moved that Bill C-223, an act to amend the Income Tax Act (deduction of interest on mortgage loans), be read the second time and referred to committee.
Madam Speaker, it is a real pleasure to rise in the House today to address my private members' bill, C-223.
This bill will be supported by a lot of industries right across Canada. I have had contacts from the housing industry and the banking industry, saying that this bill or this type of Income Tax Act change is long overdue.
This bill will make it more feasible for young families to own a home. When we look at the importance of families to a nation, we see that they are the basic building block of a strong nation. We want a good solid family, a family that has some encouragement and desire to put equity into a home or shelter.
We often forget that these young families will be dealing with a taxation burden never before been seen in Canadian history. Look at the $600 billion of debt which is going to be put on their shoulders in the next century, a debt which they will have to service. The way the government has been going the last three and a half or four years will add another $100 billion to that. We know we have to do something for these young families so that they will have an incentive to continue to pay taxes. Otherwise I think they will feel like giving up and saying “why should I even try to get equity because it is all going to be taxed away from me before I have the interest or the ability to own a home”.
I designed this bill so that it would not be an incentive for home owners to upgrade their dwelling or be favourable to the higher income families. I felt it should address the lower income families, the people who have really been behind the eight ball, giving them a level playing field when it comes to home ownership.
If we look back through history, no matter what happened in the thirties, the twenties and the fifties, home ownership was always something that set the tone for the economy of that decade. When people could afford to buy homes, we had a stronger economy. This is something that was really devastating in the thirties when homes were being vacated and people were moving to lower cost abodes. The country suffered for it. The number of homes built during the last decade was stagnant. A year or two ago home ownership picked up. When I did some research it astounded me that in 1993 there were 350,000 exchanges of home ownership. They were either people who were upgrading to better homes or people who could afford new homes. Out of that 350,000 changes in home ownership 50,000 were new homes. We know there were 50,000 new home owners in 1993. That is when things started looking a little brighter because government was trying to get the deficit under control and people had a little more confidence in the economy.
When we turn that into dollars and cents, it is quite amazing what that does to an economy with 50,000 new homes, plus the furnishings that are put into them, plus the landscaping and whatever that goes with a new home which provides a lot of jobs. That is what this country needs: jobs and the ability to afford to own a home.
This bill also gives these new home owners an incentive to apply their equity which can be used in their retirement. When they have a home to sell when they get to that age where they do not want to take care of it or they are forced into senior housing developments, they at least have some equity to back them up which today is a big problem for a lot of seniors who have never owned a home and have always lived in rental apartments. They find it hard to pay for accommodation later on.
That is another benefit in this bill. It will give people the opportunity to acquire equity that they can in their senior years use as a retirement fund.
For people who have been buying homes lately, who took the gamble because they thought the economy was turning up, I have proposed that this bill, if passed, will be applicable to first time home owners who bought their homes after December 31, 1994. Therefore, there is the opportunity for people who took the chance and went out on a limb because they were allowed to use 5% of their RRSPs to invest in a home, to secure their investment by being able to deduct the interest from the time that the bill is passed.
There was a complaint from a number of people who asked why first time home owners should get this tax break when people who rent out their units do not get a tax break. I was astounded when I researched the Income Tax Act to see what kind of tax breaks rental owners do get. There is a lengthy list which I will not take the time to explain in full but for example, any rental investor who owns a rental unit can declare the property taxes as an expense. They can include the insurance on their rental property, maintenance and repairs, heat, light and water, advertising, interest on the money borrowed, as I am proposing in this bill for first time home owners.
We can see that it is really not a level playing field for the home owners at this time.
People who have rental units can even include automobile expenses that they use for servicing the property, advertizing and commissions paid to obtain tenants. All these things are tax deductible.
That is why home ownership does not always sound feasible because the rental units can be rented at a fair cost compared to servicing the costs of a home. One needs extra wealth and income to own one's home. The bill, for the first time, would give lower income homeowners a more level playing field even if it is not totally level.
I looked at some legislation passed in the U.S. in the 1940s when all mortgage interest became a taxable expense. We are about 50 years behind in our income tax compared to the U.S. There are certain changes in its program I would not want to have in the Income Tax Act, but the U.S. did not look at the issue of how much revenue government was losing. It looked at the issue of how much more money was put into the economy. When taxes are saved they are invested somewhere else, which was behind the idea of writing that into its income tax act.
I found an article written by Hugh Segal. I do not always like what he says. A lot of people have heard him. We must give credit where credit is due. I thought he made some good comments. This is what he said:
Why should the tax system encourage one activity and discourage the other? Why is the family home a target? Why is it less important than an office, a warehouse or a piece of machinery?
That was the way I looked at it. The home is a basic place of shelter, the place where we raise our families with certain moral character, where we try to teach them what is good for the country, what will be ahead of them, what they will have to do and what their responsibilities will be when they become adults. I thought that was a pretty good argument.
In 1979 the Conservatives introduced a bill very similar to this one. However the government of that day did not last very long, only six months, and the bill died on the order paper.