Mr. Speaker, it is a pleasure to rise and speak on what has become, with very short notice, the prebudget debate this afternoon. Having said that, I am pleased to stand and represent not only my constituents but also my party on this issue.
The first concern I have with the majority report that really reflects the position of the government members on the finance committee is that I feel that some of the recommendations in it are completely insincere. I want to expand on that.
The first point is that there were headlines after this report was leaked. Sadly, it was leaked, as it always is, and as we have seen with so many different committees over the last few years. The headlines indicated that the majority report was calling for about $46 billion in tax relief.
Representing a party that has long called for major tax relief in the country, I certainly do not object to the majority report of the finance committee calling for big tax relief. We favour that completely. We believe that one of the greatest errors the government has ever made was to continue to raise taxes. It has hurt Canadian taxpayers tremendously.
However, we doubt the sincerity of that recommendation. The reason we doubt the sincerity of the recommendation is that a few paragraphs into the report we see the government claim that it wants to continue to adhere to the 50:50 promise.
For people who do not know what the 50:50 promise is, let me explain. In the 1997 election, the government made a promise that surpluses that ran up over the next several years would be divided; about 50% to new program spending and the remaining 50% to a combination of tax relief and debt reduction.
The government laid out the numbers in the fiscal and economic update in November when the finance minister told Canadians that the total surplus, best case scenario, would be $95 billion, and that the amount we could count on to use for things like spending and tax relief would be $67 billion. In that situation, it means that the finance committee report was calling to spend $46 billion of that on tax relief, leaving very little for its huge commitment to spending increases.
This is obviously a bold attempt by the government members to have their cake and eat it too. They want to be the champions of tax relief saying “Oh, we believe in tax relief, but on the other hand, we believe in raising spending dramatically. We want to see 50% of the surplus devoted to new spending”. They also care very much about the debt. They want to see debt repayment become a huge priority as well. They cannot have all of these things at the same time, but that is exactly what this report attempts to do.
So we very much doubt the sincerity of government members when they claim that this is what they want to do. These two things are simply incompatible. They contradict one another. We think it reflects very poorly on the whole report. We think it undermines the credibility of the whole report.
Starting from that very flawed approach, we think that the report, while having some merit in some areas, is also found lacking in many others, but the most glaring area is really the one I just mentioned.
I want to expand on that for a moment. This is a pattern that we see coming forward from the Liberal government. On one hand it promises that it wants to have tax relief. It promises that will come at some point in the future, but its rhetoric and its record show something completely different.
When we heard the fiscal and economic update from the finance minister at the beginning of November he talked ad nauseam about why we need to have lower taxes in Canada today. However we find out through the government's actions that it is raising taxes.
The best example is the millennium tax hike which will occur just two short weeks from today on January 1. Canadians will wake up from the big millennium party with a big tax headache because on January 1 in the new millennium, the year 2000, they will see all kinds of tax increases.
Let me recount some of them for the House. We will see Canada pension plan taxes go up as part of the largest tax increase in Canadian history. It is a double burden for the self-employed because they have to pay both halves of that huge 73% hike in Canada pension plan taxes. The government is saying that taxes are going down and that it wants taxes to go down, but at every opportunity it raises taxes.
The second example is how it is increasing personal income taxes. The government never misses an opportunity to say that it would never raise the tax rate. The government is being completely honest when it says that, but it is being somewhat deceptive when it alludes to only the tax rate because the overall tax burden will go up because of bracket creep.
Ever since 1986 when we deindexed the tax system in Canada under the previous Conservative government we have seen taxes increased automatically for hundreds of thousands of Canadians every year, without having a vote in this place to decide whether or not we should have an increase in taxes. It is an automatic tax increase. The government benefits from that because it brings in about $1 billion a year in new revenue.
I want to touch for a moment on the rhetoric of the government when it comes to how concerned it is about people on the low end of the income scale. Interestingly enough, people on the government side have made a career of telling the public how much they care about people who are struggling to get by, the people who have fallen through the cracks. Yet those people who have fallen through the cracks, the people on the low end of the income scale, are hurt more than anybody else in the tax system because of bracket creep.
It is interesting to note that every year 85,000 new taxpayers join the tax rolls because of bracket creep. They do not have any more purchasing power. They do not necessarily get a raise but they are dragged on to the tax rolls for the first time.
Why is that? It is because with every passing year not only are the tax brackets not indexed but also because the exemptions are not indexed. People end up losing the value of the exemptions which become less and less with every passing year due to inflation, due to the increase in the cost of living. These people are dragged unwillingly and unwittingly on to the tax rolls and start to pay taxes for the first time.
As the Liberals have been in power for the last six years they have increased revenue from people on the low end of the income scale, and indeed from all Canadians, by billions and billions and billions of dollars. This is a big tax increase that the Liberal government has pushed through and presides over. We never discuss it and never have a vote on it in the House of Commons, but nevertheless Canadians are much the poorer for it. That is one way in which the government continues to raise taxes.
On January 1 there will be another tax increase. This is another way that the government raises more revenue and people are less better off, without having a vote in the House of Commons.
Let me give one more example, for instance, the small business exemption. Small businesses in Canada have an exemption of $200,000 below which they pay one rate of tax and above which they pay another rate of tax. That will also be eroded by inflation this year, so small businesses will see their taxes rise again through the big hike in Canada pension plan taxes and through the erosion of the exemption for small business. That is another way.
There are other examples which I could go into. My point is simply that the government on one hand says it is concerned about taxes and it is cutting taxes, but at every opportunity it raises taxes. That is what we will see on January 1. Its say one thing but does something completely different whenever it has a chance.
How does this hurt Canadian families, Canadian entrepreneurs and Canadian investors? There are different ways in which it has hurt them. The best way to bring that home, as we have tried to do over the last several weeks, is to recount the stories of many Canadians who sent us their paystubs to illustrate to the finance minister and to the government in the clearest possible way what happens to people's incomes when taxes are as high as they are.
Let me remind members of an issue I brought to the floor of the House a few weeks ago. I had a teacher from my riding send her paystub which showed that she had received a $1,000 raise, but by the time the taxman got done with it, $81 of the $83 a month raise was gobbled up.
I know it sounds incredible, Mr. Speaker, and you look incredulous, but I can tell you we saw the paystub. We shared it with the media. We had Annalora Horch, the teacher from Medicine Hat, go to the bookkeeper of the school board and ask what was happening. The bookkeeper said that it simply reflected the tax tables for Alberta issued by Revenue Canada as of July 1, 1999. They were following exactly what the government told them they had to do. The result is that a $1,000 raise becomes a $24 raise, thanks to the tax increases of the government. We think that is terrible.
The member for Edmonton North raised the issue of Doreen, a worker from Winnipeg. Doreen sent us her paystub, her statutory holiday paystub. She had received statutory holiday pay of $53, which is a small amount, but she was really concerned that $30 or 60% of that $53 went to pay taxes. I think that is ridiculous. I remember at the time the finance minister sort of mocked this. It is a small amount of money, I will agree, but every dollar is precious to people who are hard pressed and paying the highest taxes they have ever paid in Canadian history.
It is ridiculous that on the one hand we have the government saying it wants to reduce taxes but on the other hand we see taxes mounting ever upward.
I want to raise the instance of Andy. Andy is a mechanic in my riding. He works at Evergreen Implements in Brooks. He works in the town where I live. He has been a mechanic there for 27 years. He sent us his Christmas bonus paystub which showed that out of his bonus the finance minister got 42%.
Andy, Doreen and Annalora are the ones who are putting in the extra hours. They are the ones who are working their hearts and guts out for their families. They take all the risks. They do all the work, but who gets half the bonus? Who gets half the statutory holiday pay? Who gets half the Christmas pay? It is the finance minister.
If that is not the biggest destroyer of incentive I have ever seen, I do not know what is. It is ridiculous that to burden our people the way they are in Canada. They should be rewarded for hard work, productivity and entrepreneurship but sadly they are punished.
We must remember that taxing something effectively means that we get less of it. A tax is a price. When a tax is placed on something we get less of it. The higher jobs are taxed, the fewer jobs we get. We see that with every passing year as Canada pension plan taxes go up, or when employment insurance premiums do not go down nearly as much as they should.
I remind the House that the government is still raiding or confiscating $7 billion a year of employer and employee premiums that do not go to pay more benefits and therefore should come back to employers and employees in the form of lower premiums. The government continues to raid that and as a result we see the taxes on jobs being far too high.
When we have high income taxes we have a high price placed on productivity and work. There is no incentive to work overtime any more. We wonder why we languish when it comes to productivity. The reason is that we pay a very high penalty when we work hard in Canada today.
What about entrepreneurship? There are myriad ways that the government punishes entrepreneurs. I have recounted some but I will go into that in a bit more detail. Before 1971 in Canada we did not have a tax on capital gains. Since that time we have an extraordinarily high tax on capital gains. The result is that we put a high price, a penalty really, on the great crime of investing in our economy.
One thing that has distinguished Canadians over the years is that people have been risk takers. We have been individualists to some degree. That may shock some people in the Chamber, but we have been rugged individualists. We have said that we wanted to create businesses, to start something that we could run ourselves and be our own bosses. As a result of the high capital capital gains taxes in Canada today, it is very difficult to accumulate capital to the point where we can start a business. The result is that many people leave the country.
The best example is what is going on right now in the high tech industry where we see all kinds of people who are trying to start businesses moving to the United States and other countries around the world. That is shameful.
Not only is it a shame to lose these people because of the economic impact, but we see families splitting up, families leaving the great country of Canada to go elsewhere. That is disgraceful. It is very disappointing to see the government be so sanguine about it, especially the Prime Minister who says “If you don't like our high taxes then just go to the United States”. I think that is ridiculous.
We see it in other ways, even in consumption. The more consumption is taxed, the less consumption we have. That is rather obvious. For retailers in Canada that is a serious issue. Not long ago I spoke to Peter Woolford, head of the Retail Council of Canada. Mr. Woolford pointed out in testimony to a Reform Party committee that the domestic economy in Canada had never really recovered from the recession of the early 1990s. One reason for that is the high taxes on consumption. We see this at the provincial level and at the federal level. Part of the reason is that people have less disposable income and therefore cannot purchase in the first place.
Whenever we have these taxes we have what economists call a tax wedge, a difference between what consumers are willing to pay and what the seller is willing to sell for. The tax often serves as the wedge so no deal is struck between the two. The result is that a sale is not made. We need to make sales. We need to keep the economy moving for the economy to grow, to create wealth, prosperity, jobs, opportunity and hope, something for which Canada was known during the first 100 years of its existence but too often is no longer known for.
These are all prices that are placed on very productive behaviour. Now we in Canada bear the fruit of that in the form of a brain drain and an unemployment rate that is still far too high. The unemployment rate is about 60% higher than it is in the United States. It is certainly 60% higher or perhaps higher in relation to the historical level of employment in Canada. That is a huge concern. Government members take some comfort in an unemployment rate of about 7%, but to the unemployed it is not very much fun at all.
There are other ways in which the government punishes people through the tax system. In 1995 when the finance minister undertook a number of changes he asked that Revenue Canada hire a whole bunch of new auditors. The impact has been terrifying for people who are in the sad position of having these people visit their businesses. Let me cite an example.
One accountant in my hometown, Hugh Bevan, writes to me often about something that is so bizarre, but it makes sense because it is about government. If a farmer or a rancher buys a half-tonne truck or a three-quarter tonne truck with an extended cab, a log has to be kept indicating everywhere the truck travels. The reason is because somebody might be in the back of the truck who is not actually travelling on official business. This results in farmers and ranchers being forced to keep a log. With all of these compliance costs, people try to cheat the system and get around these things in various and sundry ways.
This is not productive. Instead of trying to wring every cent out of Canadians' pockets, when will the government make a solid commitment to cutting taxes, not some airy-fairy commitment that is contradicted in the document itself, such as we see in this finance committee report?
Canadians want lower taxes. Fairness and justice demands it. It is time the government quit talking about lowering taxes and started doing it instead of giving us tax increases like we will see on January 1.
Let us end this Liberal rhetoric. We want to see lower taxes in Canada starting today. Therefore, I would move that the motion be amended by deleting all the words after “That” and substituting the following therefor: “the first report of the Standing Committee on Finance, presented on Friday, December 10, 1999, be now concurred in, but that it be recommitted to the Standing Committee on Finance with instruction that they amend the same, so as to recommend that the government re-index the income tax system to inflation by immediately eliminating bracket creep”.