Thank you very much.
I'm here on behalf of the 3.3 million members of the Canadian Labour Congress, and I want to thank you for the opportunity to present our views on the changes to the Income Tax Act that are proposed in Bill C-2. The CLC brings together Canada's national and international unions, along with provincial and territorial federations of labour and 130 district labour councils whose members work in virtually all sectors of the Canadian economy, in all occupations, and in all parts of Canada.
Personally, I think it's important to analyze these changes in terms of whether or not they will increase fairness and reduce inequality. In the case of BillC-2, I find that the result is mixed. The first part of the bill deals with the proposed middle-class tax cut. This proposal reduces personal income tax rates on income between $45,000 and $90,000 a year and then increases tax rates on income over $200,000. As Andrew Jackson, my former boss, and the senior policy adviser at the Broadbent Institute points out, this definition of the middle class leaves out most workers. Why is this?
Most workers don't make enough money to benefit. Data from the Canada Revenue Agency shows us that only one in three individual tax filers had taxable income over $45,000 in 2013. Because of how our tax system is structured, the maximum benefit of $670 per year is only available to people who earn between $90,000 and $200,000 a year. That maximum benefit goes to the wealthy group who arguably don't need it. On top of this, we know that tax cuts are the least effective form of government spending in terms of reducing inequality or stimulating the economy. I think we heard from the last panel that tax cuts, in terms of addressing inequality, are not a really effective way of doing that.
While we are supportive of the increase to the top personal income tax rates, we think this revenue would have been better spent, for example, strengthening public services, such as health care. Public services benefit everyone and reduce inequality. Pharmacare and home care are good examples of health care spending that can increase efficiencies in health care delivery and make lives easier for Canadians.
On the second part of Bill C-2, regarding the tax-free savings account, we think it's great that the government has reversed the previous government's changes. Returning the annual contribution limit to $5,500 recognizes that very few Canadians had the resources to take advantage of the higher limit. In fact, only about 8% of eligible Canadians had reached the maximum contribution limit during the first four years of the program. Again, as the other panel noted, it's the lifetime contribution that's going to matter in the long run, but for now this is a good move.
On retirement security, the Canadian Labour Congress feels that a much more important action to provide Canadians with real retirement security would be to double the CPP as soon as possible. In terms of what workers get from the Canada pension plan, it costs less than other ways of saving, such as mutual funds, RRSPs, or even the tax-free savings account. In a country as rich as Canada, no one should retire into poverty.
Thank you for your time.