada sets rates. It will affect all Canadians, in the rural parts of Canada, in big cities, and in the remote areas of Canada.

Already, after three or four months, Canadians have no faith that the government will help the people in business in Canada's once-prosperous sector. They know about the coming hard times their families will suffer during the failure of the Liberal plans. They know they will see massive amounts of tax dollars that the federal government does not have being spent on misguided efforts, job creation efforts, and token attempts at diversifying local economies. The way the Liberals will deliver on those is yet to be seen. We are still waiting for a budget.

All I know is that Canadians are disappointed with a lack of action from the government. Many Canadians know that the Liberal government is in serious trouble. Based on Finance Canada's estimates, the new Liberal tax plan amounts to an average of an $6.34 per week for those individuals who qualify. Canadians feel betrayed; $6.34 to the middle class, and yet taxing those who are job creators.

We know this small tax break is not enough to stimulate our economy. Nor will throwing money at the middle class stimulate growth and innovation. It does not help create jobs. We have not seen anything from the government that is going to help with innovation, investing back into companies, or anything that is going to help create jobs.

Our Conservative government reduced taxes more than 140 times. This modification to the income tax rate that the Liberals are bringing forward is not significant tax relief and it comes with a high price tag in deficit financing. The policies of the government will be economically destructive. We know it will be for many decades down the road.

The Minister of Finance has already conceded that this tax plan is not revenue-neutral. In Bill C-2, it will plunge the Government of Canada further into deficits and debt. I guess that is what the Liberals deliver on. This is debt that will eventually put our social programs at risk, a debt that our children and our grandchildren will have to pay off. This bill fails.

Consequently, in representing my constituents, I will be voting against Bill C-2.

[Fayçal El-Khoury, Liberal, Laval—Les Îles, QC]

Madam Speaker, I am puzzled. The member says that this government is attacking those who have higher revenue and that this will disrupt the creation of jobs. The opposite is true. He knows very well that our massive investment in green infrastructure, in technology, and in social housing is what will stimulate the economy and create jobs. That is exactly what this government will do.

[Kevin Sorenson, Conservative, Battle River—Crowfoot, AB]

Madam Speaker, we have an oil sector that is reeling under added environmental red tape. We have an oil sector, one of the largest contributors to our economy, struggling under a New Democratic Party in Alberta. We have a sector that is the job creators. The hon. member tells the oil sector that it should not worry about it, that the government will invest in green energy. That is not much solace for the people who are left with house payments and are now on the unemployment line.

That is wonderful. The former government invested in that, as well. However, I guess it is the Liberal way to turn its back on the gas and oil sector, the energy sector, and say, as the member said, that it will invest in green energy and social housing to help people when they are unemployed.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Madam Speaker, I welcome my friend back. I very much echo his sentiments and words to our families and supporters who enable us to be in this place and to speak on behalf of the good people in our constituencies.

It is somewhat ironic to hear Conservatives criticize and lecture Liberals about running big deficits and debts. The Conservatives left government having run more than $150 billion in the hole and all we got for it was a loss of half a million manufacturing jobs in Canada. Canadians will continue to pay that bill for a while.

He has some notion or obsession, as the Conservatives did, around the doubling of the TFSA. It was commented on by Joe Oliver, the former finance minister, because we know that doubling balloons the cost to government by multiple billions of dollars within 15 years. When asked, the former finance minister said that it was not for us to worry about, that it was for the prime minister's granddaughter to concern herself with. The former finance minister sometimes struggled with metaphors. The point is that to suggest that we throw the cost down to future generations is a responsible thing for government to do seems the very opposite of the definition of “conservative”, that they should only pay as they go. This is coming from a government that broke with its own traditions and ballooned the debt. Maybe its tradition is to balloon the debt as was done under Mulroney and others.

How can the Conservatives possibly attempt to make this the point of the dagger when arguing against the Liberals? Is the projected debt the Liberals are going to run not high enough, or is it—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order, please. The hon. member for Battle River—Crowfoot.