Evidence of meeting #159 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was number.
A video is available from Parliament.
President's Fellow, School of Public Policy, University of Calgary, As an Individual
There are a number of factors, but I think regulatory factors play a very big role. We can go into a lot of detail about that.
I think in the case of taxation, some areas of taxation play a role. We have to remember that some things we've done since 2000 have been good at encouraging investment, but I think right now there's been a real discouragement of it, in the past number of years. We've been raising taxes in a number of areas. The capital gains tax is a recent one.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
I have a last question for you. We hear the Liberals saying that they want to bring in generational fairness. Then we look at all these taxes, including the carbon tax, which you talked about with my colleague, the capital gains tax hike, declining GDP per capita, higher deficits and the doubling of the debt. Is this really generational fairness for anybody?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
I think we need to be very worried about the fact that our young people right now are taking a hit in many ways, which includes not just higher housing prices and rental prices, but also the fact that their incomes are not keeping up. The unemployment rate has gone up exceptionally. There are now close to 500,000 unemployed between the ages of 15 and 24 out of that 1.5 million. That's a big concern.
Liberal
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you so much, Mr. Chair.
I actually want to talk about productivity and economic growth, and I'd like to direct my questions to you, Mr. Mintz, so I was glad we kind of got there anyway. There's a lot I could say about some of the comments you made. One of the key reasons we introduced the capital gains change, which I think you know but might disagree with, was that, for us, it really was about fairness. It was about trying to find a way to redirect some additional dollars to a sector of our population that we felt was being disproportionately impacted by what's actually happening in the world today.
You might not agree with the tactic we've taken, but there's been a very real effort and a very real recognition of what our millennials and our Gen Zs are very much thinking: “How is it that I'm going to have a better life than my parents? How is it that I can actually ensure that I have a good quality of life moving forward?” I can assure you that we're very much seized with that.
I will tell you that for a number of years on this committee—I've been blessed to have served for over four years—I've always pushed for some sort of interprovincial trade barrier study. I'm also very concerned about the regulatory barriers. I was meeting with the Canadian fertilizer industry yesterday. They said that the truck weight limits are different in every province, which to me is ridiculous. The fact that our trucking industry has to care about their tire width sizes, which are different in Quebec than they are in Ontario, I find completely ridiculous. I actually think there's something around the terminology. For me, all provinces, as well as our country, should care about this as a number one priority, because all of us are better off if we actually start tackling it: The provinces are better off, our small, medium and large businesses are better off, and Canada is better off.
I will be honest and tell you that when I originally talked about interprovincial trade barriers, I would incorporate regulatory barriers, but I'm now separating it out. They're two different things. If there's one thing we could be doing right now in interprovincial trade barriers that would just get us moving on it, what would that be? If there's one thing we could do on regulatory barriers, what would it be?
I'll mention that in the past we've heard that if we could just do a registry, so we could actually start seeing.... I think that was on the interprovincial trade barriers. I don't know whether you would say the same for regulatory barriers.
If you could address both of those elements, I would be so grateful—action-oriented would be very helpful.
President's Fellow, School of Public Policy, University of Calgary, As an Individual
First of all, I think you and I do agree on the importance of the regulatory barriers in terms of impacting that growth. I think that is actually a major factor.
There are a number of things that I worry about, even going beyond the interprovincial one, which I think is absolutely correct. There's been very slow development on interprovincial barriers to trade in terms of trying to reduce them. There's been the TILMA in western Canada. Alberta actually said they were going to unilaterally get rid of a number of these barriers, hoping that other provinces would take it up. It's been a very slow process. A wonderful book written two years ago that won the Donner Prize really went through the history of this issue. You realize how slow it is in developing.
There are other issues too. There's the difficulty of getting anything built in this country and the time taken. I talked to people in the condo industry recently. In Canada, it can take a number of years before a condo building will go through all the approvals and get built, while in the United States it's a year and a half.
We could do a lot more in terms of our access to tidewater. I've argued for a long time that we should be looking at—
Liberal
President's Fellow, School of Public Policy, University of Calgary, As an Individual
We should be looking at the Australian system. I've been a great believer in the northern corridor concept as a way of trying to get our goods and services out to the rest of the world. I think we should continue working on that.
Liberal
Julie Dzerowicz Liberal Davenport, ON
How do we get past the regulatory burdens? What's the next step on that?
October 22nd, 2024 / 5:25 p.m.
President's Fellow, School of Public Policy, University of Calgary, As an Individual
I think it's something you just have to work out sector by sector. I don't think there's an easy silver bullet in any way. I know that some people have had this idea that if you introduce any new regulation, you have to get rid of two others. I'm not sure that's a great idea.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Would you say the same thing for provincial trade barriers? Do you like the idea of a registry to actually start articulating and creating some transparency?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
We already have quite a bit of information on where the barriers are; it's about trying to get the provinces to agree. That's where, of course, the federal government could take leadership in trying to get the provinces to reduce it, which might require some adjustments in other areas, including more money to the provinces to help fund things like health care.
Liberal
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Ms. Laflamme, you said earlier that it was important for the Canada rental protection fund to be increased and earmarked for the various forms of social housing.
Could you tell us more about that? I'd also like to know why the tenant protection fund needs to be increased.
Spokesperson, Front d'action populaire en réaménagement urbain
Thank you for your question.
I didn't have time to talk in detail about the Canada rent protection fund. This is another new development that we've welcomed in recent months. We make a lot of criticisms, but we also recognize the advances.
Again, this is a fund that's intended to protect housing affordability, with no guarantee that it will be used to acquire buildings for social, public, non-profit or community housing purposes. Obviously, we don't think that a private company will be able to sustainably protect the affordability of buildings that this fund would take off the market, as is the objective. We don't think we're far from the goal. It seems clear that's what this fund is going to be used for. That needs to be clarified, but more importantly, there need to be more guarantees to ensure that tenants can stay in the units that will be purchased with federal funds. Once again, this illustrates the fact that clear guidelines are needed when it comes to affordability and the protection of tenants who will remain in the units that will be purchased with federal funds. This is a good step, but we need more safeguards. The funds allocated aren't enough, given the real estate situation, particularly in a number of major Canadian cities. Funding has to be set up accordingly. Buildings are already too expensive to allow non-profits to guarantee truly affordable housing. Low-income households and very vulnerable people need access to rent subsidies.
The purpose of the tenant protection fund is to fund tenant support organizations across Canada. In Quebec, this funding is provided in part by the Government of Quebec. We have always said that the federal government should also contribute, especially since it has recognized the right to housing.
What's complex about the new fund is that, in the call for projects, what was asked of the groups that wanted to submit a project didn't quite correspond to the reality of organizations in Quebec and a number of other places in Canada. Local organizations don't want to propose projects to receive a few thousand dollars. They want a contribution that will enable them to carry out their mission of helping renters, as the government now intends to do. The parameters of this fund make it difficult and discouraging for local housing committees—there are dozens of them in Quebec—to do this work with tenants.
In our view, the fund needs to be improved quickly. It needs to be improved. When we look at the funding allocated to this fund, we see that it's woefully inadequate. All organizations in Quebec, such as the Front d’action populaire en réaménagement urbain, the Regroupement des comités logement et associations de locataires du Québec and grassroots organizations, can submit a project. The funding is woefully inadequate.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you very much.
You also said that the government should set aside surplus public lands and buildings for housing for social and community housing to achieve 20% non-market housing.
Do you have any additional explanations for us in that regard?
To your knowledge, has the federal government started giving away federal lands or buildings for social housing in Quebec?
Spokesperson, Front d'action populaire en réaménagement urbain
The short answer is no. A new tool called the land bank was recently launched. You can consult a website that maps out all federal lands in Quebec and Canada that are part of the bank.
The way it currently works is that we say we want to receive proposals for these lands instead of saying that public lands will be reserved for social and community housing projects. If we did that, we would be sending a signal that it would be worthwhile for communities to organize and for non-profit organizations to submit their projects quickly. However, the opposite is true. Competition is created between private developers and potential social and community projects. It isn't encouraging, and it doesn't send a positive message.
In Rimouski, in particular, there is public land that could be used for a housing co‑operative. People in the community are already organized and have set up a co‑operative project. There are also public lands located in the Petit Champlain neighbourhood in Quebec City. Once again, these lands were just added to the land bank.
I want to clarify that very few federal surplus lands have been placed in this bank and that other federal surplus public lands are under the responsibility of Canada Post or the Canada Lands Company, for example. There are major challenges, for example at the Wellington Basin in Montreal; the community has mobilized so that the land can be used to meet the needs of the community, which is very organized. A wonderful redevelopment project has been created in the Pointe-Saint-Charles neighbourhood. Since there are no clear guidelines from the federal government on the priority use of surplus lands, we have to negotiate on a case-by-case basis. So an immense weight is being placed on local organizations and the public. We need to reverse this trend by establishing clear guidelines for the use we want to make of public lands, which belong to the community.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Ste‑Marie.
MP Davies, you have the final five minutes to ask questions before we thank our witnesses.
NDP
Don Davies NDP Vancouver Kingsway, BC
Thank you, Mr. Chair.
Thank you to all the witnesses for their excellent testimony.
Dr. Mintz, if I understand your estimation, you forecast that increasing the capital gains inclusion rate to 66% and change for corporations and individuals with gains of over $250,000 per year will cause Canada's capital stock to fall by $127 billion, employment to decline by 414,000 jobs, GDP to fall by almost $90 billion and real per capita GDP to decline by 3%.
We all know that the capital gains rate was established in, I believe, 1972. That was at 50%. In 1988, the Mulroney Conservatives increased the capital gains inclusion rate from 50% to 66% and change, exactly the rate proposed now. What impact did that move have on Canada's capital stock, employment rate, GDP and real per capita GDP?
President's Fellow, School of Public Policy, University of Calgary, As an Individual
First of all, the few studies I've seen that were done on capital gains tax changes earlier on did estimate that there was an impact on investment and the cost of capital. That would have had an impact. The numbers that I used—
President's Fellow, School of Public Policy, University of Calgary, As an Individual
I don't remember. I'd have to go back to the studies. The one that I can think of had very similar kinds of results.
Let me just add very quickly that we have to remember that the reason the capital gains inclusion rate was increased at that time was that we lowered the corporate income tax rate quite a bit. In fact, one argument I would give is that in 2000, when we started lowering the corporate income tax rate in Canada, we reduced the dividend tax credit because of our integration system of corporate and personal taxes, but we didn't increase the inclusion rate slowly at the same time, which I think would have been appropriate, at least in terms of tax policy.
NDP
Don Davies NDP Vancouver Kingsway, BC
You may be anticipating where I'm going. If there were those negative impacts after the Mulroney Conservatives increased the inclusion rate in 1988, were the Conservatives economically asleep at the switch, then, in 1990 when they increased the inclusion rate to 75%? In that two-year period, they either failed to appreciate that there were negative impacts of their increase to 66% or they were oblivious to those negative impacts, because they then increased it again to 75%.
Can you help me understand that move by them?