Mr. Speaker, much of Bill C-10 concerns simple parliamentary housekeeping. I think my hon. colleague from Calgary West would agree with that.
However, as my hon. colleague from Calgary Southeast has pointed out in past debates on this bill, part VII of this act concerning tax treatment of social security payments from the U.S. social security fund to Canadian residents reveals another Liberal tax gouge.
I am losing track but I think this is tax hike number 38, what a record.
Arguments have been made in this House and in committee that this bill will make amendments to the 1995 third protocol that will increase tax fairness and provide tax relief for lower income Canadian seniors.
Tax relief and fairness for low income seniors is an important and noble goal but unfortunately it is a goal that will not be achieved through this legislation.
In fact, I find it difficult to belief that tax relief is the goal of a Liberal government at all because the very tax treaty that imposed a 25% flat withholding tax for U.S. social security payments coming to Canadian residents was negotiated and agreed on by this government, the very government whose members are saying that it was an unfair agreement.
To fully understand this issue, I have to review the history of public policy on social security payments and taxation. It has given me a pretty clear idea of the low quality of the legislation before us today.
The 1984 U.S.-Canada Income Tax Convention Act allowed 50% of social security payments to Canadian residents to be included for purposes of Canadian taxation. That made a lot of sense because it was the same treatment that U.S. recipients of social security have. That is to say 50% of their social security payments were included for the purposes of taxation. With only 50% of their social security payments included for taxation, many low and middle income seniors avoided paying any taxes on their social security income.
This policy was changed in 1995 when the government entered into negotiations with the Americans to produce the third protocol which imposed a 25% flat withholding tax on those payments being made to American residents retiring in Canada.
For low income seniors, this meant 25% of their income disappeared. After Canadian seniors let this government know that their treatment under the third protocol was completely unacceptable, the government went back to the table.
The fourth protocol, the results of which are included in Bill C-10, would see the inclusion rate of U.S. social security payments rise from 50%, as it was before 1985, to 85%. That is a 70% increase on the inclusion rate.
Every senior who pays taxes will now pay more under this legislation. It is not just wealthy seniors, it is all taxpaying seniors who will be hit by this tax grab. This very fact was admitted in committee and, while I was not privy to the discussions, it was a matter of public record. Section 7 of part VII of Bill C-10 is clearly another Liberal tax grab.
When seniors suffering under the 1985 treaty asked for tax fairness, when they asked the government to do something about the 25% withholding tax, they were not looking for a 70% tax increase.
What this policy will do is penalize any and all seniors who have private savings that supplement their incomes so that they are at least within the lowest tax bracket.
Middle income seniors who have made sacrifices and wise financial choices about their retirements are being punished. This is not exclusively the very rich. It is every senior who pays taxes and who collects the U.S. seniors benefits, whether they make $10,000 a year or $1 million.
I am sure that this point will be ignored and my colleagues from across the way will remark that Reform is protecting the interests of the wealthy. This is simply not true and I would ask my colleagues to think about the facts before they perpetuate misunderstandings and misinformation.
Further to the issue of U.S. social security payments to Canadian residents it must be known that unlike CPP payments that are taxed only as income when they are withdrawn, U.S. social security payments are taxed at the time they are made and not when they are withdrawn. So Canadians receiving U.S. social security benefits have already paid taxes on those benefits.
A Canadian working in the U.S. would pay taxes on his or her premiums but would pay little or no taxes when he or she claimed the benefits. This makes sense since seniors are less able to pay the taxes when they are on a fixed income in their retirement years.
If that worker who contributed to the U.S. social security system moved back to Canada he or she would have to pay taxes on 85% of his or her social security income. They are being taxed twice. This is not only unfair, it violates the intended goals of our tax convention which is to eliminate any tax duplication.
I want to stress some key points before I conclude. First, this legislation was rushed through the industry committee. The critic for this bill, the hon. member for Calgary Southeast, only discovered that Bill C-10 would proceed through the industry by chance at the last minute. This makes me pretty suspicious that this legislation contains merely house cleaning matters.
Second, as I understand, the chair of the industry committee disallowed the hon. member for Calgary Southeast to request that seniors affected by Bill C-10 be allowed to testify before the committee. If there were nothing offensive in the legislation, the government would have nothing to fear from being transparent.
Another unfounded concern that came up in committee is that Reform is trying to delay the issuance of cheques owed to seniors by not allowing Bill C-10 to be fast tracked through the committee. Bill C-10 provides for the partial or full refund to some seniors of the IRS to a 25% withholding tax which occurred because of the original Liberal bill that was flawed.
The government has also said that Reform is doing this in an attempt to protect a small group of high income seniors from taxes. This is not true. The facts are every senior who receives U.S. social security and who pays taxes will pay more under this legislation. The inclusion rate for calculating taxable income moves from 50% under the pre-1996 convention to 85% under this bill, the fourth protocol.
By suggesting that Reform somehow wants to protect its idle rich supporters by supporting this bill, the government apparently feels that any senior who pays taxes is a high income senior and an idle rich supporter of the Reform Party.
For the record, let me remind the House that demographic studies show that the Reform supporter on average is less wealthy than the average Canadian. Our supporters are not very rich. They are average Canadians who are hurt by the heavy burden of taxation. However, I am not here today to speak exclusively on behalf of Reform supporters. I am here to speak on behalf of Canadians.
I would like to bring the attention of the House to the fact that the committee reports contain a clear statement by senior tax bureaucrats that the inclusion rate would rise from 50% to 85% under Bill C-10, and that this rise would cost all taxpaying seniors.
Reform resents the suggestion that we are responsible for delaying Bill C-10. We did not create the problem in the first place; the government did. Reform did not delay bringing forward this legislation until after the election; the government did. Reform did not wait three weeks since the debate to bring Bill C-10 to committee; the government did. And Reform did not refuse to hear witnesses explain the impact that this would have on their livelihood; the government did.
I am not naive to the fact that government backbenchers followed the lead of their cabinet. But an issue that involves raising taxes of Canadian seniors is just the sort of issue that should compel hon. members of the House to either change their caucuses or defy their caucuses.
Canadian seniors need a unified voice in the House, a voice that will speak resolutely whenever the government reaches its hands into their pockets. I fear that they do not have this voice with the government. This is not just about money, it is about seniors with retirement dreams and it is about seniors who will face their retirement years in government imposed poverty.