Madam Speaker, in the time allotted to me this morning, I will provide some context for the thinking behind the 1998 budget and then highlight some of the measures that were included in this particular bill which forms the income tax side of the 1998 budget itself.
First, the 1998 budget reconfirmed our balanced approach to building a strong economy and a secure society. The federal books are balanced. We have put an end to credit card government. We indicated in the 1998 budget and have continued to reduce Canada's debt burden through a two-front strategy of stronger economic growth and a concrete debt repayment plan.
As government members, we have always said and we recognize that a healthy bottom line is a means to an end, not an end in itself. In the 1998 budget we have also included the Canadian opportunities strategy, which included the millennium scholarship program, as well as other programs.
The 1998 budget represents the second stage of a three part plan that we put together in 1994. The Minister of Finance said that this plan was not simply a theme for one budget or one year. It has defined our approach from the beginning and will define our approach in the future.
First, as in the previous budgets, we reduced the deficit. With the 1998 budget we balanced the books and have begun the process of debt reduction. In future budgets we will stay the course. The 1999 budget proved these words.
Second, we have invested in the future. Over 80% of the spending in the 1998 budget reflected two of the highest priorities of Canadians: access to knowledge and skills, and support for health and education through increased transfers to the provinces.
Third, we reduced taxes initially in the 1998 budget in a targeted way. As soon as the country's resources permit we will broaden and deepen the process. As we saw in the 1999 budget, that is exactly what the government did. Collectively, the 1998 and 1999 budgets provided $16.5 billion of tax relief to Canadians. This is an approach that is delivering real benefits for Canadians today. It is certainly a robust outlook for Canada as we start the new millennium.
As I go through and highlight some of Bill C-72, I will take a moment and comment on what members will probably hear from the Reform Party, the Bloc and other opposition parties. These parties will say that the government is off track. We will argue that we are not. The true test will be what Canadians think.
As we conclude our prebudget deliberations from year to year, and we are about to start in June and into the fall for the upcoming budget, over and over again Canadians reflect on our approach. We have taken a balanced approach in both the 1998 and 1999 budgets, which is what we will continue to do.
Let me highlight some of what is included in Bill C-72. When the finance minister presented the 1998 budget, he noted that these measures represent the first steps toward general income tax relief. Each of the budgets have provided targeted tax relief where it would be most beneficial. With the deficit behind us, the government is now in a position to introduce broad based tax relief while adhering to the principle that such relief must not jeopardize our regained fiscal health or impinge on the priorities like health care and education.
General tax relief as indicated in the 1999 budget will speak for itself. The measures in the bill reduce taxes for low and middle income Canadians, those least able to pay. Two of the measures in the 1998 budget provide general tax. For low income Canadians, the amount of $6,456 that can be earned tax free is increased by $500 effective July 1, 1998.
Most people will ask, as I am sure the hon. member for Elk Island has asked before, how this can actually work. It was explained to the member in committee. He seems to understand the technical matters of this particular bill so I will leave the member to refer to the report from committee. The spousal and equivalent to spousal maximums of $5,380 were also increased by $500.
What does this mean? It means that single taxpayers with incomes under $20,000 can earn up to an extra $500 tax free; for a family earning under $40,000, the maximum increase would be $1,000 tax free. As a result of this measure, 400,000 low income individuals will be removed from the tax rolls and another 4.6 million taxpayers will pay less income tax.
The 1999 budget was a follow up on the 1998 budget and in fact continued on the same track. The 1999 budget extended this $500 increase to all taxpayers and raised it by a further $175, increasing the basic exemption by $675. Canadians are now able to earn $7,044 tax free in 1999 and $7,131 in the year 2000. In addition, the maximum spousal and equivalent to spousal amounts will increase to $6,055.
These measures will benefit 600,000 low income Canadians, 400,000 will pay no federal tax as a result of Bill C-72 and another 200,000 will disappear from the tax rolls because of the 1999 measures.
The second measure providing tax relief in the 1998 budget is the elimination of the 3% general surtax for people earning under $50,000 and a reduction in the surtax for those with incomes between $50,000 and $65,000. Members may recall, and there may be people in the gallery who will recall, that when the Conservatives were in office they put in place a 3% surtax to pay for the deficit. What we have always said is that once the books were balanced the 3% surtax would be the first tax measure we would deal with, and the 1998 budget did so in a targeted fashion. The surtax has been eliminated for almost 13 million filers and it has been reduced for another one million Canadians.
The 1999 budget is very much intertwined with the 1998 budget. In 1998 we targeted the reduction of the 3% surtax to those earning below $50,000 and in the 1999 budget we will have eliminated the surtax completely for 15.1 million Canadian taxpayers as of July 1, 1999.
In every budget our government has provided targeted tax relief where the need was greatest and the benefits most substantial. The 1998 budget was no different. It introduced the Canadian opportunities strategy which was designed to ensure that all Canadians have an equal opportunity to participate in the changing economy.
Hon. members know that many students have limited access to post-secondary education because of financial barriers. Bill C-72 implements several measures which will financially benefit students.
For example, for some students a federal tax credit of 17% of interest paid on federal and provincial student loans was introduced, which will provide tax relief for about one million students. A student with a $25,000 loan, which is the average, would typically see a federal-provincial tax reduction of $530 in the first year alone. The new credit would mean about $3,200 in tax relief over a 10 year pay down period.