Mr. Speaker, I congratulate the member for Portage—Lisgar for his initiative in proposing this bill. I am sure he is well intentioned. He would like to give Canadians a tax break, he would like to stimulate housing construction in Canada and he would like to re-emphasize the importance of the home, the family, et cetera.
I am sure that none of us in this House would disagree with those objectives, but the bill proposes that interest paid by a taxpayer on the first $100,000 of a mortgage loan secured by that first qualifying home acquired by a taxpayer would be allowed as a deduction for tax purposes. I am afraid the bill falls short of meeting the objectives proposed by the member when he introduced this bill.
The bill raises a number of important questions but fails to answer them. I am sure they are begging for answers but I am not sure the bill really answers them. For example, is it appropriate to give a tax break to a citizen who does not own a home but who rents or who does not pay rent or own a home at all? Why give a tax break to someone who owns a home versus someone who does not own a home?
Why should first time buyers of a home receive a tax break versus people who already a home? Does that make any sense? I submit that it does not make any sense at all. Should our tax system reward borrowing and penalize saving? I am not sure that is the kind of incentive we want to build into our tax system.
If the mortgage interest were deductible clearly taxpayers would be motivated to have the highest mortgage possible. They would have more interest and more interest to deduct. Clearly we would be encouraging Canadians to borrow more and save less. I am not sure that is something we want our tax system to encourage. These are some serious questions that really beg answers. Maybe the member opposite will have a chance to address them but the answers are not contained in his private member's bill.
It is unfortunate that there are more questions that beg answers. Currently in Canada the capital gain on a sale of a principal residence is not taxable. If we allowed the interest to be deductible then surely the capital gain on the sale of a principal residence should be taxable. The reason a capital gain on a principal residence is not taxable in Canada now is that we do not consider an investment in a principal residence as an investment. It is the ownership of a private home. You cannot have your cake and eat it too. You cannot be tax free in terms of capital gains and have interest that is tax deductible.
There is the serious question of the cost of implementing this proposal. If this proposal were implemented the annual cost to the treasury would eventually be approximately $3 billion a year. If the tax rolls were broadened to be at least within the context of the member's proposal to be more equitable in terms of not just first time home buyers but all homeowners, the annual cost to the treasury could rise to $6 billion at a time when we are looking at fiscal priorities. I could think of a myriad of other good ways to give Canadians a tax break or to repay the debt or to invest in some much needed social and economic programs. First time home buyers already get some tax assistance under the home buyers plan.
What the bill fundamentally proposes comes from a misunderstanding of what Canadians want in their tax system. They want a progressive tax system. That is the whole essence of our tax system in Canada. Under this proposal individuals with higher incomes would get a bigger tax break. That is really contrary to the whole philosophy and the principles behind the tax system in Canada, and I think quite rightly.
I am sure the member opposite gets a lot of his ideas from what goes on in the United States. Yes, it is true that mortgage interest is deductible for tax purposes in the United States, but again capital gains in excess of $500,000 on a principal residence are typically taxed. In addition, most Americans do not really take advantage of the deductibility of mortgage interest because they prefer to take the standard deduction without any questions. Our personal income tax system in Canada is far more progressive than the U.S. income tax system.
While I and a lot of my colleagues I am sure would like to reduce the general burden of personal income taxes in Canada, and we are working very hard toward that end, I am quite convinced that this proposal is really not a very equitable or a very efficient way to give tax relief to Canadians.
If we look at the United States and just to sort of emphasize the lack of progressiveness in its income tax system, Americans hit the highest marginal income tax rate when they get to incomes of $300,000 plus. By way of contrast, in Canada when we hit incomes of $150,000 or thereabouts we start to hit the top marginal tax rate. That is by design. That is the way our tax system works. We say that those people earning the bigger incomes are able to share their wealth to some extent to help those who are in less advantageous positions. That is the whole philosophy behind the income tax system.
This measure is really not a very progressive step at all. I am sure it is really counter to what Canadians expect from their income tax system. For that reason I urge members of this House to vote against this bill.