Thank you, Mr. Chair.
Good afternoon, committee members. My name is Kim Moody. I am appreciative of the opportunity to speak before you today. I have a long history of serving the Canadian tax profession with a variety of significant leadership positions, and I continue to do that. I'm a prolific writer on taxation matters, including writing a weekly column for the Financial Post.
Today I'd like to briefly comment on whether or not Bill C-4 lives up to its title, “An Act respecting certain affordability measures for Canadians and another measure”, and offer some suggestions for improvement. Before I do, all committee members and witnesses who have appeared before this committee obviously know that Bill C-4 is not yet law. That's why we're here to discuss and allow the parliamentary process to run its course. If you believe the messaging from the government, this bill is indeed law with respect to the proposed 1% tax cut for the lowest personal tax bracket. In my view, such messaging is misleading. It's only possible because of the CRA's current policy on the provisional administration of tax proposals, which I wrote about in one of my recent articles.
Canadians' overall financial literacy needs to improve in order for them to make good financial decisions and be better informed come election time. Trumpeting that the proposed 1% tax cut is law when it is not is misleading politics and does nothing to advance the important objective of improving Canadians' financial literacy. The CRA's policy should not be used to suggest that such provisions are law until they are. Anything less undermines our parliamentary process. In my view, this needs to change.
With respect to the simple question of whether or not the bill lives up to its title, the short answer is “no”. While the government states that the maximum tax savings for the 1% tax cut is $400 per person, the more important statistic is what the average savings will be for Canadians. The Parliamentary Budget Officer stated in the June 18, 2025, costing note that the rate change will save tax filers “an average of $110” in the next year and gradually increase to an average of $200.
Let's be generous and say that it is $200. For average Canadians, that's 55¢ per day—less than the cost of a daily cup of coffee. To suggest that this tax cut will make a material difference in Canadians' quest to deal with affordability issues, including the millions of Canadians who already don't pay federal income tax, is silly. It won't. For some who suggest that this immaterial tax cut is tax reform, well, think again: It's not. I'll say more on that in a bit.
While I think tax cuts are necessary to deal with affordability, productivity and competitiveness issues, this minuscule tax cut is not it. It needs to go much further. To balance such revenue loss, significant expenditure reduction by government needs to be completed. The proposed Conservative tax cut of 2.25% that was put forward during the recent election campaign, combined with government expenditure reductions, would have been a much more significant step in that direction.
As mentioned many times in my writings, a more meaningful and critical tax cut for the country would be to eliminate the highest personal tax bracket, which was unnecessarily introduced in 2016. That introduction included messaging that asked high-income earners to pay “just a little bit more”, an offensive speaking point when one understands how much high-income earners already pay when compared with the whole of Canada. Our country's high personal tax rates stifle productivity and competitiveness. As recently reported by the Fraser Institute, Canada's top combined statutory income tax rate ranks fifth highest out of 38 OECD countries. These personal tax rates have contributed to an exodus of capital and successful Canadians leaving Canada. We need to stop this.
Before I offer suggestions for improvement, I'll quickly comment on the proposed GST measures in the bill. While a GST holiday for new home purchases can assist with affordability measures, to restrict it to first-time homebuyers significantly reduces access. It's not only first-time homebuyers who are struggling with affordability matters. There are numerous reasons why existing homebuyers may desire or need to purchase a new home. Why restrict this to only first-time homebuyers?
How do we improve our tax system and improve affordability for Canadians? Is it with immaterial personal tax cuts? No. It's with tax reform. As many tax practitioners who have appeared before this committee over the years have previously stated, our income tax statute is a patchwork quilt and a mess. It's tired and tattered and full of political measures, such as the prohibition of deductions on certain short-term rentals and the recent amendments to the alternative minimum tax. These are counterproductive and ineffective policies, and they contribute to the fact that our tax system is far too complex. A key objective of tax reform should be to simplify and remove obvious ineffective policies, but it should also encompass big-bang personal and corporate tax reforms that incentivize investment in Canada and make a real difference in improving affordability for average Canadians.
I was hopeful that the tax reform task force proposed by the Conservatives during the election campaign would have been that step in the right direction. While the Liberals have proposed “an expert review of the corporate tax system”, such a proposal does not go far enough. Corporate tax revenues are approximately 17% of overall federal government revenues—