These are principles that have governed our actions, highlighted by the multi-year tax cutting plan announced in the February budget.
However, even before that, in the update itself, we announced steps that provide concrete benefits to every Canadian employee, not just a single group like mechanics. We announced that for the sixth year in a row employment insurance premiums would be reduced from $2.55 to $2.40 for the year 2000. This means that employees and employers will save an additional $1.2 billion this year, bringing total annual savings relative to the rate that prevailed in 1994 to $5.2 billion.
We then followed up with budget 2000 and its proposed five year tax reduction plan. This is a plan to provide real and lasting tax relief for all Canadians, providing accumulative savings of at least $58 billion over the next five years with a particular emphasis on families with children.
The plan is based on two measures that break with the past to implement the two most important structural changes made to the tax system in more than 10 years.
First, the plan provides for full re-indexation of personal income tax, retroactive to January 1, 2000. This measure will benefit all Canadians, particularly low and middle income earners.
Second, the plan will reduce the middle income tax rate to 23% from 26%, beginning with a two point drop to 24% on July 1, 2000. This will cut taxes for nine million Canadians. I would expect that many mechanics would fall into this category.
These changes anchor a range of other actions to help reduce working Canadians' tax burden.
Personal income taxes will be further reduced within five years by increasing to at least $8,000 the amount Canadians can earn tax free and by raising the income amounts at which the middle and upper tax rates begin to apply to at least $35,000 and $75,000 respectively, again, to the lasting benefits of all Canadians.
To assist families with children, the Canada child tax benefit, CCTB, will be enriched by $2.5 million a year by 2004 to more than $9 billion annually. Maximum benefits will reach $2,400 for the first child and $2,200 for the second child.
Personal tax cuts alone will not deliver new jobs and growing incomes over the long term. A growing economy centred on innovation is an important part of the equation. That is why budget 2000's five year tax plan takes additional measures to help Canadian businesses become more competitive internationally by making the tax system more conducive to investment and innovation. This will help to ensure continued growth and job creation in a global economy that is increasingly knowledge based.
To that end, the plan proposes to reduce the corporate tax rate to 21% from 28% within five years for the highest taxed businesses, such as high technology, with a one point drop to 27% effective January 1, 2001.
To assist small businesses the corporate tax rate will be reduced to 21% from 28% on small business income between $200,000 and $300,000 effective January 1, 2001.
The net effect of these measures will be to create jobs and improve the lives of Canadians from coast to coast.
As members can see, the goal of the five year tax reduction plan is clear and concrete: more money in the pockets of Canadians, stronger economic growth and enhanced job creation.
Taxes will be reduced by a cumulative amount of at least $58 billion, with personal income taxes being reduced by an average of 15% by 2004.
While all Canadians will benefit from the tax plan, it recognizes the needs of low and middle income Canadians who will see their personal income taxes reduced by an average of at least 18%. In particular, relief will be provided to families with children. Including the enriched benefits under the CCTB, families with children will see their personal income taxes reduced by an average of 21%.
Accordingly, the immediate tax relief under the plan will grow over time. Consider, for example, that in 2001 a typical one earner family of four with about $32,000 in income will receive more benefits from government, thanks to the CCTB and the GST tax credit, than they will pay in personal income taxes. What this really means is that this family will pay no net tax. By 2004, that family could earn up to $35,000, or $3,000 more, and still pay no net tax.
Here are two more examples of the tax plan at work. In the first full year of the plan, a typical one earner family of four with $40,000 in income will see its net federal income taxes reduced by at least 17%. In 2004 their taxes will be cut by at least 48%, a savings of over $1,600 compared to what they would pay without the plan.
A typical two earner family of four with an income of $60,000 will see their taxes reduced by almost 9% in 2001, and by $1,546 in 2004. That is a 27% savings relative to what they would have paid had the plan never been established.
Full indexation of personal income tax will put an end to automatic and hidden tax increases that result from what is called bracket creep and to the erosion of tax benefits that has characterized Canada's tax system since the middle of the 1980s.
This means that salary increases that simply correspond to the inflation rate will no longer automatically put many taxpayers in a higher tax bracket. In other words, taxpayers will no longer see their taxes raise when their real buying power has not increased.
Moreover, benefits, such as the Canada child tax benefit and the GST credit, will automatically increase to offset inflation.