Thank you.
The first suggestion would be to offset the benefits that the middle tax rate cut affords the higher income groups by increasing the tax rates in the third and fourth brackets.
Next, to help those at the bottom of income distribution and to facilitate a transition to a basic income guarantee, make all non-refundable tax credits refundable. Enhance them, especially the disability tax credit, and claw them back like the GST credit, the child tax credit, and the guaranteed income supplement.
Finally, broaden the tax base to complement the increase in the top tax rate by reducing or eliminating the 50% exemption for capital gains by considering an upper limit on capital gains exemptions for housing. Also, reduce the use of the small business deduction to shelter income by denying its use by professionals and by restricting the hiring of family members
The second area is innovation and business taxes.
I would retain the small business deduction but reinstate a cumulative upper limit to prevent the disincentive for small businesses to grow. I would allow a carry-forward of losses with interest. I would consider encouraging innovation by flow-through share financing of R and D investments so that deductions are forwarded to the owner—the equity holder—and studying the use of patent or intellectual property boxes to encourage the exploitation of innovations in Canada
In the longer term, I would consider major reforms to the corporate tax, such as those that have been proposed in the U.K. and the U.S. and in many tax reform commissions around the world, and in particular, what's called the allowance for corporate equity system that's been introduced in some countries in Europe.
Third, I have some remarks on federal-provincial fiscal arrangements.
To protect both vertical and horizontal balance in the federation and to enhance the integrity of federal-provincial fiscal relations, I would restore formula-based equalization by removing the GDP growth limit. I would escalate the Canada social transfer and the Canada health transfer by the average rate of growth of provincial expenditures on social programs. Also, I would enhance federal and provincial co-operation by seeking federal government membership in the Council of the Federation.
Those are my remarks.