Finance Committee on Nov. 23rd, 2006

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

There are different ways of doing that, as you know. You can increase the basic exemption. There are different ways you could effect the personal income tax reduction.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

We were told this morning that a 1% reduction in income tax is going to cost--or save, depending on which way you look at it--$6 million. So 0.7 would be 0.1% or 0.2%?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

The line you're looking at on page 38 is the line relating to the annual savings in interest on the payment this year of $13.2 billion against the public debt. That alone is $700 million a year this year and next year, 2007, and going forward. Then there's the additional line with the $3 billion per year debt reduction, which is $200 million, $300 million, and growing beyond that. That's how you get to $1.4 billion. There may well be more if there's more surplus.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Exactly. I'm just trying to get to the number. When are we going to go back to the Liberal 15%? We're at 16%. When are we going to get down to the 15%?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

There's more than one way to reduce taxes. You can increase the basic personal exemption. There are different ways of doing it, as I was trying to mention.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm talking about the tax rate for now. I understand there are different ways, but I'm talking about the tax rate right now. So it's not going to happen at the lower rate?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

Sorry?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

So it's not going to happen. I'm talking about income tax at the lower rate.

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

That's one way of doing it, but there are other ways of doing it. Pension splitting is another way of reducing income tax for people, which they seem to like a lot.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm sure there are a lot of people who would like a lot of different things.

[The Chair, Conservative, Brian Pallister]

I think they might like income splitting even more, Minister.

You have about 20 seconds left.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'll ask a quick one.

Last time you were here, Mr. Minister, we had had the finance officials in in the morning, and we had asked for different estimates on different proposals this committee had seen. We haven't seen any costing. Do you think it would be possible to get some of those costings?

[The Chair, Conservative, Brian Pallister]

I'll do some quick housekeeping for the committee's purposes in response to Mr. Pacetti's question. Committee members, you'll be e-mailed the response from the Department of Finance tomorrow morning on the questions we had asked in our meeting last week.

The second issue I want to remind the committee of is our meeting on Tuesday, which will be at 3:30, at which time we will proceed until we have concluded preparation. The committee is the master of its own destiny, but that's the intention. We will leave that meeting open-ended, and dinner will be served.

We conclude our questioners with Madam Ablonczy.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Minister.

As you can imagine, there's quite a bit of interest in what you've said today. Canadians had heard talk about possible income splitting, some capital gains relief, equalization, and all of these programs. Is there enough room in the fiscal framework leading up to the next budget to address some of these issues? What can Canadians expect on these particular issues that of course are bread-and-butter issues to them?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

It's a good question, and it's very reasonable for Canadians to expect that we will look at the tax options that we have in terms of tax reduction. We're obviously committed to tax reduction. It's important, and we've done a lot of it so far.

We have the capital gains tax issue, which I've mentioned today. We want to reduce capital gains taxes in Canada. That's one issue we'll look at as we prepare for the budget. We'll certainly listen to the recommendations and comments of this committee, which I know are forthcoming shortly on the hearings you had across Canada. We have the personal income tax, which we can always reduce more in Canada, because relatively speaking we have high personal income tax marginal rates in this country, and those affect our ability to attract workers. There are a number of issues concerning taxation, all of which we'll look at as we move towards the budget. Some choices have to be made and some priorities set.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I have one other question.

[The Chair, Conservative, Brian Pallister]

Please proceed.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I want to come back to my colleague Judy Wasylycia-Leis' concern that somehow this focus on debt reduction and tax reduction to make sure we have a dynamic economy is going to interfere with our ability to deliver strong social programs. What would be your response to that?

[Jim Flaherty, Conservative, Whitby—Oshawa, ON]

It's just the contrary, actually. We have a very substantial planned commitment of more than $40 billion this year, running up to nearly $50 billion in the years ahead.

We have the fixed increase in the health transfers, which are very substantial running out to 2014, compounding at 6% a year on the base. So we have very substantial transfers, and as part of the discussions right now with the provinces and territories we're looking at that post-secondary education issue and the infrastructure issue. So there's more to come in terms of that relationship.

I might add, if I may, Chair, just at the end, that the total government net debt data is on page 45 of the economic and fiscal update. I knew it was here, but that's where it is: at the bottom of page 45.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Minister.

All of us, of course, on this committee are concerned, as Canadians should be, about the productivity gap that exists vis-à-vis a number of our competitors. Today's announcement is going to give us all some optimism, I think, that we're moving in a direction with a plan that can address some of these shortcomings we've seen develop over time.

Thank you to your officials as well for being here with us. We are appreciative of your appearance here.

We are adjourned.