Certainly, Madam Speaker. I am not sure whether it is an alliance party or a movement but I am happy to comply.
The Canadian Alliance solution 17 heads in the opposite direction. It would significantly reduce the progressivity and fairness of the tax system. For incomes above the basic exemption, it would tax a lone parent earning $30,000 a year at the same rate as a wealthy CEO making $2 million a year.
Let us step back for a second and look at this issue on a broader conceptual basis. Indeed several different flat tax proposals have been put forward in recent years both in Canada and abroad. Typically such proposals involve the replacement of a progressive rate structure with a single tax rate and the elimination of many deductions and credits. The resulting tax structure is of course appealing for its superficial simplicity. However, these flat tax proposals raise a number of issues.
Flat tax systems can be designed to be progressive, like the current income tax system, through the provision of a relatively high basic personal exemption for low income filers. Providing such an exemption with the reduced single rate would result in a significant reduction in income tax revenues. We have to consider the cost of any proposal especially over the long term.
The opposition's 17% solution, including an increase in personal exemptions to $10,000 and a new $3,000 exemption per child, would cost in the range of $34 billion a year. That is almost one-third of the entire federal program spending budget for this year. Even including the tax cuts we have announced, it would entail major cuts to federal programs. Which programs would the hon. member want to cut: health spending, support for R and D or old age security? It would be cuts like these that are the real cost of the tax savings the opposition seeks.
What about the issue of simplification? Here too the opposition is playing fast and loose with both fact and philosophy. The real fact is that most taxpayers would not find tax calculations much easier if only one rate were used. Simplicity generally comes from the elimination of deductions and credits, not from reducing the number of tax rates. Again we get a glimmer of the real bottom line agenda of the opposition.
In the real world many of the deductions and credits that would have to go to deliver tax simplification and to pay for the reduction in the tax rate would hit painfully and punitively on modest and middle income Canadians. It could mean for example getting rid of the child care expense deduction, the medical expense and tuition fee tax credits. Perhaps the hon. member for Medicine Hat has no problem getting rid of this targeted relief aimed at those who are in the greatest need.
That is not the solution this government would ever embrace because Canadians demand better of us. Canadians understand that eliminating these deductions and credits would provide less recognition of the ability to pay tax of individuals in different circumstances. Canadians recognize that such action would mean less flexibility for the government in delivering social and economic policy in a volatile global economy; policies designed to help our country seize new economic opportunities while protecting those who can be buffeted when the winds of change blow too harshly.
Here is where we can see clearly and cleanly the basic philosophy difference between our government and the opposition. We both may agree that a key objective of national policy must be to lower tax rates in order to leave Canadians with as much money as possible so that they can provide for their needs. However, we differ diametrically when the advocates of flat taxes justify the elimination of deductions and credits by arguing that the government should not use the tax system to pursue social and economic policy. The sad irony is that if these deductions and credits are carried forward in the solution 17 flat tax proposal, then clearly they would not have made the income tax system more simple, as many Canadians believe to be the advantage of flat tax system. We cannot have it both ways.
While I agree that taxes should be lowered, this government also believes that how and how fast we cut taxes is also critical. To make those decisions, we believe that fairness should be paramount. The government must ensure that the most vulnerable in society are not left behind. This in turn has a concrete corollary which recognizes that the ability of Canadians in different circumstances to pay must remain a key concern.
In conclusion I emphasize that looking for ways to improve the fairness of the tax system while keeping it as simple as possible are ongoing objectives of the government. We are committed to bringing the overall tax burden down as fast and as far as we can without jeopardizing Canada's hard won fiscal stability. Never again will we risk a return to deficit financing, especially not with pie in the sky tax solutions.
And that is the problem with the idea that underlies this time-wasting motion. Against every element of a proper template for tax action—fairness, effectiveness, compassion, and long-term fiscal prudence—the opposition's approach fails, and fails badly.
Let us not reward that failure by wasting much more time here today. We should get the motion defeated and get on with the real tax cutting as contained in the income tax amendment act before us.