I hear my hon. friend. In 1977 the federal government agreed with the provinces to give back their tax points. Tax points are tax revenue earned in the provinces which goes to the federal government and is yielded back to the provinces. That agreement was made 23 years ago. There were no strings attached. No one said they had to go to a particular set of services.
At what point does that money belong to the provinces? It is not part of the cash transfer which the federal government originally agreed to give to the provinces to ensure that things like health care and higher education were funded. Absolutely not.
If the government were honest for a moment, it would acknowledge that cash transfers have dropped dramatically for health care. Even with the money it put back in, it is nowhere near where it was. The government has come nowhere near addressing the problems in health care. All it can do today is pick fights with the provinces.
Witness the problems with Ontario. Witness the problems with Alberta right now. Its solution is to go to the level of government that provides the services the moment it tries to do anything different. The provinces are trying to find some way to ensure that important health care services actually deal with the needs of their own people. The federal government at every opportunity dumps all over them and threatens to withhold transfers. The only level of government which is showing any kind of innovation is the provinces. The federal government's answer is to hit them with the big hammer every time.
I do not think that is dealing with the problem. I would argue it is trying to shift the blame to the provinces. I would argue it is an abdication of its responsibility as the senior level of government in Canada. It has completely abdicated its responsibility.
There is an example of where budget 2000 and Bill C-32 fall short of addressing a fundamental need of Canadians, which is good and timely health care. It is not happening and Bill C-32 did not address it.
What are other examples of huge problems which the government did not address? If we go through the entire budget, we find piles of documents which are probably eight inches thick. Do we ever see a mention of problems in human resources development, of the mismanagement of funds?
If chief financial officers for a private sector company produced an annual report which neglected to mention the type of mismanagement the government is involved in human resources development, in Indian affairs, in EDC, and in the scientific research and experimental development tax credits, which the auditor general reported on yesterday, and did not report on those things, they would be fired so fast it would make their heads spin. They would probably be in big trouble with securities regulators for producing a report that was so misleading.
Does the government even feel a twinge of conscience about producing a budget that does not mention these things? Not at all. There was not a mention in my friend's speech across the way of the problems in human resources development and the other problems that have plagued the government over the last several months. When people are not told the whole story it is the same as telling a lie. I would argue that the government is not telling Canadians the whole story.
What are some of the other problems that are not addressed in the budget? Let us consider the fact that in Canada we have seen disposable income virtually sit stagnant for 10 years. It has finally risen about 5% over the last 10 years. Does the budget deal with that problem?
My friend across the way will say that they brought in $58 billion in tax relief, but when we break it down is it really $58 billion? Let us go through the numbers. My friend talked about the child tax benefit. Anybody who pays attention at all would argue that it is not a tax break, that it is a social program.
What is the definition of a tax break? It is when the money is left in people's pockets in the first place. It is not taken out and redistributed so that some people get it back and some do not. That is not a tax break. That is a social program. That is what we do with the guaranteed income supplement and old age security. Those are social programs. They are not tax cuts. We cannot call that a tax cut. It is a social program of about $7.5 billion.
What about bracket creep? My friend mentioned that they eliminated bracket creep and reindexed the tax system for a tax break of $13 billion. Is that really a tax break? All that does is cancel future tax increases.
We are happy the government has done it. It picked the pockets of Canadians for a long time and milked the cow dry. That does not mean all of a sudden when it quits doing it that the government should be credited for cutting taxes. It simply is not the case. It is a cancellation of future tax increases of $13 billion.
The third trick it used was to suggest that if it cut taxes with one hand and raised them with other somehow people would be better off. That is exactly what it does. Let us consider that over the next few years $29.5 billion will come out of the pockets of taxpayers to pay for higher payroll taxes, Canada pension plan taxes in particular. That largely erases any benefit from income tax cuts that the government would bring in.
What is the net effect? Out of that $58 billion in tax relief emblazoned in headlines the day after the budget Canadians will get $8 billion. That is the real tax relief. When we break that down per taxpayer, it means $100 in his or her pocket a year. It should not be spent all in one place, that $2 a week. We could go to Starbucks and it would be spent in a week. That is not very much tax relief.
I remind my friend across the way that it is not simply a case of ensuring we put more disposable income in people's pockets, as vital as that is. It is also a situation where we have to remain competitive with our neighbours to the south and other competitors from around the world. I will get into that in more detail in a moment.
We have talked about the government's failure to deal with the problems in health care. It has failed to deal with the mess in human resource development and the general mismanagement of government. It has failed to deal with ensuring that people have more disposal income.
Let us talk for a moment about Canada's competitive position. Does it really deal with some of the problems that plague Canada when it comes to our competitiveness? I would argue that it does not. While this debate is occurring to some degree in academic circles, and certainly the business community is vitally interested and has taken the government to task a number of times over this issue in the last little while, I would argue that it is not happening in public often enough.
It is time for it to start to happen. I also think many Canadians are starting to see the connection between high taxes, high corporate taxes, lots of regulation, obtrusive governments, lack of competitiveness and back sliding against our international competitors. It truly is a concern.
Let me talk about our situation when it comes to competitiveness, especially in relation to the United States, our biggest trading partner and certainly the country we are in most competition with. Taxes in Canada, even after all the government's changes or its alleged tax relief, are still going to be far higher than they are in the United States. Why is that a problem?
It is a problem for a number of reasons. First, if our taxes are higher, those who are trying to run businesses charge more for their products and services. They need to charge higher prices in order to pay the taxes they have to deliver to government. That makes them uncompetitive. It also means that shareholders start to say there is a point at which it may make more sense for them to move to some place which rewards initiative. In many cases, unfortunately, that means moving to the United States.
One of the great ironies involves a company called Clearly Canadian that manufactures a soft drink. It had to move out of British Columbia to Seattle. Clearly Canadian is now clearly not Canadian. It was driven out by the tax policies of the government. It is essentially a tax refugee and we see thousands of them.
We also see all kinds of young people who were educated at taxpayer expense at Canada's wonderful universities and colleges being lured south to greener pastures by American firms, typically, but also by other firms from around the world.
Why is that? In some cases people take a look at their tax position in Canada and at the tax position in the United States and say they would be better off in the United States. I am not suggesting that is the only reason, but it is a reason for a few people.
Because we have much higher taxes than those in the United States, we do not have the economic activity which breeds the type of economy that produces jobs like the economy in the United States. Right across the border in the United States there has been much faster growth over the last several years. As a result it produces far more jobs.
Unemployment in Canada is at 6.8%, the lowest unemployment rate in 18 years. Historically we are doing okay, but internationally we are so far behind that it is unbelievable. Our rate is 70% higher than it is the United States. It is also about 70% higher than our average until about the mid-1970s.
With unemployment levels at that rate and when people can go across the border and find jobs very easily, they tend to go where the jobs are. When they go to the United States not only are there more jobs but the jobs pay better because businesses are desperate to find people and offer more money. When people are hired there they find they have more money left over because taxes are lower. Of course they end up being paid in American dollars which are worth more than Canadian dollars. When people go south of the border they win economically in four different ways. There is a huge attraction to the United States.
The answer is not to criticize people for being disloyal like the Prime Minister would do. It is not to bury our heads in the sand and say the brain drain does not exist. The answer is to learn from the mistakes of the past, learn from other countries around the world, heed the advice of people affected by it and start to make some changes which ensure that the economy grows not as fast as the economy of the United States but much faster. It is to ensure that we remain competitive and get ahead of other countries so we can attract back some of this talent and investment.
We want to become a magnet for talent and we want to become a magnet for investment. Bill C-32 simply does not do that. It is like saying “We will grudgingly make some changes”, but it does not catapult us into the lead, and we are critical of the government because it does not recognize the problem.
Consider that between 1988 and 1998 Canada's output per capita, which is a reflection of the standard of living, grew by 5% over a 10 year period. In France it grew three times faster. In the United States and Australia it grew four times faster, in Norway six times faster, and in Ireland eighteen times faster. The government should be ashamed of that.
That should be a wake up call. When it is punishing the people because of inaction and the inability to make the connection between public policy decisions and good outcomes for the people, it should be ashamed if it cannot make that connection. Too often this government uses the tools of government to make decisions that not only do not benefit its people, but which ultimately benefit the Liberal Party of Canada. There are so many examples of that, I could stand here all day and talk about them. That is a shameful legacy which this government is leaving behind and there is much human wreckage in the wake.
What do we do when we are confronted by this sort of situation in this great country, Canada, with its huge and bountiful natural resources and wonderful human capital? We have an educated nation. We have a nation of immigrants, people who have brought their experience from around the world to Canada. We have a history of being innovative. We are entrepreneurs. These are our great natural advantages. What do we do to enhance those advantages, to ensure that we get the most from what we already have? What are the public policy decisions that we put in place so that we can really mine our great resources, both natural and human? I would argue that the very first thing we should do is to stand out of the way of those people.
One of the first decisions any government should ever make is to understand its own limitations. It should put limits on itself, because governments cannot do everything. They do some things well. They keep the peace well. They can be very helpful if they remove the barriers to trade. They can be very helpful even in redistributing income. I will concede that. However, once governments go beyond that they get into very dangerous territory.
The record of this government is littered with examples of that, whether it be human resources development or the scandals that go on in departments like Indian affairs, or even industry, or the revenue agency's handling of the scientific research and experimental development tax credits, which is absolutely shameful. When governments go beyond that and try to pick winners in the economy we have problems. As the finance minister said—and I am sure he wishes he had never said this—“Government cannot pick winners, but losers sure can pick government”. Truer words were never spoken. I just wish that he would listen to his own advice because this government intrudes into the economy far too much and the result is that Canadians are worse off.
When the government takes a dollar from the hands of the taxpayer and puts it into the hands of a bureaucrat or a politician, we end up with the taxpayer, an entrepreneur, a business person, a homemaker, a student, being $1 worse off and somebody else, someone who is a friend of the government, doing much better. That is a lousy trade-off. It stinks. Many times I would argue it is nothing but pork barrelling and patronage, and it must come to an end.
What do we do now, once we have decided to limit government, to put some clear restrictions on what government should do? We start to take the resources that are freed up as a result of that and put them into things which people care about. What are those things?
If we suddenly reallocated money from all of those grant-giving agencies, what would we do with it? We would put it into higher education. Absolutely. That is something which people value. They want an educated populace in the country. They understand that one of the things we can do to help make our country more productive and allow people to live more enriched lives is to ensure that they have an education. We support that. That makes more sense than giving it to the human resources minister to hand out to cronies and friends, which is crazy.
We could put it into health care. We have argued that we have to do a lot more than put money into health care, but when it comes down to making choices about how money should be spent by government, I think most Canadians would concede that money is better spent ensuring that we get medical services when we need them instead of pouring it into a fountain in the Prime Minister's riding, which is some of the crazy stuff that goes on through human resources development and other agencies.
Let us make those kinds of fundamental choices. Let us reallocate. We believe that there is $5 billion to $10 billion in the existing envelope of spending in government today that should be reallocated from things that are counterproductive and low priority, and sometimes outright pork barrelling and patronage, and put into things that people care about. I have named a couple of them, higher education and health care, to name just two. That is the first thing we do.
Second, once we have established that, we would ask what we would do with the approximately $150 billion which will accumulate in the next five year period over and above the amount we spend this year.
I remind my friend across the way that in the November fiscal and economic update the finance minister laid out a projection of what the surplus will be that will accumulate to the government over the next five years. When we get through all the gobbledegook, it amounts to roughly $150 billion. What would we do with that $150 billion?
We believe that after we have reallocated the waste that already exists in government into things that people care about, like health care and higher education, we should take the great bulk of it and start to give it back to the people who earned it in the first place. It is their money.
Do you realize how hard Canadians work today to look after their families? It is incredible. People work very hard. All they want is to be able to keep the money they earn.
I find it unbelievable that if a person is making $10,000 in Canada today as a single person, that person has to pay federal income tax. All these people want is the dignity that goes with knowing they can support themselves and their families, if they have a half-decent job and are working a reasonable amount of time. That is all they ask. They are not asking a lot. They just want to keep the money they earn. They are willing to pay their share of taxes, but they are not willing to pay taxes to all kinds of things that most people regard as wasteful and corrupt. That is what happens too often today in Canada.
How do we do this? The Canadian Alliance has a solution. We call it solution 17. It is a program of major tax relief and important, if not sweeping, tax reform. It has three major elements. The first element is that we would raise the basic and married exemptions, both, to $10,000. Those people who are making $10,000 in income would no longer have to pay any tax. A two income family, each making $10,000, would still not have to pay any income tax because they would have a basic exemption of $20,000.
The second thing we would do is extend a deduction of $3,000 per child to every family in Canada with children. A single income family of four would not pay any tax on the first $26,000 of income. A single parent with one child would pay no tax on the first $23,000. If there were two children, there would be no tax on the first $26,000. This would help people at the low end.
According to the Library of Parliament when it ran our proposal through its modem, it found that 1.9 million low income Canadians would no longer have to pay any tax to the federal government, which is an outstanding social benefit of solution 17. It is not the only one. I will say more about some of the other social benefits of solution 17 a bit later on.
The third point is that if we got rid of the 5% surtax, got rid of the 29% rate and the 26% rate, we would be left with one rate of 17%. What would that mean to people if they had the big hike in exemptions, the deduction for children, for every family in Canada with children, and the dropping of the rates to 17%? Obviously it would mean a huge tax cut for every Canadian. There would be 1.9 million low income Canadians lifted right off the tax rolls.
My friends have asked if there would be a tax cut for people at the high end. Absolutely. Would there be a tax cut for people in the middle? Absolutely. In fact, if someone was making $50,000 a year, in a single income family of four, the tax bill would drop by $5,000 in the fifth year of our program.
My friends have asked about somebody earning $200,000. That person would also do very well. We want to reward people who work hard and have in many cases the skills and the options to leave this country, as many of them have already done. We want to keep them here.
The top 1% of income earners in Canada produce 17% of all the tax revenue in Canada. We want to keep those people here. The top 10% produce around 50%. The top 10% are people who earn more than $50,000 a year. Do we want to alienate those people and drive them out? I do not think so. Those people bring in a lot of revenue for government, so let us provide incentives for them to stay in this country. Those people are the entrepreneurs, the innovators, the people who form the new economy.
I want to point this out because it is a pretty important point when we are talking about the new economy. In 1999 on the NASDAQ, the new technology stock market exchange in the United States, there were 165 initial public offerings for new Internet companies. On the TSE over the same period in Canada, one year, 1999, there were four. There were 40 times more in the United States. Why is that? Because the United States does not punish people for being entrepreneurial. It encourages an environment where there is capital accumulation.
Venture capital is extraordinarily important in ensuring that new companies get off the ground. In 1995 there was 12 times more venture capital in the United States than in Canada. By 1999 the gap had grown to 18 times more venture capital in the United States than in Canada. Obviously there are incentives for people in the United States to save and pool their capital. In Canada it gets taken by the taxman. We have such high taxes in Canada that people cannot save money to invest in new ventures, as an example. That is why the size of Canada's new economy, on the biotechnology side, is so tiny compared to that of the United States, even on a per capita basis. It is not a 10th, it is like a 50th of the size. The reason for that is, we do not have the proper incentives in place to grow the economy.
The government had a chance with Bill C-32 and the budget to address this fundamental problem, but it completely ignored it. Solution 17 recognizes that we are in global competition. We understand that. We would address these things by rewarding people for taking a risk and not punishing them for the crime of making a good living. There is nothing wrong with that.
I do not believe in the politics of envy. I do not think we should say because they have done well, we will now punish them. That is crazy. People should pay their fair share. Under solution 17, people at the high end would pay more than their fair share. Let me give an example of what I mean by that.
Under solution 17, a single income mom earning $24,000 would pay about $170 in taxes. Compare that to someone who makes $1 million, an income which is 40 times more than that of the single income mom. That person's tax bill would be 1,000 times more, and would pay about $170,000 in taxes.
I do not know how anyone could say that that system still is not progressive. Obviously it is. Does it punish people at the high end? No it does not. It drops the rate at which they have to pay and encourages them to stay. In fact it will draw people back. I believe that solution 17 would help Canada become a magnet for talent and capital, just like Ireland has become.
I mentioned Ireland a few minutes ago. Ireland is an amazing success story. Between 1988 and 1998, the output per capita grew 18 times faster than it did in Canada. How did it do that? What did it do? It did a number of things.
Ireland put more money into education. We acknowledge that and we are arguing we should do that as well. We probably should go with some reforms because we do not believe just throwing money at things is the right way. We think it is appropriate to put some money into the transfers to the provinces for health care and education.
Another thing Ireland did was it bought some labour peace. It had had problems with squabbling between the private sector unions and employers. It bought some labour peace and that is a good thing, but that is not nearly the problem in Canada that it is in Ireland.
The thing Ireland did which had the biggest impact was it dropped taxes. It dropped corporate taxes dramatically. It dropped personal income taxes and capital gains taxes. What was the impact? As I mentioned, its standard of living has jumped through the roof.
Ireland is a country that for 150 years lost population. Its biggest export was people. Canada was one of the great beneficiaries of that problem. In fact, my own ancestry can be traced back to Ireland. Ireland was such a poor country for so darn long but it finally figured it out. It understood there was a correlation between smart public policy and prosperity, something our government cannot seem to get through its head.
When Ireland figured that out, what happened? Now its population is growing for the first time in 150 years. The situation is that Ireland with 1% of the population in Europe now gets 20% of all the new investment in Europe. So much money is pouring in that it now provides its citizens with free university education. It has a growth rate which is through the roof.
That could be Canada in North America. We could be what Ireland is to Europe. We could be the place where all the money flows to. The United States does not have to be seen just as a big competitor. It can be seen as a big market, as an opportunity. Why do we not mine it by making proper public policy decisions?
The government is so mired in the past. It seems so unwilling to change even when problems are so obvious and confront the government every day. It boggles the mind. It is still caught up in a 1970s time warp where it thinks it can intervene in the economy, and pick winners and losers. Ultimately it picks losers and the result is we are all impoverished for it. That is so wrong.
I remind my friends across the way that Canada has a long heritage and history of having a standard of living which was higher than that of the United States. As the industry minister would point out, that is no longer the case.
John McCallum of the Royal Bank pointed out in a recent paper that Canada's standard of living which was once the same as that of the United States is now down to two-thirds. He said that if we keep going the way we are going, in another five years we will be down to 50%. Well, thanks very little. I am not interested in that.
We have to recognize the problem and make the public policy decisions that will get us out of it, not to make us equal with the United States but to move us beyond the United States. Why can Canada with the resources it has not be the most prosperous country in the world? We would be helping not only Canada and our citizens if we did that but we would be helping the world because that prosperity goes everywhere. Those are the types of public policy decisions we should make. Solution 17 is part of that. I have talked a bit about solution 17. I want to talk about some of the other changes that we would make.
Another part of our overall fiscal plan is to take the entire contingency reserve and the entire prudence adjustment the government itself suggests we need over the next five years and use it to pay down debt.
The government has taken a very tepid approach to debt repayment. When it first came to power the debt was $480 billion which became a debt of $583 billion and now it is down to $577 billion. We should pay down that debt more aggressively. Some revenues are starting to come in. Let us make hay while the sun shines. Our plan would pay down $34 billion over the next five years compared to the government's $15 billion, a big difference.
Finally, we would also put another $15 billion into spending, $1 billion a year over the next five years. This would ensure that there is money for things that people care about: health care, education, defence, the RCMP, infrastructure. Those are important things, a lot more important than some of the wasteful things the government spends its money on.
I know my time is coming to a close and I regret that. I could say a lot more, but I will be very satisfied with the 40 minutes I have been allotted.