Mr. Speaker, I will be splitting my time with the member for Niagara Falls.
I will begin by apologizing to the finance minister. I have, privately and publicly, described him as a tax cutting wimp. I thought that was an accurate description as far as previous budgets, but I am wrong. Quite clearly this budget is an aggressive run at tax issues that have been on the agenda for years and years and years.
Publicly, I would like to apologize to the finance minister because he has proved me to be wrong.
As I listened to the budget speech, I was absolutely stunned at the breadth and magnitude of the finance minister's commitment to tax cuts. Frankly, I had trouble believing that the finance minister reindexed the entire system and killed off bracket creep. This is enormous. This is the most important event in the entire budget process in the last seven years, second only to this government getting serious about eliminating the deficit.
Members of our caucus, members of the Standing Committee of Finance and others have talked repeatedly about the stealth tax that occurs in the indexation of the system and that nasty little surprise Canadians get when they get a modest raise which jumps them into a new bracket.
Many of us know that bracket creep was probably the most significant inequity in the tax system. On the first occasion in which the finance minister could meaningfully address this issue, he made it the centrepiece of his budget.
For those of us who have laboured long and hard in this area, it is indeed most gratifying. I would especially like to thank and acknowledge the work of the member for Durham who has spoken about this issue repeatedly over the past five years both in and out of caucus, and has spoken about it even when others were not speaking about this issue.
The good news does not stop there. The Minister of Finance also took the opportunity to raise the threshold to $8,000. The last time he raised the threshold we were given to understand that something in excess of 400,000 Canadians were taken off the tax rolls. I expect this will do the same thing.
Simultaneously, he raised the middle threshold from $29,000 to $35,000, and the top threshold from $59,000 to $70,000, while dropping the middle rates two points, from 26% to 24% effective July 1 of this year, and an additional point later on in the five year plan. I know this is a significant cost to the treasury and that it takes enormous courage on the part of a minister of finance to take these steps. Any one of these steps would be a significant reform to the income tax system. Cumulatively it is enormous.
However, it does not end there. He also mounted an attack on the 5% surtax after having completely eliminated the 3% surtax last year. As of July 1, the 5% surtax will be completely eliminated on incomes up to $85,000 and phased out on incomes over $85,000. Taken individually, these changes to the system of personal taxation would be significant but collectively they are enormous. I am sure that over time Canadians will start to realize that what they witnessed on Monday night was a radical remaking of the personal tax system in the country.
However, the minister did not limit himself to changes to the personal tax system but he also started the process of business tax reform. When we start talking about business tax reform we usually start to hear a gagging sound on the left. The rhetoric starts getting cranked up about rewarding rich business cronies on Bay Street, et cetera. The rhetoric gets a little childish at times and what gets lost is the simple truth that all businesses, be they large or small, must be successful. If a business is not competitive it will not survive. If that business does not survive it will have no employees.
I have never understood why the left wants to hobble business. It is like a gag reaction to any person who is successful or to any business that is successful. We seem to be compelled, it is almost in our culture, to bring Canadian business down to mediocrity. Canadians seem to like to reach for the bronze medal but leave the rest of the medals to everybody else.
I was therefore pleased to see that the Minister of Finance start to lower the tax rate on the high tech sector by 25% over the next five years. Regardless of what others say, this was absolutely necessary. High tech, by definition, is virtually borderless and can vacate a jurisdiction in a flash. Unless the tax environment is competitive—and here one might just as well read U.S. rates—business will move there unless there is some other reason to keep it here. We therefore have the strange anomaly of having fostered these businesses by bringing in our best educated people, providing the business environment with a good start up environment and providing research money and then, when it gets successful, it moves to California. It is the worst of all possible worlds.
I am not arguing that the magic of changes to a tax environment is the panacea to high tech business, or any other business for that matter, in terms of vacating the jurisdiction, but lowering the high tech rates generally and on small business immediately is the right thing to do.
It is clear that some of our most talented people leave for opportunities in other jurisdictions. It is my opinion that the tax environment does not drive them out of Canada rather it is factors such as career opportunities and research and development opportunities. However, the tax environment is still a factor of some significance and I believe that the Government of Canada made a significant step in the right direction.
The so-called brain drain is of concern to us all. I will point members in the direction of some information I came across recently. It was put forward by graduates who moved to the United States. It is a rank and class of graduates who moved to the United States for work related reasons. For those who moved, 42% of those graduates were in the top 10% of their classes and 39% were in the top 25% of their class. That cannot continue. We simply cannot survive in a modern industrialized economy if that continues to happen.
The tax environment is not the be all and end all of the brain drain. However, lowering the capital gains taxes so that the inclusion rate is now at 66% rather than 75% is a step in the right direction.
Postponing taxation on stock options to when the shares are sold rather than when the options are exercised is a step in the right direction. Increasing the amount investors can put into new investments by allowing a $500,000 tax rollover for qualified investments is a step in the right direction. These are significant in and of themselves but cumulatively these are extremely significant.
This is the best budget in 25 years. This is a taxpayers' budget. This is a budget that addresses the fiscal reality in an even-handed way. This budget is good for business. This is great for personal tax filers. I would urge hon. members to support the passage of this budget.