Finance Committee on Feb. 17th, 2016

[Jan Slomp]

—and those decisions are negative.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you. I don't mean to cut you off, but the chair has given me only five minutes, so let me just continue.

Mr. Tapp, your organization is one, I believe, that along with the C.D. Howe Institute did some fiscal tests on the middle-class tax cut that the government enacted at the start of this year, on the claim, when they were elected, that it was going to be revenue neutral. Your organization came out saying that it was far from revenue neutral.

I think your organization said, and correct me if I'm wrong, that there would be around a billion-dollar shortfall from the revenue received from the upper-income level to the middle class. Is that correct?

[Stephen Tapp]

I should clarify there.

At IRPP, the Institute for Research on Public Policy, we have a policy options blog. People have been commenting on the website about the cost of various measures, but the institute has not undertaken a thorough review of these.

[Phil McColeman, Conservative, Brantford—Brant, ON]

No.

[Stephen Tapp]

But I think it was Kevin Milligan and Michael Smart who had a paper that looked at the elasticity, if you increase tax on the top 1%. In the context of that discussion, it was suggested that the revenue estimates of the government might be optimistic, unless enforcement were stronger.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Right. And the C.D. Howe Institute ended up saying that it was about $1.4 billion short of what it was supposed to be, revenue neutral. I just bring that up in the context of your comment about fiscal credibility.

Another term has not been mentioned here that I'd like to get your views on, and perhaps, if we have time, Mr. Wright's.

I don't think anybody disagrees that well-targeted infrastructure spending is a positive thing, and especially if you have room and interest rates are low. We get that; we understand it. But structural deficits are our concern.

So when there are shortfalls in taxation levels for benefits that the government decided to proceed on, even though they broke the promise they had made to Canadians, when do structural deficits come into play in your mind, when the government goes down that road? We've had organizations here for the last number of panels that have put in requests for $3.3 billion, $4 billion, $7 billion, on regular spending programs, not infrastructure programs. When does it become a concern in your mind?

[Stephen Tapp]

Mr. Chair, I think the question, as always in fiscal policy, is about setting priorities. People are coming with asks with specific costing estimates associated with them, and some not.

When the parliamentary budget officer did a longer-term, 75-year look ahead, which I think Ms. Raitt was talking about, the provincial part of the equation mattered. Federally, in general you could argue we're doing pretty well and are quite fine; fiscally, the structure that was left in place by the previous government is sustainable. However, the challenges are equal in size for the provincial level.

What you need to do is look at the entire Canadian government as a whole, including the pension plans, including municipalities. You could have a structural deficit at one level and a surplus at another. The issue is really the fiscal balance there and whether the math makes sense.

[The Chair, Liberal, Wayne Easter]

Thank you.

Okay, Mr. Wright, respond quickly. He stretched his five minutes to seven quite easily.

[Craig Wright]

I'll keep my answer very short.

The challenge on the structural side is the reason that fiscal policy, as I suggested, needs to be timely, targeted, and temporary. You don't want to get off on the fiscal trajectory whereby a debt-to-GDP ratio is turning higher forever. That's the temporary component to successful fiscal policy.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the panellists for your excellent submissions. I thoroughly enjoyed them and I learned a lot.

I'm going to start off with Madam Arte. Yours is an excellent submission. I have a quick question.

You're saying that it's going to be revenue neutral. Somebody who recently graduated from school carries student loans. I empathize with your organization and understand the importance of ensuring that all young Canadians have access to education.

You said that tax cuts, which a lot of us still benefit from going forward, once we are employed—you get to use your tuition tax credits.... Are you saying that these aren't used a great deal and that we should scrap that program and invest in the Canada student grants program?

[Bilan Arte]

What we're saying is that current tax credits and various savings schemes—for example, tax credits that exist around tuition programs, textbook programs, or in addition to that the RESP program, as one that many might be familiar with as well—are oftentimes programs that benefit middle-income to especially high-income Canadian families.

What we're looking for is government spending ensuring accessibility for all Canadians. I think it is incredibly important for us, when we're speaking of a $3.3-billion dedicated transfer coupled with the national act, that it is going to include a vision that provides for an accessible system of post-secondary education for all Canadian families, not only those who can afford to pay up front today or who can afford to save today in order to have access to that education tomorrow.

[Raj Grewal, Liberal, Brampton East, ON]

To follow up, let's say hypothetically that we get $3.3 billion and that post-secondary education becomes free across our country. Don't you think the cost is actually unpredictable, because there would be such a higher adoption if it were free?

[Bilan Arte]

I think we would see more and more Canadians being able to access post-secondary education. As a result, we would also see more and more young people being able to gain access to the skills and training they need in order to be successful in today's workforce.

It's no secret that about 70% of new jobs today require some form of post-secondary education. I think that largely speaking, if we have a more educated population, we'll have more young Canadians in this upcoming generation who have access to the skills they need to find gainful employment and as a result be able to contribute to our progressive tax system. Those are the returns we were speaking of during my presentation.

When we look at a 6.2% return in Ontario on post-secondary education, this isn't a cost any more; it's an investment in the future of this country.

[Raj Grewal, Liberal, Brampton East, ON]

Excellent. Thank you.

Mr. Wright, you spoke about infrastructure spending being basically a short-term solution to stimulate the economy.

Our government has made a commitment to finance public infrastructure projects across the country, to ensure that we have investments in infrastructure. The requirements in the first year have been outlined as retrofit projects, such as repairing affordable housing, stuff that hasn't happened for the last 10 years, and working with the provinces and the municipalities to identify these projects and get them going.

My question goes a step further. Won't there be an impact at the provincial level? We've been speaking a lot about the debt-to-GDP ratio federally and then the debt-to-GDP ratio provincially. With the federal government being able to stimulate the economy through these infrastructure projects, won't we see an improvement in that debt-to-GDP ratio at the provincial level?

[Craig Wright]

Sure. I suggested that the infrastructure spending is short-term positive, because it fills the gap in the economy that we need. As everybody has suggested, with low interest rates and not competing for labour and capital, it's the right time to do it to increase the odds of return on investment and the like. But I suggested that it's also long-term gains in productivity that grow the living standards we all share; it's accelerating the speed limit for the Canadian economy. So I think there is long-term benefit.

In terms of what it does for the provinces, we have to keep in mind that if we just look at the federal government infrastructure, if it gets $20 billion, that's 1% of GDP, and there's going to be some leakage in that. You're not going to get a full lift of 1%.

Will it help some of the provinces? Probably it will, as long as they don't do anything different with their deficit situation. But it is 1% spread across the country. It's not going to change the direction for some of the more fiscally challenged provinces, but it's probably a step in the right direction.

[Raj Grewal, Liberal, Brampton East, ON]

So the trickle-down effect is very minimal is what you're saying.

[The Chair, Liberal, Wayne Easter]

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I will ask a couple of quick questions.

Mr. Ross, I was interested that 98% of farm families are still family owned. Do you have any numbers? I'm assuming that 98% is 98% of all farm operators. I would assume that the percentage of land, in the case of grain farmers, farmed by non-family farms would be considerably less than that. Is that fair?

[Scott Ross]

I can't say that we have accurate statistics on that, but from our measure a lot of what you'd characterize as larger grain operations in the west are still owned by farm families. The acreage that they manage is still managed by a farm family. I don't think it's a fair characterization to suggest that larger operations are necessarily no longer managed by family farms.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Certainly, Hutterite colonies have continued to buy up farmland. I was wondering if there was a number on that.

There used to be a time when agriculture survived to a large degree on off-farm income, in other words, going to work on the oil rigs in the wintertime. We have, certainly in western Canada, a situation where it might be reversed now.

What would the average farm wage rate be in western Canada these days?

[Scott Ross]

Are you suggesting just from the farm, the income they would generate from the farm itself?

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Yes. If you were employed on a farming operation full-time today, what would the average wage rate be?

[Scott Ross]

It varies considerably depending on the region. You'd find some farmers, for example, in northern Alberta near the oil patch, would be making.... For a typical farm, not operator, but someone to work on the farm would be paid wage rates upward of $25 to $30 an hour. This is a wage paid just to find people to bring onto the farm. When you come out east, that number declines, depending on the region and the type of work involved.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

When Dennis Laycraft from the Cattlemen's Association was here yesterday, and this goes to Mr. Sorbara's question, a lot of what he was referring to was not so much the inability to find workers on the farm, but it was an inability to find workers in places like packing plants and things like that, which are less desirable positions, even though the rate of pay might be pretty decent.

Would that be fair?