Mr. Speaker, it gives me great pleasure to enter the debate on Bill C-223. I would also like to thank the member for Portage—Lisgar for bringing this matter to the floor.
This is not the first time that this has been debated in the House of Commons. The ill fated government of Joe Clark and Mr. Crosbie made it part of its budget projections which eventually saw it defeated. Subsequently not many people have sought to reintroduce it.
I understand the member is interested in helping young families get a start in life, a very admirable position to have. I do not think it is going to attain the objectives he is interested in for a number of reasons.
First, this would increase the complexity of the existing income tax system. The thing that people mention to me is they want to see a simpler and fairer taxation system. We will have one group of taxpayers eligible for deductions and another group not.
I want to specifically talk about some of the problems of the American system which allows the deductibility of mortgage interest. I am certain the administrative people in the United States would dearly love to get rid of the mortgage deductibility. The tendency of the government there has been to eliminate consumer deductibility for other forms of debt such as car loans and credit card interest, which have already been eliminated. The American system is tending to go away from the concept of mortgage deductibility.
What this does is encourage people to be in debt. I have some American friends who are quite amazed that Canadians eventually pay their houses off through a process of saving. Canadians have one of the highest percentages of home ownership probably in the western world because of that. I know the member is talking about first time home buyers, but it has been the tendency for Americans that every five years when their mortgage comes up for renewal they increase their mortgage. They increase it based on the inflated value of their real estate because there is a tax incentive to do so.
As a consequence few people actually try to pay off their mortgages and they live with debt risk. If there is a downturn in the economy, these people, the very people the member is interested in assisting, will end up losing their homes because they are too highly leveraged and the incentive to save has not been there.
Let us look at the experience in the United States. We have talked about the difference between the wealthy benefiting from this package as opposed to those who are not so inclined. Of course it benefits people who own homes as opposed to those who rent.
In the United States currently only 8% of new homeowners recently polled cited the tax break as a reason for purchasing their homes. In the United States only 6.2% of household earnings between $10,000 and $20,000 per year claim the deduction compared to 78.1% of filers who declared more than $100,000 of taxable income.
We can see very clearly that the American experience is that the high income earners are the ones taking advantage of this and not those with low incomes. It is a regressive tax in the sense that it favours higher income groups at the detriment of lower income earners.
Previous speakers have mentioned that to some extent capital gains on personal residences are taxed in the United States. Of course Canada does not do that. If we introduce a process whereby people are allowed to deduct the interest they pay on their mortgages, it follows that we should also tax capital gains. I believe we would find there would be a lot of reticence if we moved in that direction.
This would be what we call a retrogressive tax. It would increase the complexity of the tax system. It is a reward for spending as opposed to saving. These all seem to run counter to the things which government should be promoting in our country.
The Americans like this because they have a consumer driven society. Basically we will find in the United States that their savings rates are significantly lower than those of Canadians. That creates a great deal of uncertainty in their lives. Indeed many people live from paycheque to paycheque. I suppose we could argue that this happens in Canada as well, but it is more evident in the United States.
When the hon. member first opened debate on this issue he talked about who would benefit. I am surprised at the reference he made. He said that he had been informed by the banking industry that it would be in favour of this. Why would it not be? After all, if the banks are going to increase their mortgage business, why would it not be a great business to have?
I suggest to the hon. member that the people he is trying to defend, the first time homebuyers, are the very people the banks want to get into their clutches. The banks will tell them not to pay down their mortgages or save because the banks will lend them the money. We know who will become wealthy from that. It will not be the first time homebuyers, it will be the financial institutions which will benefit.
In conclusion, while I am aware of the good intentions of the member, I encourage my colleagues to vote against this bill.