Finance Committee on May 25th, 2023

[The Chair, Liberal, Peter Fonseca]

MP Lawrence, you have the floor.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you. I'd like to read into the record the following letter with respect to our members at this committee:

We are writing to express our profound disappointment regarding the insufficient witness testimony on Bill C-47 the Budget Implementation Act. The motion passed on May 16th, which was the result of collaborative efforts by Conservatives, clearly outlined the committee's objective of conducting a minimum of 20 hours of study before commencing clause-by-clause consideration of the Bill. However, as the scheduled time for the clause-by-clause review approaches...May 25th at 11 am, we have only received 10 hours of witness testimony....

Conservatives were fully prepared and available to work diligently over the weekend, as well as on Tuesday and Wednesday of this week, to ensure ample witness meetings took place. Regrettably, no such meetings were scheduled, which undermines the goodwill with which [the motion was passed on May 16th]. Furthermore, it is disheartening for all Canadians who are eager to testify on the budget.

Canadians need to have their say as they are struggling with the cost-of-living crisis. Budget 2023 proposes $60 billion in new spending and since it was introduced, inflation in Canada has increased. Groceries are inflated [by] 10% [per month], food bank use is at record highs—

I might add, from the testimony of this very committee, that food bank experts, CEOs and leaders were saying that the situation on the ground was “terrifying”.

—1 in 5 Canadians are skipping meals and it is getting harder and harder for many to get by. On housing, rent and mortgage payments have doubled over the past eight years, and 9 out of 10 young people believe that they will never...own a home. These are the issues concerning Canadians and this is the testimony that committee needs to hear.

Considering that we are...10 hours short of the testimony required to fulfill the minimum goal specified within the motion, Conservatives will introduce a motion tomorrow....

It has been introduced.

Let me put some background behind this. I had numerous discussions in good faith with my counterparts across the way and made it clear that Conservatives wanted 20 hours of testimony and that we were willing to sit whether it be Saturday, Sunday, Monday, Tuesday, Wednesday, Thursday or Friday, to get this done. We were absolutely clear on this, and there can be no doubt. I would put my honour on it. Any type of comment otherwise is the height of disingenuity. That's perhaps not surprising, given that with this government's record of corruption, with the SNC-Lavalin affair, with WE and with foreign interference, we have seen that this is a government we cannot trust.

Maybe it was because of the testimony, which was absolutely damning for the 10 hours. We heard that this was the slowest economic growth since the 1930s. Since the Great Depression, Canada has never experienced such economically challenging times with record-low growth.

Yes, there was some time before the committee, during which absolutely Conservatives engaged in a lengthy discussion or debate, and that was in order to get Minister Freeland here. This is a minister who has now presided over the worst economy since that during the Great Depression, and she wouldn't come to talk for two hours.

That was the outrageous demand of Conservatives: to have her come and testify for two hours. Then she came to committee and she wouldn't answer the most basic of simple questions. My colleague Mr. Chambers asked the simplest question, a question she was well equipped to answer off the top of her head, but she would not answer. She would not answer the simple question of how much interest was being paid on the debt.

These were simple questions. All that we asked was for the Minister of Finance, who is presiding over the biggest national debt, some of the highest inflation and the worst housing situation in a generation, to come for two hours and answer simple questions. That was the only precondition to going forward. Acting collaboratively and in good faith, I personally worked with members at this committee and told them to work more to move the process forward. I personally had discussions with them and counted on them to act as honourable members of this House, and they committed to me that they would do everything possible to get 20 hours of testimony. That was a personal discussion. It's the spirit of this act, and it's the spirit of this motion.

If this chair is unwilling to do the right thing and have testimony put on the record...and it's completely possible, because do you know what, Mr. Chair? When it came to you trying to grind or punish Conservatives, you had all the time in the day. We could go until midnight any night we wanted to. Now, suddenly, there's a lack of resources. This is the height of hypocrisy and a biased chair.

All Conservatives want is to hear from Canadians. Canadians deserve the right to hear why $60 billion of their money is being spent and why this government—why this Minister of Finance—is blowing past the debt-to-GDP ratio. All we want is the right for Canadians to testify. This is not outrageous. We are not trying to do anything that is beyond the pale. We're asking for an additional 10 hours of testimony.

Conservatives are committed to democracy. Conservatives are committed to putting on the record the important issues and, Mr. Chair, one of the most important issues with respect to the current economy. Philip Cross, a noted academic, a noted former employee of Statistics Canada, used Statistics Canada information to demonstrate that we have the worst economy since the 1930s, and one of the issues is this government's war on work.

If this chair is unwilling to put forward witness testimony, I will simply start reading it into the record, as is my right. The C.D. Howe Institute has a report: “Softening the Bite: The Impact of Benefit Clawbacks on Low-Income Families and How to Reduce It.” This would have been an important witness to hear.

It would have been great to hear from some of the great think tanks across the country, not just on the right but on the right, the left and in the centre. I would have loved to hear from the Fraser Institute and many other institutes...the Broadbent Institute.... I would have loved to hear all of this important information.

As we start here, we'll start with the summary, just to give our viewers an idea of what I'm going to talk about:

As families earn more taxable income, government benefit entitlements are reduced...at various phase-out rates, which reduces their overall cost for government and ensures that they remain targeted to the [low]-income families. However, benefit reductions act like hidden tax rates: They reduce the effective gain from working to generate...income. To determine the tax system's full impact on a family's financial gain from work, one must take into account the combined effect of both taxes paid and cash...reductions.

What this means, Mr. Chair, fellow members and all of our viewers out there, is that Canadians are increasingly being disincentivized to work. Their incentive to work is being reduced. There are many low-income Canadians who are giving back to the government more than 50¢ on the dollar of every dollar they earn. The government is the greatest thief of the means that low-income families need to provide housing, to provide food and to take care of their children.

It continues:

This Commentary presents various estimates of effective tax rates on personal earnings for families with children. These effective rates play a key role in family work decisions by reducing the monetary reward of earned income. The “marginal” effective tax rate...conveys the loss, through additional taxes and diminished benefits, associated with an extra dollar of earnings. For a working parent, it represents the financial penalty that must be paid from any small addition to their income. The “participation” tax rate (PTR) is the cumulative effect of all...taxes, other contributions, payroll deductions and loss of...benefits on the entire prospective earnings from work.

That means that if a mom or dad wants to go back into the workforce, they face substantial headwinds. Many times, they're greater than the child care cost, because of the taxes they are paying. If this government were serious about allowing women to return to work—as they are still the disproportionate caregivers to children—they would reduce these barriers. Quite frankly, however, they are not serious about enabling women to return to work. If they were, they would remove these barriers, these high levels of clawbacks and taxation, that make it difficult for women with children to return to the workforce.

Marginal effective tax rates, or METRs, as they are sometimes colloquially referred to, “have generally been higher for lower-income families than those of higher-income families.” Let me reread that, because I think it's important for people to understand: “[Marginal effective tax rates] have generally been higher for lower-income families than those of higher-income”. That means that the poor are paying more and the rich are paying less.

It continues, “In some cases, the lower-earning parent in a dual-earner family with three children might lose more than 80 cents of an extra dollar of earnings.” Yes, you heard that right. If, for example, you are a mom and dad, and you have three kids, with the next dollar that you earn, you might be giving 80¢ of that back to the government. That's a substantial disincentive.

As Mr. Cross so eloquently said when he was at this committee, when we allowed witness testimony, it's not necessarily the calculation that occurs. It's more the global social impact that happens. It's like death by a thousand cuts. As Canadians work harder and harder, and earn less and less and keep less of their paycheques, it is a disincentive. You feel that the more you work....

You're working so hard, but you're just spinning your wheels. You're not getting ahead. That has to have a negative impact on Canadians' desire, on Canadians feeling that they are rewarded for their work. This is an issue not only for their economic well-being but also for their mental health.

It says, “Nationally, 15 percent of working lone parents or the lower-earning parents in dual-income families face a [marginal effective tax rate] above 50 percent, and 14 percent of stay-at-home parents face a PTR”, which is a participation tax rate, “above 50 percent.” This means that if you are a stay-at-home parent and you wish to rejoin the workforce, for every dollar you earn, you're only going to be able to keep less than 50% of it. Finally, it says, “And these proportions have risen substantially since the mid-1980s and early 1990s when very few families faced a [marginal effective tax rate] or [participation tax rate] greater than 50 percent.”

There are a number of ideas that I could carry on with in this discussion, but I think I'd like some of my colleagues to make a couple of comments, if they wish. Please do put me back on the speaking list, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

We have PS Beech.

You're on.

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

Thank you, Mr. Chair.

I wasn't sure if I'd be getting the floor back.

There were some interesting discussions there about honour and the like that I'm just going to let sit. I can talk to my colleague about that personally later.

The fact that the Conservatives have clearly shown that they're willing to filibuster yet again and prevent us from now going through the democratic exercise of clause-by-clause consideration demonstrates to everyone around this table that they want to filibuster. They want to delay. They're not interested in having a democratic debate about what's actually important for Canadians. If that were the case, we would have had an extra 25 hours of witnesses instead of 25 hours of the Conservatives talking to themselves, which is exactly what happened.

I propose to members that the ideal thing to do is to get to the business that we are here to discuss. We have officials here. I would, therefore, move that the debate be now adjourned.

[The Chair, Liberal, Peter Fonseca]

It has been moved that the debate be now adjourned. We'll take a poll of the members.

(Motion agreed to: yeas 6; nays 5)

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Mr. Chair, I have a point of order.

There were still individuals on the speaking list, I had thought.

[The Chair, Liberal, Peter Fonseca]

We're moving on.

Members, we are now back to meeting number 92. Pursuant to the order of reference of Tuesday, May 2, 2023, we are here for clause-by-clause consideration of Bill C-47, an act to implement certain provisions of the budget tabled in Parliament on March 28, 2023.

Pursuant to Standing Order 75(1), consideration of clause 1, the short title, is postponed.

We are now at part 1, “Amendments to the Income Tax Act and Other Legislation”. There are no amendments to clauses 2 to 70. I don't know if members would like to group those, but we would need unanimous consent to be able to do that.

Did I hear a “no”?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

There was a “no”.

[The Chair, Liberal, Peter Fonseca]

We do not have unanimous consent.

(On clause 2)

Shall clause 2 carry?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I would like a recorded vote, but, Mr. Chair, I believe we have the ability to debate and discuss this.

[The Chair, Liberal, Peter Fonseca]

We're at clause 2.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes. I believe we have the ability to discuss it.

[The Chair, Liberal, Peter Fonseca]

Yes, you do.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

As I was saying:

Clearly, geared-to-income fiscal benefit programs provide valuable financial assistance to families, but these benefits can result in low-income families facing...high [marginal effective tax rates] and [participation tax rates]. Federal and provincial policymakers should pay special attention to these effective tax rates when they consider changes to the tax and transfer system.

I'll continue:

Tax benefits are government payments to individuals. The largest are old age payments to seniors and benefits to families with children. Childrens’ benefits play an important role in the reduction of child poverty by providing income support to low-income families. For example, a low-income family of four with two...children in Ontario stood to receive over $20,000 in federal and—

[Julie Dzerowicz, Liberal, Davenport, ON]

On a point of order, Mr. Chair, what's the relevancy? I think clause 2 is regarding the standby charge for automobiles. I don't think anything Mr. Lawrence is saying is relevant.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

I'll just look to the legislative clerk in terms of relevance. It is about the standby charge for automobiles, so that's correct.

MP Lawrence, you're speaking to the standby charge for automobiles. That is clause 2.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Could the clerk please read the clause into the record?

[The Chair, Liberal, Peter Fonseca]

Okay.

[Philippe Méla, Legislative Clerk]

Thank you, Mr. Chair.

Part 1

Amendments to the Income Tax Act and Other Legislation

Income Tax Act

2(1) The portion of paragraph 6(1)‍(e) of the Income Tax Act before subparagraph (i) is replaced by the following:

Standby charge for automobile

(e) if at any time in the year an automobile is made available to the taxpayer, or to a particular person who does not deal at arm's length with the taxpayer, by another person (referred to in this paragraph as “the employer”) because of or as a consequence of a previous, the current or an intended office or employment of the taxpayer, the amount, if any, by which

(2) Subparagraph 6(1)(e)(ii) of the Act is replaced by the following:

(ii) the total of

[Julie Dzerowicz, Liberal, Davenport, ON]

Mr. Chair, I have a point of order.

Does Mr. Lawrence not have a copy of the bill? If so, perhaps we can send it to him, since this is something we're discussing.

[The Chair, Liberal, Peter Fonseca]

That isn't a point of order.

What I will ask, though, MP Lawrence, is that when you do not have the floor, mute yourself, please. We are hearing background sound.

We'll go back to the legislative clerk.

[Philippe Méla]

Thank you, Mr. Chair.

(ii) the total of all amounts, each of which is an amount (other than an expense related to the operation of the automobile) paid in the year by the taxpayer, or the particular person who does not deal at arm's length with the taxpayer, to the employer for the use of the automobile;

(3) Subparagraph 6(1)(k)(ii) of the Act is replaced by the following:

(ii) amounts related to the operation (otherwise than in connection with or in the course of the taxpayer's office or employment) of the automobile for the period or periods in the year during which the automobile was made available to the taxpayer, or a person who does not deal at arm's length with the taxpayer, are paid or payable by the employer within the meaning of paragraph (e) that made the automobile available (in this paragraph referred to as the “payor”), and

(4) The portion of subsection 6(2) of the Act before the formula is replaced by the following:

Reasonable standby charge

(2) For the purposes of paragraph (1)(e), a reasonable standby charge for an automobile for the total number of days (in this subsection referred to as the “total available days”) in a taxation year during which the automobile is made available to a taxpayer, or to a person who does not deal at arm's length with the taxpayer, by a person (referred to in this subsection as the “employer”) shall be deemed to be the amount determined by the formula

(5) Subsections (1) to (4) apply to taxation years that begin after 2022.

[The Chair, Liberal, Peter Fonseca]

That was clause 2.

MP Lawrence, I hope you do have a copy of the bill in front of you. We did have our legislative clerk, our hard-working legislative clerk and his team, read out that clause for you.

If you want to speak to that clause, you're more than welcome.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

I'd actually like the officials, if they could, to explain the state of the current law and the impact of the amendment.

[The Chair, Liberal, Peter Fonseca]

Ms. Gwyer, if you could, come to the table, please.