Mr. Speaker, I stand on behalf of the Reform Party to also oppose the motion.
The motion suggests, I think almost insultingly, that experts who have been asked to write a technical report are unaware of the kinds of political concerns which dominate the thinking of professional politicians in the House. As a former economist who has written such reports, I can say that the political concerns are always constraining and they influence what the expert report comes up with. I believe it is inappropriate that members of Parliament dictate on a day to day basis what the outcome is because they have the opportunity to influence the public information about the subject.
Once the report is written it is almost certain to go for hearings to the Standing Committee on Finance of the House of Commons. At that time members of Parliament can insist on having other experts brought in. They can ask questions relating to the contents of the report. They will have input for generating information that is broadly representative and goes beyond what the technical experts are saying, even if this is necessary.
Once the report is tabled and goes to the Department of Finance, legislation may or may not come out of it. Clearly, once legislation stimulated by the report is proposed, members of Parliament have yet more input. The legislation will not only be discussed on the floor of the House but there will be opportunities for hearings and further experts being brought in when the legislation is considered before the Standing Committee on Finance.
Therefore, it is totally inappropriate at this point to try to introduce a more direct influence of professional politicians into the deliberations of the technical experts.
My own party is not totally happy with the way in which the frame of reference of this committee has been designed. We believe in this modern age as a result of developments in communications and globalization of financial markets it is time to have a more thorough examination of the entire taxation system. We should look not just at the business taxes; we should also look at personal taxes, excise taxes and customs. It is also very important to look at some of the Department of Finance publications. There should also be consideration of the practices of local governments in their taxation of individuals and corporations. These matters are all interdependent.
All of the country's taxation laws should be examined again as a cohesive single unit, an interdependent system, while keeping a very close eye on how it works in relation to foreign practices. We live in this global village which has made it very difficult for individual countries to have policies that can be carried out simply to maximize domestic objectives without taking into account the way in which foreigners are influencing the effectiveness and the workability of those domestic practices.
There are many problems with the present system of which I am very much aware from the hearings of the finance committee but also because I delved into the literature on the flat tax. The proposals for a flat tax in the United States, Canada and throughout the world are now being given a serious hearing. I believe that is the case for exactly the reasons I have mentioned. Globalization and all kinds of practices reduced the work before we had these international developments; we are not likely to do so in the future.
The biggest problem almost all tax experts agree on is that in Canada and most other industrial countries income from property is taxed three times. First, the business which earns profits from investment pays its business or corporate income tax. These dividends or profits are then entered into the income of the person who owns the business or shares in it and it is taxed again at the personal tax level. It is taxed twice, but it is worse than that. We also have taxation of capital gains. If someone then sells his business or shares in the future, if there has been an accumulation
of wealth, an accumulation in the value of that business, there is then the capital gains tax.
The capital gains tax is particularly pernicious. First, many of the gains that appear are really paper gains. If I make an investment of $100,000 and at the time I make the investment I could have bought a residence for $100,000, then we have inflation. The value of my business triples. It is now worth $300,000, but because it was general inflation I can still only buy the same residence with it. I have not become any richer as a result of the increase in the value of my investment in a business.
When the government steps in and says that 30 per cent or 50 per cent of the increase in the value of the business is due to capital gains and is taxable then it is expropriating the owner of that business. After taxation that business will be able to buy only one-half of a home rather than a full home. What is the justification for this? The asset, which is being taxed like this, has already paid income taxes, both at the business level and at the personal level.
There is fairly widespread agreement, not total agreement, among economists that this bias against the returns on investment and savings has depreciated the rate of capital accumulation in our country. It is capital that is invested in the country which raises the productivity of labour, which raises personal income, and which determines in the end our standard of living. Therefore it is detrimental to Canadians in the longer run to put such a heavy tax on income which is subject to this kind of double taxation.
I want to make one quick reference to the high progressivity in taxes. In British Columbia it is now well over 55 per cent for the highest income earned.
Someone produced a chart for me which shows that we started off in 1967 with a marginal tax rate of 80 per cent in Canada. It has now reached about 50 per cent. During this period one would have expected that the income taxes paid by the top 1 per cent of all income earners and the top 10 per cent would have decreased because after all the rates of taxation that they are subjected to have decreased so dramatically.
The graph shows that the proportion of all personal income taxes paid by the top 1 per cent of all income earners has remained absolutely constant between 1967 and 1993. There were some fluctuations, especially around the mid-1980s, when interest rates were 20 per cent and all these companies went bankrupt.
Basically the same thing is true for the top 10 per cent. It suggests that the disincentive effects which have come from these high marginal tax rates have not really been effective in getting more money out of the rich people and we might as well get rid of them.