Finance Committee on May 30th, 2006

[Serge Nadeau]

The apology is accepted.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

When we talked on May 10 we tried to get a sense of what research existed to suggest that the GST reduction was better than the income tax reduction. We had quite a little debate, and I think it was suggested--by you, Mr. Ménard--that it's just a fact that the GST is better than the income tax reduction. I tried to say at the time that was different from what many of the groups involved in this area were saying, and it certainly seems to be different from what Mr. Flaherty was saying back in 2001. I'm wondering if you have any studies that you can give us to make this point.

[Serge Nadeau]

Yes. In what I signed off yesterday, it shows that for low-income households, a GST reduction is better than an income tax reduction, because low-income households don't pay any income tax. This is mathematical. Low-income households don't pay any income tax, therefore they won't benefit from an income tax reduction. But they do buy stuff and pay GST, hence a GST reduction is better for low-income households.

For example, a one-earner family will generally not pay any income tax if its income is below $18,000. Therefore, for such a family, an income tax reduction is not worth anything. However, such a family will benefit from a GST reduction.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Overall, the GST is a regressive tax, and if you're looking at this in terms of a macro context and good public policy, it probably makes sense to consider the progressivity of an income tax cut.

[Serge Nadeau]

But you have it exactly. You exactly point to that. Sometimes it's called a regressive tax. Therefore, increasing the GST is regressive, but lowering the GST is progressive. It's exactly that.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

That's not even economics 101. That's not even basic economics.

You tell that to a low-income person who might get a $40 benefit or a $99 benefit from this reduction, versus a wealthy family getting a $900 benefit.

Let me go on to the other issue. I think we'll get nowhere on this. I think it's a very simplistic analysis and does not reflect the reality of people's lives.

I would like to talk about mortgage insurance, because it would seem, based on all of our discussions, that this is something the department has wanted for a long time. I thought before maybe it was a Liberal agenda and then a Conservative agenda. My sense is that it's been a department agenda and it has been advanced regardless of the political situation. Now you have your day. Now you've won the way, and there does not seem to be a single piece of evidence or a study you've done--unless you can table that today or soon--that demonstrates how in fact this new approach of opening up wide the system for a number of competitors will actually help people who are looking for mortgage insurance.

I'd like to know if there's a study that shows there's a problem now. I'd like to know if there's a study that's been done on the possible impact. We received some very good presentations, and all suggested safeguards be put in place. Where's the information to show that you've taken into account those concerns and that this isn't just a simple case of advancing an agenda regardless of consequence?

[The Chair, Conservative, Brian Pallister]

There's approximately a minute available for your answer, sir.

[Serge Dupont, Acting Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance]

I would just say that it is not a departmental agenda; it is simply a policy that has been in the law for a long time that there will be competition with CMHC in the mortgage insurance market. To this day there has been only one provider coming forward, to whom has been provided a guarantee by the government in order for that provider to be able to compete meaningfully with the CMHC.

Others have now come forward and have issued publicly their intent to incorporate a subsidiary in Canada. The Government of Canada is simply saying it will provide to these providers the same guarantee it is providing to the current private sector provider in order to compete meaningfully in the mortgage insurance market.

The CMHC's mandate to provide comprehensive coverage is not affected. This is simply allowing other competitors to do what one firm has been able to do today.

[The Chair, Conservative, Brian Pallister]

Madam, your time has elapsed. It's Mr. Savage's turn.

Mr. Savage, please proceed with your question.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chair.

Ms. Wasylycia-Leis was right; we did request that information and were told we would get it. It's important to us to get the chart. I'm specifically looking at the minutes, one of which was about who reaps the benefit and how the 1% deduction in the GST affects families across the board. That's important, and it's the same with the income tax cut.

One of the big ways the GST cut has been touted, and has been touted here by Mr. Nadeau, is that low-income families don't pay income tax under a certain level, so the GST helps them.

It helps them very marginally, because many of the products they buy are necessities, a lot of which aren't covered by GST. My concern with the GST cut is that it disproportionately helps those who spend the most. It's pretty simple. It helps the people who spend the most, so it's pretty simple that it helps the rich more than the poor, but I think it's an important thing to factor in—in the simple way that on a more expensive car you save more than on a cheaper car. It's not complicated.

I'm going to ask you about the universal child care allowance benefit. Are you familiar with the Caledon report on that?

[Serge Nadeau]

Yes.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Do you agree with it?

[Serge Nadeau]

The Caledon report—one of them, at least—assumed the benefit would be clawed back by the federal government when computing income-tested benefits. Actually that's not going to be the case. As Minister Flaherty mentioned earlier, the benefit won't reduce other income-tested benefits such as the Canadian child tax benefit, the GST credit, and so on.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

The minister clearly did say that it will not negate other direct benefits. Has the Canada child tax benefit's young child supplement not been eliminated?

[Serge Nadeau]

The supplement will be eliminated.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

That's the supplement that helps the lowest-income families.

[Serge Nadeau]

No, we're not talking here about the national child benefit; we're talking about the $200 supplement.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

I'm talking about the Canada child tax benefit's young child supplement of $249. Are you telling me that has not been eliminated?

[Serge Nadeau]

The national child benefit supplement is not being eliminated. What is being eliminated is the $247 CCTB supplement that is clawed back with child care expenses; it's that part. The maximum that is being eliminated is $247.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

So it is eliminated.

[Serge Nadeau]

That's right.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

So it wouldn't be correct, and it may have been an oversight—I'm not suggesting the minister lied—to suggest that things are not being replaced by this universal child care payment.

[Serge Nadeau]

What he meant here, just to make sure, is that—

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

No, I don't need you to interpret what he meant; I heard what he said.

My question goes to the issue of fairness again. The Caledon report, and there have been several of them that have come back and forth, depending on what the government included in it, shows a very significant variance; for example, a $30,000 two-earner couple would get the net benefit of $199, while a $200,000 one-earner couple would keep over $1,000 of it.

[Serge Nadeau]

I don't have the figures they produced, so I—