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

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

Madam Speaker, from 2006 to 2008, the Conservative Government of Canada paid down the national debt, paid down just under $40 billion. We lowered the GST. We lowered taxes so investors knew that Canada was the place to do business.

In 2008, the world went into the largest recession since the Great Depression. Around the world governments were investing in infrastructure and stimuli. Our government did the same. With great pride, we invested in infrastructure in our cities and rural areas. Although the member talks about unemployment, 1.1 million net new jobs were created from 2009 to 2015.

It was a massive recession worldwide. It did not start in Canada or begin because of what happened here. However, the government responded.

With respect to the tax-free savings account, we all know, including the finance minister, if we read his book, that the third pillar of pension funds and personal investments for their pension and that is what we need to improve. That was why we brought forward the tax-free savings account. That was why we brought forward the pool registered pension plan. That was why we brought all these measures forward. Through CPP, OAS and GIS, that pillar is strong. We want to ensure—

[The Assistant Deputy Speaker, NDP, Carol Hughes]

I want to remind members that if you want to participate, you are to stand up to ask the question and to be respectful when someone else is speaking. I could see that there were many people who wanted to ask questions, so I would remind people to try to keep your questions brief, as well as the answers.

Resuming debate, the hon. member for Renfrew—Nipissing—Pembroke.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Madam Speaker, it gives me great pleasure to rise on this occasion as the member of Parliament in the 42nd Parliament of Canada. The people of Renfrew—Nipissing—Pembroke have my sincere gratitude for giving me the honour and the privilege of being their representative in this sixth consecutive election.

Now that the election is over, I renew my pledge that I never forget the people who made this possible, the good people of Renfrew—Nipissing—Pembroke. They can be assured that I will continue to fight for the issues that they tell me are important. As always, I am their servant.

There are many individuals to whom I owe a great debt of gratitude for the confidence they have placed in me, for their hard work, and for the long selfless hours they put in to build a winning streak that has become our standard for successful campaigns.

For the many newly elected MPs who are not aware of the history, the Ottawa Valley became the eastern beachhead of democracy in the year 2000. That marked the beginning of meaningful change as Canadians entered the 21st century, and from the period 2006 and on, a period that will be fondly remembered as the good old days of responsible leadership while today's Conservatives take a short break from government.

I extend my heartfelt thanks to our entire campaign team, my spouse Jamie, and the many hundreds of volunteers who demonstrated what a truly grassroots campaign Ottawa Valley style is really all about.

Before I begin my comments regarding Bill C-2, I want to make it fundamentally clear that the Conservative Party I am proudly a member of stands for lower taxes and less government interference in the daily lives of Canadians. The best anti-poverty program is a job. We do not create employment by taxing, borrowing, and spending more than we can afford.

My constituents support lower taxation. They sent me to Ottawa to reduce government and to fight for lower taxes. Bill C-2 is about a misleading campaign promise that was presented to a distracted public as reducing taxes at the expense of raising taxes for others, when in fact all this does is raise taxes for everyone.

In the case of this so-called middle-class tax cut, it was claimed during the last election that taxes would be reduced on the middle class by asking the wealthiest Canadians to pay more. Canadians have since learned that higher taxes for the wealthiest Canadians will not begin to pay for this campaign promise that is the basis of the legislation before us today. The promise was made without even the most superficial analysis. It was made to get elected.

More from the wealthiest does not go far among the rest of the population. The middle class will end up paying for its own tax cut, plus the interest on billions borrowed to cover the tax change, and to cover successive deficits that were promised by the Liberals, a promise they intend to keep, and more, and that should be meant to be broken.

The mark of Liberal generosity is with other people's money. Deficits are just deferred taxes, which is our children's financial inheritance. The irony is that ample evidence shows that government loses revenue when it targets individuals who can afford to pay for avoidance, including by moving their financial affairs to places like Bermuda, which was the tax haven of choice of the last Liberal prime minister before the current occupant.

The legislation before us today, being introduced as the first finance bill in the opening session of a new Parliament, and before the federal budget, when these tax measures could easily have waited to be included in the next federal budget, is intended to fulfill a signature campaign promise. I get that.

It was former Ontario Conservative Premier Mike Harris who set the bar when it comes to keeping one's election promises, so I understand that a political party does not want to be accused of lying to get elected, which is what a government is doing when it breaks its promises. For the Liberal Party, it would seem, then, that there are two types of campaign promises: those made to get elected and those meant to be broken.

I actually had an individual who worked for a major Canadian chartered bank tell my office that he believed that once elected, the Liberal Party would do what it had always done and break election promises it had made to appeal to those confused between election promises made to get elected and election promises made to be broken. He could not believe that the Liberals would attack the middle class by tampering with TFSAs, which, in his professional estimation, were better than RRSPs as a savings instrument, particularly for seniors, and certainly for young families aspiring to be middle class and saving for their first home.

If the debate about Bill C-2 is actually about helping the middle class, there are many other campaign promises that should be broken.

A measurement of a vibrant middle class in a society is home ownership. A recent study by the Canadian Centre for Economic Analysis has identified those under the age of 45, families with two income earners, who cannot find affordable housing without a long commute as being those most under pressure.

I know a dual-income family in Toronto where both spouses are lawyers, and they are shut out of the housing market, where a starter, fixer-upper home costs $1 million in the neighbourhood where they rent.

TFSAs are being used by young families to save for their first homes. Housing is a need, just like food or water, and if we need it, there is a greater and greater pressure on us to get it, regardless of the cost.

What is occurring at the moment in places like Toronto and Vancouver is not sustainable. The fear in places like my riding of Renfrew—Nipissing—Pembroke, in eastern Ontario, is that eventually, the dream of home ownership that has died in the big cities will start to die in areas like ours, smaller local areas, and that rising taxes, electricity costs, transportation, and other big city problems will also contribute to barriers to home ownership locally.

Take away the dream of home ownership in Canada and we take away the middle class. It is no secret in Ontario that this province is struggling because of a misguided energy policy that has caused the exodus of jobs, fleeing some of the highest electricity prices in North America, to U.S. border states. Lower electricity prices will spur economic activity. Lower energy costs are good for consumers and manufacturers.

Where there was once a burgeoning middle class based on blue collar manufacturing jobs, the decision, in the words PMO principal secretary Gerald Butts puts in the mouth of the Prime Minister, to transition away from manufacturing jobs has cost the middle class dearly in Ontario.

I urge members of the Liberal caucus and the rest of Canada to pay attention to Ontario's problems. The same people who ran the corrupt McGuinty provincial government have fled the sinking provincial ship and are now backroom operators in Ottawa, and they promise to take the entire country down the same deficit-spending, tax-the-rich, let-them-eat-cake attitude that is so toxic in Ontario today.

Focus on the one thing that would really improve the economy and help the middle class: create employment. Avoid the incessant talk about the environment. The greed energy act in Ontario, which was brought in under the guise of helping the environment, caused the loss of tens of thousands of jobs, of good-paying jobs, in Ontario's manufacturing sector.

[Vance Badawey, Liberal, Niagara Centre, ON]

Madam Speaker, I thank the member for a speech that I am sure we are all going to remember.

The current government will strengthen the middle class. We made ourselves very clear during the campaign and in the comments made today. It will benefit nine million more Canadians, who were abandoned by the previous government.

In tandem with these investments, our government would invest in infrastructure and the economy. It would therefore create jobs and new economies and would sustain this and future generational assets by contributing to municipalities the needed funds, which would offset property taxes and water and sewer rates for the middle class. In tandem with the cuts we are speaking of within the bill, we would also be contributing to the economy with residual benefits for other levels of government to offer those savings to the middle class.

How would the member come up with ideas to contribute to overall middle-class savings and more prosperous times for the nine million middle-class Canadians who were abandoned by her government?

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Madam Speaker, our Conservative government left a surplus, and in less than a month, on his very first road trip to the UN, the Prime Minister spent more than double that surplus. What Canadians have seen is a spend-crazy Prime Minister who has spent through the first surplus in his first days of government.

The contortions we hear from the government benches about the deteriorating condition of finance in Canada makes them worthy of the circus this Parliament will become if we do not start having an adult conversation about the economy, minus the selfies.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Madam Speaker, across my riding, people are really struggling. We have patchwork employment, families with multiple part-time jobs, and seniors living off small part-time jobs to supplement their tiny pensions. In fact, many seniors are facing challenges of homelessness, which we have never seen before in our area.

The TFSA contribution at $10,000 is not helping these members of my community. In fact, the increase to the maximum would have deprived the treasury of billions of dollars in the coming years. Do the Conservatives still believe that our grandchildren should pay for their bad decisions?

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Madam Speaker, the fact is, the government putting the people of Canada into successive deficits that lead to structural debt, as the Liberals are trying to put into law, will indeed drive our youth, our future generations, into irreparable debt.

Lower taxes, less government interference in the daily lives of people, and encouraging economic development is how we will lift everyone out of poverty.

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

Mr. Speaker, I thank the member opposite for her speech. It was certainly full of a lot of passion and a lot of partisan rhetoric. However, let me state for the record that they had eight straight deficits, two recessions, and an economy that is absolutely in the tank.

I wonder if the member would probably blame the snowstorms in Atlantic Canada this weekend on the Liberals also.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Madam Speaker, with reference to the cold, the increase in costs due to such related weather in the future is what is going to drive Canadians even further into the hole. We have not even had the budget yet, and already the Liberals are increasing taxes. What we know is that with the architect of the greed energy act of Ontario now calling the shots here in Ottawa, every last Canadian is going to have to pay more down the greed energy alley and be at an even higher deficit.

[Michael Levitt, Liberal, York Centre, ON]

Madam Speaker, before I begin, I would like to mention that I will be splitting my time with the hon. member for Edmonton Centre.

It is my honour to rise in the House today in debate for the first time as the member of Parliament for York Centre. I would like to take this opportunity to thank the residents of my riding for entrusting me with such an important responsibility to speak and vote on their behalf in this chamber. I would also like to thank all the volunteers and supporters, and especially my family, who have been so supportive in sharing the vision that all of us here share for a better, fairer, more prosperous Canada.

I have walked through every neighbourhood and talked to tens of thousands of residents of York Centre. People from all over Canada and around the world call my riding home. What I heard from so many people of all backgrounds was that making ends meet is becoming increasingly difficult. The cost of living is rising faster than incomes. Indeed, middle-class income growth has been and is still stagnant. Middle-class families drive our economy, and right now they are stuck in neutral. That is why I would like to take this time to express my support for the government's middle-class tax cut introduced in December and explain why it would help grow the economy.

As we embark on an agenda of economic growth and long-term prosperity, there is no doubt that we are facing considerable headwinds. Globally, we continue to experience what Christine Lagarde, the International Monetary Fund managing director, famously called the “new mediocre”.

In its latest economic outlook in January, the IMF expected global growth to pick up modestly to 3.4% in 2016 and 3.6% in 2017. This is down 0.2 percentage points from both 2016 and 2017 compared to its October 2015 world economic outlook. Although the recent performance of the U.S. economy is encouraging, the European and Chinese economies are still facing challenges.

Global crude oil prices remain less than half of what they were in mid-2014, reflecting softening demand and a global oil surplus. What is happening beyond our borders has real and tangible consequences for all of us. In Canada, our economic performance in the first half of 2015 was poor, mainly due to the collapse in oil prices in 2014.

Last April the government projected that the price of oil per barrel would reach $71 U.S. by the end of this year. As I speak, oil is trading at less than half that amount. We now know that growth will be lower than was expected in the last budget projections. This, of course, has important implications for our currency and our fiscal situation. The good news is that the IMF, in its latest economic outlook released on January 19, expects growth in Canada to pick up over the next two years relative to 2015. We also maintain an enviable position with a low debt-to-GDP ratio, abundant natural resources, and one of the world's most educated workforces. Keeping our debt-to-GDP ratio on a downward path throughout this government's mandate remains fundamental to our economic vision for Canada, alongside balancing the budget. To achieve this, our policies will strike a balance between fiscal responsibility and controlled investments that result in a smaller debt-to-GDP ratio, which promotes economic growth.

One of the most important components is restoring middle-class economic progress, the backbone of our economy. That is why one of the government's first orders of business was to table a ways and means motion to cut taxes for the middle class. That was the right thing to do and the smart thing to do for our economy.

The proposed middle-class tax cut and accompanying proposals would help make the tax system fairer so that all Canadians would have the opportunity to succeed and prosper.

Specifically, the bill proposes to reduce the second personal income tax rate to 20.5% from 22%, introduce a 33% personal income tax rate on individual taxable income above $200,000, return the tax-free savings account annual contribution limit to $5,500, and reinstate indexation of the TFSA and annual contribution limit.

Let me very quickly expand on these three points.

First, the personal income tax rate changes took effect on January 1. It is expected that about nine million Canadians would benefit from this measure in 2016. Individuals would see an average tax reduction of $330 each year, and couples would see an average tax reduction of $540 each year.

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

Third, the government will be returning the tax-free savings account annual contribution limit to $5,500, also effective January 1 of this year. Let me reassure all members of the House that the change is not retroactive. The TFSA annual contribution limit for 2015 would remain at $10,000. Returning the TFSA annual contribution limit to $5,500 is consistent with making the tax system fairer and helping those who need it the most. When combined with other registered savings plans, a $5,500 TFSA annual contribution limit gives most individuals the opportunity to meet their ongoing savings needs in a tax-efficient manner. Indexation of the TFSA annual contribution limit would also be reinstated so that the annual limit remains at its real value over time.

Finally, before I conclude, I would like to highlight some of the other measures that are included in today's legislation.

Today's bill proposes to change the current flat top rate taxation rules applicable to trusts to use the new rate of 33%. The bill 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, and it would increase the special refundable tax and the related refund rate imposed on investment income of private corporations to reflect the new proposed 33% personal income tax rate.

Going forward, the government will introduce proposals in the budget to create a new Canada child benefit payment, which would begin in July of this year. In addition to replacing the universal child care benefit, which is not tied to income, the proposed Canada child tax benefit would simplify and consolidate existing child benefits. It is also targeted to those who need it the most. By simplifying and consolidating these benefits, people will understand how to access and take advantage of them. That is why the tax credit was introduced initially.

All of these initiatives demonstrate that our sights are clearly set on the future. This legislation would strengthen the middle class by putting more money in the pockets of Canadians to save, invest, and grow our economy. More broadly, it would help grow our economy in the context of a difficult global economic climate so that all Canadians can benefit. Therefore, I encourage all members of the House to support this legislation.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Madam Speaker, the increased TFSA amounts that our government introduced encouraged people to save and prepare for their own future and their own retirement. The limits or amounts were realistic for the people who could save. Not everyone is able to save through workplace agreements.

Do the member and his government not realize they can reduce the burden on future governments by providing means and encouragement for savings through the increased TFSAs for those who are able to prepare for their own retirement, or will the government choose to discourage personal savings and make far more people reliant on governments of the future?

[Michael Levitt, Liberal, York Centre, ON]

Madam Speaker, our government is reducing the TFSA annual contribution limit because we want to make these types of programs more accessible to all Canadians. We believe that as of 2013, only 6.7% of eligible Canadians maximized their TFSA, and that was at the $5,500 limit. Clearly, increasing the limit to $10,000 will not increase the number of those contributing.

We want to make sure that more Canadians are given the advantage of having tax-efficient savings for the future, and we believe this is the best way to achieve that.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Madam Speaker, in my riding, many of my constituents are increasingly frustrated watching logs barged away from our communities. Forestry, a backbone of our riding, has been hit again and again with no commitment to secondary manufacturing. Those good-paying jobs float away and many of my constituents are working more and making less.

The Liberal plan will assure that those making between $89,000 to $200,000 will receive the maximum tax reduction. That will not help most of my constituents. Is this the Liberals' definition of middle class?

[Michael Levitt, Liberal, York Centre, ON]

Madam Speaker, we have been very clear that this is the first phase of a number of actions that will help those striving to reach the middle class. Our Canada child benefit will help numerous Canadians when it is introduced in July. It will certainly bring over 315,000 children out of poverty.

In addition, with regard to the comment made about jobs, a huge part of our plan is infrastructure spending, which will be happening across Canada and which I am certain will benefit many of those in the hon. member's riding as we seek to bring Canada back to economic stability.

[Raj Saini, Liberal, Kitchener Centre, ON]

Madam Speaker, I want to commend the hon. member on an excellent and very thorough analysis of the current economic situation.

Could he enlighten the House why he believes the reduction in the TFSA contribution limit is important?