Debates of May 4th, 2000

Business Of The House

[Some hon. members]

Agreed.

(Motion agreed to)

The House resumed from April 7 consideration of the motion that Bill C-25, an act to the Income Tax Act, the Excise Tax Act and the Budget Implementation Act, 1999, be read the second time and referred to a committee.

Income Tax Amendments Act, 1999

[Monte Solberg, Reform, Medicine Hat, AB]

Madam Speaker, it is a pleasure to debate Bill C-25. Whenever we bring legislation before this place that comes from the Department of Finance, in fact legislation that comes from anywhere in government, one of the things we should be doing is examining very closely that legislation to determine whether or not it is working to enhance Canada's productivity as a nation. I am going to argue that Bill C-25 does not seriously do that.

I am going to argue that most of the legislation that comes from the government in fact does not enhance our productivity as a nation. That is one of the reasons Canada is chronically an underachiever. It is one of the reasons we continue to fall behind in the world. Any objective review of the facts will bear that assertion out. I think it is absolutely the case. We can point to lots of research that will underscore what I have just stated.

I want to run through why I think it is so critical that we start to improve our productivity as a nation. It is a simple fact that when a country becomes more productive, the standard of living increases. This is an obvious truth; it is self-evident in a sense. When we produce more things of value, it means we have more income, more money. That allows us to spend it on things that are important to us, not the least of which is ensuring we have a good health care system and the things that are important to people that they finance sometimes through their government.

Not very long ago despite the best efforts of the government, a government that has been in power now for seven years, we saw another report which indicated that the productivity gap between Canada and the United States is widening. It is getting larger. This should be alarming to us because over the last couple of years report after report after report has said that the Canadian federal government should be worried about this and it should start to do something about it.

Sadly, apparently the government is deaf to that message. It does not seem to understand. It cannot see the connection, which I argue is self-evident, that if we produce more things that people value, we are going to have a higher standard of living. The government cannot seem to figure that out.

We are in a position now where with every passing day we see Canada fall far short of its potential which means that Canadians are far poorer than they need to be. That is not just a hard economic fact, it is a personal human tragedy for many people. It is wrong when we as legislators have the ability to make changes to make this country better, more productive and wealthier that we do not do it, that we sit on our hands.

I am imploring the government to listen carefully to the argument I am going to make. It is one of many arguments that others have made imploring the government to do the same thing.

I mentioned a minute ago that the productivity gap continues to widen between Canada and the United States. It is important to measure us relative to the United States because in many ways there are things we can compare. We speak the same language, share the same continent and engage in many of the same kinds of industries. It was not long ago when Canada had a standard of living equally as high as that of the United States.

I do not think it is a birthright that we should have a standard of living that is higher than the United States or any other in the world, but if it is achievable we should strive for it. We know now, according to reports by people like John McCallum, the chief economist of the Royal Bank, that Canada has fallen far behind the United States, a country with which our standard of living was equal.

In his last report, Mr. McCallum pointed out that our standard of living was now two-thirds of that of the United States. If we keep going the way we will soon be at 50% of that of the United States. Bill C-25, and Bill C-32 which we addressed the other day, do not go anywhere far enough to addressing these fundamental problems.

The first thing we must do to ensure that our country becomes a lot more productive is to remove the impediments to wealth creation. We must beat down burdensome regulations that have outlived their usefulness. There are tens of thousands of regulations on the books today that nobody in any particular industry can be expected to know all about. We cannot understand thousands of regulations that affect each and every sector of the economy. No one can possibly know all the regulations but we are somehow expected to comply with them.

Second, we still have interprovincial trade barriers that cost the economy a tremendous amount of money. In many cases, it is a lot easier, for instance, for Ontario to trade with Michigan than it is with Quebec, which is crazy. The federal government has the power in the constitution to ensure that those trade barriers are broken down. However, it refuses to act for reasons that I cannot understand.

One of the biggest impediments falls under the umbrella of tax policy. Something the government cannot seem to figure out is that high marginal tax rates hold back our economy. We have high marginal tax rates. What is important, when we talk about ways to make the economy more productive, is the tax that we pay at the margin. What I mean by that is, if we have an income in Canada of say $80,000, every dollar we earn beyond that we pay over 50% to the taxman.

It appears to people who are innovators or entrepreneurs who invent things that they are being punished for the crime of producing these things that are good for the economy, for their families and for the world. Their reward is to pay higher taxes. The result is that many of these people get frustrated. They say “If I am not going to be valued in my country, then I will go elsewhere”. That phenomenon is called the brain drain. Some people in the government deny that it happens, the Prime Minister being one of them, but according to the evidence there is a brain drain, and that is beyond question.

If we really want to find out about that all we have to do is go to one of the high tech firms in Ottawa and Kanata and ask them how many of their people have left for the United States or other jurisdictions. We will find out that brain drain is a real problem. When we talk about the high tech field, we are talking about the field that will create the lion share of the wealth around the world in the next several decades. As legislators, we are crazy if we do not do something about that.

It is public policy that is standing in the way. This is not because we have some natural disadvantage in Canada. On the contrary, we have all the natural resources in the world at our fingertips. We are one of the wealthiest countries in the world when it comes to natural resources. We have an educated public. We have great human resources. Unfortunately, we have a situation where public policy is standing in our way. The only people who can change it are the people in this place.

Sadly, that government across the way is fixed in cement when it comes to making the types of changes were are talking about. People are paying for it in the form of standards of living that fall far below their potential. That is a shame. Governments should not punish the people they purport to serve. I would argue that this government, through neglect, is doing exactly that.

I will make the case that this is happening by pointing to the OECD statistics from 1988 to 1998. During that 10 year period Canada's real output per capita, the standard of living of Canadians, grew by only 5%. Over that same 10 year period we saw the output per capita in Mexico grow three times as fast; in France, three times as fast; in Australia and in the United States, four times as fast; in Norway, six times as fast; and in Ireland, a staggering eighteen times as fast. Why is that? Is it because Ireland has so many more resources than Canada? No. It is because it put in place the right public policy, something this government has failed to do.

What I want to talk about now is in the context of the Ontario budget that came down yesterday. One thing that the Government of Ontario understands and the federal government does not understand is that we are in a global competition. If we do not react and put in place public policies that make our jurisdiction an attractive place to invest, then we will be left behind and our people will pay the price in the form of a falling standard of living. That is exactly what has happened to Canada.

Let us consider what happened in Ontario on Monday when the Ontario government brought down the budget. When it brought down the budget it made sure that it lowered corporate taxes so that they would be lower or the same as many American states. It lowered provincial income taxes to the point where they are now the lowest in Canada. What does that mean? It means that the Ontario government is sensitive to the fact that if it does not get taxes down it will lose crucial investment that will go somewhere else in the world.

Let us consider what happened with the Alberta budget. The Alberta government brought down a very unique tax proposal. It is essentially a single tax rate of 11%. It is designed to attract people to Alberta and to keep people who are currently there. We understand that when we attract investment and the people who create jobs everyone will ultimately benefit. The Alberta government understands that.

I would argue that the Government of the United States at times in its history has very much understood that. I think it is shocking that the United States, which has 10 times Canada's population, spends more per capital on public health care than we do. How do they do that? It certainly does not distribute it the same way and some people are left out. We eschew that system. We do not agree with it. However, how does it do that? How come it is not going bankrupt?

At the same time, how does the United States do that and still spend so much more as a percent of its GDP on military financing? How does it do that while at the same time have a debt to GDP ratio that is far lower than ours? In other words, it did not go into debt or borrow money to do this. How does it fund all those things? It is able to do that because its economy is much more productive. The output of the average American is much higher than that of the average Canadian. Why is that? Is it because they are smarter? Of course not. Do they work harder? Sometimes they do, but that is really not the key. The difference is that the United States has the proper incentives in place to encourage people to go out and create wealth. When wealth is created, some of it is paid to the government. That is how it is able to finance all those things with much lower taxes than we have in Canada.

I just pointed out that the United States spends more than Canada on public health care and far more on defence, but it has a much lower debt per capita and much lower taxes, about 30% lower, than Canada. The only way that can happen is if each individual American produces more. The way to ensure they produce more is to lower marginal rates. That is critical. That is something our government cannot get through its head.

In the last budget the government cut taxes very minimally but it did not do anything at all about lowering marginal tax rates. We missed a golden opportunity to send a message to the rest of the world that we are open for business and that we will value investment if it is brought here because then everyone gets to benefit from it. If it goes somewhere else it will benefit someone else. It is time we learned that lesson. How do we do this? How do we turn this ship around?

We must first change our attitude. We must look at legislation like Bill C-25 or Bill C-32 and ask what it does to improve the productivity of the country and, by extension, the standard of living of Canadians. When we ask that question, we say that we will beat down marginal rates. That is why the Canadian Alliance is advocating solution 17, this idea of lowering taxes for all Canadians at the low end, the middle and the high end. It is a single rate tax proposal. It has three elements. One element is to raise the basic and married exemptions to $10,000. In doing that, we would lift 1.9 million low income Canadians right off the tax rolls. They will not pay any more tax. This plan also benefits people on the low end. We would extend a $3,000 per child deduction to every family in Canada with children under the age of 16. Right away $26,000 of income would be exempted for a single income family, or a dual income family for that matter, with two children. After that, we propose a 17% tax rate for everyone.

We would knock down the hurdles that make it difficult for people to climb up the income scale. The way it is now, when we begin to climb up the income scale, bang, we are into a higher tax bracket. All of a sudden the incentive to continue to work harder is gone.

In the finance committee's majority report in December, the Liberals on the committee said:

The greatest economic gains, however, will be achieved when marginal tax rates, especially the highest ones, are reduced.

Those were Liberal members who were arguing this because they understood something that the government, in general, does not understand, which is that high marginal taxes impede productivity.

We argue that we must beat down those rates and not fall a little less quickly behind the Americans, the Irish, the U.K. and other countries, but to catch up and go beyond them. It is a sin, in a country as naturally wealthy as ours and with the human resources that we have, that our standard of living continues to decline relative to all these other countries around the world. It is a sin not to fulfil our potential, but that has been the legacy of this government. It has allowed that to happen. The Prime Minister is the one who sticks his head in the sand.

If members doubt for a moment any of what I am saying, they should reflect on the Prime Minister's sanguine attitude toward the fall of the Canadian dollar. “A low dollar is good”, he says. However, a low dollar is a reflection of the strength of the economy. Our dollar today dropped about a quarter of a cent, down below 67 cents. Unbelievable. In the mid-seventies to late seventies it was higher, and that reflected our standard of living being so much higher relative to the Americans. On that fact alone, the government should stand indicted of a great crime which is to allow Canada to underachieve. Canadians, individually, are poorer for it.

I will conclude by moving an amendment. I move:

That the motion be amended by deleting all the words after the word “That” and substituting the following: “this House declines to give second reading to Bill C-25, an act to amend the Income Tax Act, the Excise Tax Act and the Budget Implementation Act, 1999, since the principle of the bill does not provide for a Single Rate Tax Plan as proposed in solution 17.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I heard the comments of the member for Medicine Hat. The party opposite uses the expression “marginal tax rates”. What are marginal tax rates? Marginal tax rates are taxes at the margin; what an individual will be taxed for every incremental dollar. It can apply to anyone in the income tax system, but when members opposite talk about marginal tax rates they talk about marginal tax rates at the high end. While it is true that the government has not reduced marginal tax rates at the high end as much as we have reduced marginal tax rates at the middle income and low income levels, we have reduced taxes significantly.

In budget 2000 we have a tax package of $58 billion as a minimum. The economy continues to tick away at a growth rate of about 4% annually. There have been 18 consecutive quarters of growth. The way the member opposite was speaking we would think it was doom and gloom. There have been 18 straight quarters of growth in the country. We are leading the G-7 and the OECD countries. In terms of employment growth, we are leading the G-7. Unemployment is at its lowest level in a generation—in 24 years. I could go on and on about the good news. I am glad that Canadians do not listen all that carefully to the doom and gloom across the way.

I would like to address the member's premise in terms of the tax rates at the high end of the income tax scale. That really coincides with the opposition's flat tax proposal. Let me give a comparison. A taxpayer—

[The Speaker]

I do not know how we are going to divide this. You are asking a question, I believe. Perhaps you could put a question so that we would have time for a few more.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I was building up to a question. I will leave the subject of the flat tax for a moment and come back to it later.

The member for Medicine Hat talked about the huge amount of money spent in the United States on health care. Will he acknowledge that in the United States, because of its private health care system, fully 30% of the costs of the total health care system is spent on administration, filling in forms?

[Monte Solberg, Reform, Medicine Hat, AB]

Mr. Speaker, I do not know if it is or it is not. I am not advocating that we embrace the U.S. system. In fact, as I said in my speech, we do not agree with it. It is the wrong system.

My point was that the U.S. economy produces so much more wealth per person that it is able to fund public health care to a greater degree than Canada. I think my friend across the way should pay attention to that fact. Whether the administration eats up 30% or whatever is irrelevant to this debate.

My point is that the government is anaesthetising itself with happy talk about the growth in our economy. The truth is that one of the ways we are subsidizing the growth in our economy is by allowing our dollar to sink, producing a feeling of good times, but at the same time not preparing our economy in the proper way to take advantage of the new economy. We are allowing the government to cruise, perhaps through to another election campaign, sacrificing the best interests of Canadians in doing so and making us poorer in the long run.

My friend across the way must acknowledge that if he is going to be completely upfront and forthright with Canadians.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, in response to the hon. member opposite who asked a question of my colleague, I would like to ask him what his view is of yesterday's Ontario budget which made cuts to corporate income tax and the capital gains tax. That has actually done more for the Canadian economy, for which the Liberals would like to take credit.

[Monte Solberg, Reform, Medicine Hat, AB]

Mr. Speaker, first, it is a recognition of the fact that people in the Government of Ontario understand that they have to be leaders when it comes to attracting wealth and talent from around the world, so they move to cut all of their taxes significantly.

The federal government seems to think that if taxes are cut in the middle, very marginally by the way, only about $8 billion over five years, when we net everything out—my friend across the way laughs, but I am happy to do the math for him—

[Roy Cullen, Liberal, Etobicoke North, ON]

I have heard it.

[Monte Solberg, Reform, Medicine Hat, AB]

He has heard it, but the government does not include $30 billion in tax hikes for Canada pension plan premiums when it does its figuring. Eliminating bracket creep is not a tax cut. It means that we will not have future automatic tax increases. That is not a tax cut.

With regard to the child tax benefit, the government is talking about it as though it were a tax cut. It is a social program by any reasonable definition.

My friend across the way is completely deluded if he thinks that somehow Canadians are going to end up being $58 billion better off because of what the government brought down in the last budget. That is simply not the case.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, it is a pleasure to speak to Bill C-25 and comment on the exchange that took place between my colleague from Medicine Hat and the parliamentary secretary regarding the $58 billion which the Liberal government is talking about as being tax cuts.

As my colleague from Medicine Hat indicated, there really are no tax cuts. We simply have to ask Canadians if they see more money in their pockets. It is a simple question. All members should go to their ridings and ask this question of their constituents: Have you seen the so-called tax cuts that the Liberal government has brought down in this budget; the $58 billion which it is touting? They will not find Canadians who say that they have received any tax cuts. Where are these tax cuts? I do not know where these tax cuts are. Canadians do not see them.

The claim by the government that there is $58 billion in tax cuts is all accounting and bookkeeping which the government has brought forward so it can spin it to the country that there are tax cuts.

I would like to address two areas. One deals with what Canadians are facing. The other deals with the impact of the government's fiscal policy on international trade.

I have received constituent complaint after constituent complaint, complaints of the draconian measures that Revenue Canada takes when going after people who cannot afford to pay, unfairly squeezing money out of them, putting them into more misery.

The government says that Revenue Canada has a system of fairness and that people can complain. I can tell the House that is not happening. What is happening is that Canadians are calling their members of parliament. Any member of parliament would tell us that Canadians are complaining about the draconian measures which the bureaucrats are taking at Revenue Canada.

I received a call this morning which concerns me. A constituent of mine is having problems with Revenue Canada. This case was given to the Minister of National Revenue six months ago and we have not had a reply. My constituent phoned the agent who seized an aircraft from U.S. Customs. What did this bureaucrat tell my constituent? He said “You went to your member of parliament. You complained to the minister. I am sorry, but we are going to take our sweet time in dealing with this”. Is that how we deal with Canadians?

I have another case dealing with immigration bureaucrats, from whom I have written proof that they say to members of parliament “Sorry, we will not respond to your inquiries”. I would like to tell these bureaucrats that members of parliament have been elected by Canadians. We are the voice of Canadians on the street. It is their democratic right to come to us for help. It is our right to ask the government and the bureaucrats questions and it is our right to expect a response.

Is that happening? No, it is not happening. What is happening now is that we are seeing the bureaucrats taking over, making decisions and then telling members of parliament that they cannot respond to them. This is becoming a trend which is quite disturbing.

With respect to the tax cuts which the government is talking about, time after time calls have come into my office asking where are these tax cuts. Where is this tax relief?

A constituent came into my office. He had been granted a CPP disability pension. Under the CPP disability plan he was eligible for a claim because he was recognized as having health problems. He is disabled. When he filled out his income tax forms and included the disability credit, lo and behold, Revenue Canada said “No, you are not disabled. This disability claim is disallowed”.

How can one arm of the government give him a cheque, saying that he is disabled, when another arm of the government, Revenue Canada, is actually telling him that he cannot claim the disability credit and, therefore, will have to pay tax? Then Revenue Canada charges interest on it, and this poor man just cannot afford to pay. He is on disability from CPP. How does this work? I do not know.

The government says that it is compassionate and is giving a tax credit. Students and single parents have come to me who cannot pay. Do members know what is killing them? It is the so-called interest and penalties, even if it is Revenue Canada's fault. That is the problem.

At times Revenue Canada will not tell the constituent what it is doing. It just goes ahead and assesses without giving due notice. That is why my colleague from Calgary Southeast is presenting a taxpayer bill of rights. That is the best legislation that could be brought down to give Canadians at least a voice against the draconian measures taken by the bureaucrats of Revenue Canada.

What can be done about a system which charges penalties and interest and says that we have to pay it? People are already facing problems and having difficulty paying in the first place. These are not people who are trying to cheat. They are not denying their incomes. It is not that. They are not making much income but the problem they are facing is that Revenue Canada without informing them is taking draconian measures.

They come to our offices and at times we are successful, but why does it have to take us to do it? Why cannot the government do it? This is a concern which I thought was appropriate to bring out when we are talking about Bill C-25.

I am the international trade critic and I would like to talk about the government's fiscal policy on international trade. Many times I have heard the Minister for International Trade mention very proudly that 43% of our GDP or one out of three jobs is tied to international trade. He says this proudly. As a matter of fact he said it today.

I refer to book entitled “Africa Trade Strategy 2000”. That is fine and I accept it. We are proud of what is going on. However, I have a question to ask of him. Why has there been no trade mission to Africa? The Minister for International Trade rightly said that when Canadian companies are interested we will have a trade mission to Africa. The essence of the point is: when Canadian companies or businesses are interested in doing it.

The Minister for International Trade and all the trade officials that work for the Department of International Trade around the world are promoting trade. Trade means jobs for Canada. We all know that. They are promoting trade to the best of their ability, signing deals, creating corridors and opening windows of opportunity for Canadian companies. That is great.

The problem is that it is for Canadian companies. With the high taxation that the government's fiscal policy has created and the refusal of the Prime Minister to recognize that, will Canadian companies at the end of the day be able to take advantage of the international windows of opportunity? Absolutely not. As the minister said, he may go out there and find there are no companies.

A problem is also originating out of this, which is evident even from EDC's list of clients. We have a serious problem henceforth with calling for EDC's privatization. We are getting concentrically narrower and narrower and narrower with only a few Canadian companies out of the whole Canadian economy. I can name a couple of them, Bombardier and SNC-Lavalin. These are the companies that are taking advantage of it. The Canadian economy is growing. There are companies all over the country that would like to do international trade. We need to expand to get them to take advantage of international trade.

We cannot restrict it to companies that are benefiting from grants and that have connections with the government. We have to open it up. That can only happen if there is sound fiscal policy by the government. Lowering taxes is the peak criterion. Time after time every business leader says that productivity has curtailed and taxes are too high. At the end of the day the government refuses to listen. The Prime Minister says that if they do not like it they can leave the country.

About a week ago I saw an article in the paper indicating that 500 Newfoundlanders were going to Ireland to work. Companies from Ireland came to Newfoundland and asked people to work for them. What does that tell us? It tells us that in Ireland the economy must be booming. There is a shortage of people so they come to Newfoundland, and rightly so. Let them come to Newfoundland. If Newfoundlanders can find work in Ireland, great.

We can look at the massive change that has taken place in Ireland because of lower taxes. Ireland looked at its business environment and said that its economy had to be productive. It did that. Today its companies are coming to Canada looking for workers.

Our government refuses to do that. The Minister for International Trade and everybody else including me will proudly say that we are trying to promote international trade. That is good for Canada. International trade provides jobs. When we try to sell business opportunities in the international market to Canadian companies they say cannot do it. They cannot expand because people are leaving the country. They do not have the workforce and taxes are very high.

As I was saying, it is critically important that we have a sound fiscal policy. That will create an environment where business can flourish, which in turn means jobs for Canadians, which in turn means prosperity for Canadians. If we do not do it, the prosperity of Canadians will go down and down. It is a question we need to be worried about because Canada has the potential. We are touted as the best country in the world. If we do not stop this now, we will start slipping.

I think we already are slipping, when we look at our partners that compete with us on the international trade scene. We have started to lose ground to them rapidly. If everybody else is recognizing the problems of productivity and high taxation and are addressing those issues, when will our government address them?

In solution 17 that my party proposed we are asking for the general corporate tax rate to be reduced from 28% to 21%. We are asking for the payroll tax, the EI premium, to be reduced to $2. We are asking that the small business tax rate be reduced from 12% to 10%.

We do not have to be rocket scientists to know what all this means. It will mean more money in the hands of businesses and of Canadians. More money in their hands means more consumer spending, which means companies become productive, the business environment has the strength to grow and we will be looking at a robust economy. If we fail to do that it will not happen.

The international trade agreements we are signing are opening the doors for other countries to come here as it is opening the doors for us to go first. If we are not going to go, they are going to come here. When they come here there are jobs for Canadians, but we would be weakening Canadian companies. We want them to be strong and to take advantage of the ongoing globalization era around the world.

It is a question of priorities. Yesterday the Ontario government introduced a budget which targeted the business sector and a reduction of taxes as its number one priority. It is the largest province and it is doing well. I was at the dinner and I can say there was a great sense of optimism in that province. In my home province there is also a great sense of optimism. Those two provinces are optimistic. The question we might ask is why. The answer is simple. Their economies are becoming robust, not because of the federal government but because of the provincial governments which have taken the lead in reducing taxes.

The federal government is refusing to recognize the results. It is refusing to recognize the evidence that is out there. There is evidence of those provinces reducing taxes. The European Union started reducing taxes. If we are not careful, even with the NAFTA trade we are doing with our neighbour to the south we can start losing ground. Nothing will stop them. They will be going down to Mexico.

We hope that by bringing it to light the government will recognize it and do something about it. At this time I would like to move an amendment to the amendment.

That the amendment be amended by adding the words “by the Official Opposition”.

[The Speaker]

The amendment is in order. It would add those words after the words “solution 17”.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, given that we will be strict on time in terms of questions and comments, I feel like someone at a smorgasbord. I do not know where to start, but I will be succinct.

The member talked about the budget in Ontario, corporate income taxes and their impact on trade, et cetera. Has the member actually had a chance to read the Ontario budget or budget 2000 of the federal government? Budget 2000 of the federal government reduced the general corporate tax rate from 28% to 21% or seven percentage points. A few months later the Ontario government has come along and made similar reductions in the corporate tax rate. I applaud the Ontario government for following the lead of the federal government.

In fact, the member opposite talked about how Canadian companies are not competitive. He cited Ontario. I can tell the hon. member that when these corporate tax reductions are fully implemented, the combined federal and Ontario corporate tax rate will be significantly below the tax rates in that party's sacred cow, the United States, and in the United Kingdom, two jurisdictions that the member for Calgary East cited.

I am wondering if the hon. member has had a chance to actually read the Ontario budget and to read budget 2000 of the federal government and if he would reconsider the conclusion he reached earlier, because I think it clearly negates what he said earlier.

[Deepak Obhrai, Reform, Calgary East, AB]

Mr. Speaker, I am glad the hon. member raised this question. Yes, the press release on the Ontario budget talks about reducing the corporate income tax. I did read about it.

I ask the member, aside from the corporate income tax, what about the payroll taxes? The federal government just increased the CPP premiums. How much money is it taking on the Canada pension plan because of the government's mismanagement? With the increase in the Canada pension plan premiums, the federal government is taking away the money. Look at the EI surplus. The government could reduce the tax burden on the corporations making them more competitive. Again it is the numbers game my colleagues on the other side like to play, but which at the end of the day does not result in what the corporations are looking for.

It is critically important that we say what is right. In our view, the budget does not create the environment required for Canadian corporations and businesses. It does not give the working Canadians the tax reductions that are needed.

[Gerry Ritz, Reform, Battlefords—Lloydminster, SK]

Madam Speaker, I enjoyed my colleague's comments immensely.

There are a couple of things he alluded to in his speech. One of them was constituents' complaints. The leading one I get is when they deal with Revenue Canada on GST and revenue taxation. I wonder if he would like to outline a little bit more on that.

He also alluded to the private member's bill which is almost a taxpayers' bill of rights and provides for an ombudsman for people to call. To whom do we go? I try to work out things for my constituents. In dealing with the revenue minister, the finance minister, the Prime Minister and so on, we seem to get pushed around and around and really do not get substantive answers to a lot of our concerns. Would the hon. member care to comment?

[Deepak Obhrai, Reform, Calgary East, AB]

Madam Speaker, I would like to thank my colleague for bringing forward a very good point of view.

Every member of parliament sitting over here knows that the number of complaints against the federal government and Revenue Canada has skyrocketed in our offices. The majority of the complaints somehow seem to get settled after we get involved and we wonder why. Why can the government and Revenue Canada not just settle these problems? Why do they make Canadian taxpayers go through the pain and suffering and time wasting procedures?

The majority of complaints are that the laws that have been made by the government are so weak that they can be interpreted by the bureaucrats in any direction they want. One goes in one direction and one goes in another direction. One will accept it and one will not accept it. There is inconsistency. Where can people go? That is why my colleague has brought in the Canadian taxpayers' bill of rights. At least the people will have somebody to complain to about what is happening. Maybe then the government will listen.

I am surprised that the members of parliament on the government side will not tell their ministers or the bureaucrats what they are hearing from their constituents.

[Bill Gilmour, Reform, Nanaimo—Alberni, BC]

Madam Speaker, my colleague was talking earlier about international trade.

I would like to go back about 40 or 50 years when Japan was just starting out and when the image of made in Japan was not a particularly good item. However through progressive governments that have been favourable to industry, through productivity, individual work ethics, some of that productivity in Japan is now some of the best in the world.

We have seen that go from Japan to Korea to Taiwan, a similar move of where economies start at the low end but through progressive governments that are favourable to industry, they end up doing particularly well on the international market. These are the markets with which we have to compete. We will be competing with China over the next several decades. That will be an absolute workhorse of productivity and an economy that works.

My impression is that Canada is just about at the opposite end. The government is trying to penalize industry. It is not making progressive taxation or legislation that works for industry. That is my impression. I ask my colleague do we seem to be on the wrong side of this issue?

[Deepak Obhrai, Reform, Calgary East, AB]

Madam Speaker, at the end of the day what concerns me is whether this new century will be the century of missed opportunity for Canada. It will be if we do not address the fundamentals in creating the economic environment for business to thrive.

My colleague alluded to Japan and other Asian tigers. They became tigers because they recognized the importance of international trade and of a freer market and creating an environment for business to thrive. I accompanied the Minister for International Trade to Latin America which is doing the same thing.

The question is will this century become the century of missed opportunities for Canada? I hope not.

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, I am pleased and honoured to enter the debate on the income tax amendments. It may interest those watching in the wonderful world of CPAC to know what it is we are actually debating here this afternoon.

I was talking to a lady at a trade fair a couple of weeks ago. We have these trade fairs out west. I stood all day and listened to people about their concerns. Among their concerns definitely with tax day looming was the whole situation of taxes. This one lady said she always watched CPAC. I asked her if she had any other problems. She was a very delightful lady.

I want to bring to the attention of everyone in the House, as well as to those who are watching via the electronic medium, that we are debating Bill C-25. We have a tendency here, and the parliamentary secretary will agree, to bring all these things together. Even in his questions he was talking about budget 2000 which the Minister of Finance brought down several months ago. However, this bill is one which is now over a year old. I think people should know that. We are finally getting around to implementing measures that were introduced in budget 1999 some 13 or 14 months ago. It is really quite ridiculous.

Furthermore, this bill also covers two ministries. There are several amendments to acts which are under the co-ordination of the Minister of National Revenue and then others for the Minister of Finance. This is an act to amend the Income Tax Act, the Excise Tax Act and the Budget Implementation Act, 1999. We are really doing catch up here and I do not mean that in the sense of something we put on our fries.

I would like to also point out some of the individual topics that are covered and make little comments about them. One of the measures in the bill is that the tax credits for individuals, the basic amounts and spousal amounts, are to be increased and the amounts are specified. This is a lame halfway measure the government introduced last year to begin to index the tax system.

Bracket creep has been a real problem. The government just loves to crow now about the fact that it has ended bracket creep. We have been calling for that for six years. For six years we have been saying to index all of the provisions of the Income Tax Act, particularly the basic exemptions so that people do not have a hidden increase in taxes every year. Finally last year the government started to do something about it and it took further measures this year.

After my little lecture speaking about last year's budget I will mention about this year's budget. Now the government has said it will restore full indexation. While I would like to put my hands together to applaud that, the government missed because in the last six years it has used bracket creep to ratchet up the amount Canadian taxpayers pay, to the tune of around $40 billion a year more tax revenue since the Liberals took office. That is since 1993. The Liberals have ratcheted up the income tax revenue over that time and now they say, “Are we not wonderful? We are now going to keep it there”. We were at a lower level; the government allowed it to go up and now says it will no longer increase it.

By the way, since I was a teacher and an instructor for 31 years I have the habit of showing graphs from the point of view of the people watching me. When I raise my hand I presume that people will see a blackboard on which I am drawing a graph and they are looking at it and I am sort of behind it. It is a skill I wish I could use here. I would love to have graphics, charts, overhead projectors and animated graphs using a computer. We would be able to communicate so much better.

The point I am making is a very important one. By lack of indexation over the last six years since the government took office, it has moved the basic rates up. Now it says it will increase the rates no further. As my colleague from Medicine Hat mentioned in his very fine speech, it is now claiming as taxes have been going up due to bracket creep, had the government not ended it in this year's budget it would keep on going.

The government is saying that based on what those rates would be in the next five years, it would be collecting a whole bunch of dollars but now it will not collect them and therefore the government will call that a tax cut and that will make everyone feel good. The fact is it has been a huge tax increase from the 1993 level to the 1999 level when the government started reducing the increase. Now it claims the level is flat. Let us hope the government keeps it that way.

There is the elimination of an individual surtax. We promoted and proposed that both the 3% and the 5% surtaxes be eliminated.

In the 1999 budget the Liberals undertook to eliminate the 3% last year, and I say great. I guess we should give them credit when credit is due. An income splitting tax is included in this legislation. It is rather interesting. While they talk about cutting taxes, here is one where they arrange to tax mostly young people. A tax is added to the earnings of a person living in a home with his or her parents. Those earnings are added to the income of the parent claiming an exemption. They introduced a tax on passive income. It is a tax increase no matter which way we slice it.

One could argue that it is only fair. Why should one person be able to earn an income and have to pay tax on it and the other one not? There is an element of fairness, but the fact of the matter is that they drew into the tax rolls individuals who were not there before.

The bill addresses a number of other issues. One I found particularly interesting was the one on communal organizations. There are a number of such organizations. We certainly have them in the west. I have several of them in my riding as a matter of fact. Instead of individuals owning farms there are communes. They are very successful farmers but do not own the land as individuals. Instead they all live on it. Actually they are delightful.

If any of my colleagues end up in western Canada and have an opportunity to visit one of the Hutterian Brethren communes it will be quite an experience. All the young people are taught to work. They all participate in the task of putting bread and butter on the table. They have animals. They are also excellent grain farmers and so on.

The particular measure provides that in order to compute the taxable income of communes they can apply the basic exemptions of all individuals who are part of the communes. This seems fair. I do not think there is anything patently wrong with it. I am not going to criticize it because I think it is fair.

Let us say that 50 people are making their living from a farm. If they all owned little pieces of land they could all claim their basic exemptions. None of them can claim personal incomes. They do not operate that way. They all live together. They share their food. They share their accommodations and so on. The costs are paid by the commune. To apply the collective exemptions of all of them to their income is a fair situation.

However it makes me think of a shortcoming that I often think about, particularly with respect parents who choose to have one of them stay at home and look after the children. That is also a form of commune. Only one parent is earning an income and the other parent and the children are dependants. Yet the government has never seen fit to apply a basic exemption for those members of the family who are not making an income. They always have a reduced exemption.

In our solution 17 we have proposed this in various income tax projections over the last number of years. We have been quite consistent in this regard. Both parents should enjoy the same basic exemption. There should not be a differential. Our solution 17 does the same thing. Whether it is a one income or a two income family it matters not. Each adult in the family would be eligible for a $10,000 basic exemption.

If they recognize the principle for communes of 50, I invite them to recognize and apply the principle to a commune of two: a mom and a dad looking after their children. Let us have a fair tax system so that we stop bleeding families dry and making it so difficult for them to make ends meet.

There are a number of other issues in the bill. I will skip right to the last one and make a comment on the bill before I say some general things. The last one has to do with income taxes related to the hepatitis C trust. We will remember that the Liberals were hammered for the fact that they wee very selective in whom they chose to give compensation. In the rules that were set up, if a trust is set up and it earns interest that interest should be taxable. They are talking about taxable income as a result of interest from these trusts.

Two days ago young Joey Haché was here again. He is one of the young fellows who has been highlighting the whole hepatitis C issue. So far we find that the bulk of the money paid out under that program has been to lawyers. The victims of the hepatitis C scandal at this stage are still mostly struggling to get compensation to reach them.

I would like to say a few things in general about taxes. It is interesting that the decisions we make in life are based on our perception of facts. They are also usually based on certain assumptions. Assumptions are sometimes a little different from facts because what we are doing is saying if we do this, then this is likely to happen. Perhaps it is not 100% predictable. It is a non-repeatable experiment in many cases.

For example, if I throw a glass of water out of a 12 storey building, chances are pretty good that when it hits the ground the glass will break. If it actually breaks I cannot repeat the experiment of throwing it to see whether it will break a second time. It is a non-repeatable experiment.

That is the case with some economic assumptions. We often hear from the government in its budgetary policy that it is creating jobs. It keeps talking about this, but no one ever admits on the other side that for every job it creates it is probably killing 1.1 jobs. Another way of putting that would be to say that for every 10 jobs it creates, it is killing 11. The reason is very simple. Canadian families are taxed to death. With all three levels of government most Canadians will end up having half of their income confiscated from them.

I thought of something last week during the Easter recess. I noticed that my garage roof was leaking. That is unfortunate because the water falls on to the car and because it is a tar roof it marks the car. I thought of the money I pay in taxes to help create jobs building a fountain in Shawinigan. If I could have my taxes reduced I would have enough money to phone the roofer and ask him to come and fix my roof. He would have a job for a day. We know how much mismanagement and mishandling there has been of government funds. The boondoggle has become quite a large issue in the country.

The fact of the matter is that I have had this idea for many years. When we take money away from people who have earned it, we are not creating new jobs. We are moving the jobs. That is what we are doing. If we take the overhead costs of that process, the cost of collecting the taxes and the whole bureaucracy of distributing the money, we recognize that maybe my ratio of 11 to 10 is wrong. It is a number I have pulled out of the sky. Maybe it is 15. Perhaps for every 10 jobs the government claims it creates through grants and contributions, the government is killing 15 jobs in the economy. I do not know what the number is. Perhaps studies have been done that give us that information, but I have an idea that is a safe assumption.

I would much rather leave more money in the hands of the people who earned it and have them create the jobs by having the roof fixed or by making a new business investment which would directly hire people. To me the marketplace is a much better creator of jobs than the temporary jobs created by a handout government, especially at election time when we see these handouts peaking.

We are in May 2000 debating the budget brought down on February 16, 1999, well over a year ago. Most of these things have actually already been collected. That is quite an issue.

We have an increasing lack of respect for the taxation collection agencies in the country. More and more people are beginning to question the legality of paying taxes and all these things. I do believe in law and order and all that, and I really do not think the so-called anti-tax people who claim that it is unconstitutional to collect taxes are right. Even if they were, I would still like to have a tax regime that works. I want to maintain the structure of solid government, such as we have in this country, but not with excessive taxes. When we behave this way we build a stronger case for them to reject our tax system.

There are a number of items for which the people have already filled in their forms. They have filed their taxes on this basis. Strictly speaking, we have not yet passed the orders into law. Those people who claim that this is not constitutional or not legal could probably win in the supreme court. I hate to say that, but they probably could because the court would have to rule that it would be illegal for the government to collect the tax or in some cases to make an exemption which had not yet been passed into law. I think that is regrettable.

The government should make sure when it has a budget that it deals forthwith in implementing the provisions of the new budget so that people can have confidence that what they are being asked to do is legal. I regret that my time is up because I could speak for hours on the whole issue of taxation.

[Roy Cullen, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, I listened to the hon. member for Elk Island finally get to budget 1999, but in his preamble he talked extensively about the reindexation of the income tax system which occurred in budget 2000.

The hon. member talked about the flat tax. People understand that the flat tax or solution 17 is not a progressive tax. In other words, it moves the tax burden from high income Canadians to middle income Canadians. For example, a single taxpayer earning $30,000 would receive a tax reduction of 12% while a similar taxpayer earning $200,000 would receive a tax cut of 39%.

We know it is not progressive but we hear about the simplicity where people will fill in a form with their income and they will just take 17%. I heard the member talk about various deductions.

I do not have the information on solution 17. Under solution 17 will there be various deductions and tax credits? For example right now under our tax system we have deductions for RRSP contributions, pension contributions, charitable donations, medical expenses over a certain amount, union dues, professional fees and special tax considerations for people with disabilities. Will items of that nature still apply under solution 17 or will it just be a matter of taking one's income and applying a percentage?

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, I need to congratulate the parliamentary secretary. That is such a super question. He could not have asked a better question.

There is this myth going around that the single rate tax, which is different from the flat tax, is a tax break for the rich. It is not. It is an equalization of the tax burden.

The basic exemptions are increased dramatically. We are going to give a percentage tax cut indeed to the average Canadian taxpayer. However the people who benefit the most are the families. For example a mom and a dad and two kids who earn $26,000, I do not have the numbers right at my fingertips on how much tax they would pay under the Liberal government but whatever it is, we are giving them a 100% tax break. Every tax dollar that they have paid they now will no longer have to pay. They get off the tax rolls completely because there is a $10,000 basic exemption for each of the adults and $3,000 for each of the two children which is $6,000. That is $26,000 they earn before they pay a single penny of tax. They get a 100% tax break.

I am not going to apologize for the fact that even those who are making more money also get a tax break. It is time for us to stop punishing people who earn money in this country.

If a person is making $50,000 or $60,000, and if they earn an extra $5,000, I can see where we are going to tax them on that extra income. However I reject the hypothesis that as they earn more we have to take a higher and higher proportion of it because that totally stifles economic growth and it kills the enthusiasm and joy of our citizens. If they earn $10,000, let them pay twice as much more tax as the ones that earn $5,000 more. I am talking about after those basic exemptions.

The other question the member asked had to do with the deductions from taxable income for all of the other expenditures. The short answer is that most of the deductions that are in place now would still remain in place. It is not a flat tax per se. It is a single rate tax. It simply means that there is a certain level on which earners pay no tax and after that it is 17% on every additional dollar after the basic exemptions. They still will be able to apply, for example, their deductions for charitable donations and others.

[Maurice Vellacott, Reform, Wanuskewin, SK]

Madam Speaker, my colleague was giving some very enlightening comments on our 17% tax proposal. I want him to carry on a bit to clarify and enlighten all of us here and the viewing audience as well.

Let us keep this real simple and use the example of a husband and wife with no kids on the scene. I have a brother and his wife who are in that situation. If they had an income of $40,000 and they each had this $10,000 exemption, in effect they are going to be paying 17% tax on that additional $20,000. Am I correct in understanding that they are not going to be paying 17% on that second $20,000, from $20,000 to $40,000? At that level they will not be paying 17%. It would be much less. In fact one would have to have a fairly good wage before one would be paying anywhere close to that actual 17%.

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, again it depends very much on the individual situation. Let us talk of two adults, a husband and a wife, who earn $20,000 between them. If they have no deductions, then they would pay 17% on $20,000 which would be $3,400. That would be their total tax but the effective rate for them would actually be 8.5%.

The beauty of this tax system is that for each incremental or marginal increase in one's income, the tax is linear. I am speaking as a mathematician. It does not go up exponentially as it does with the Liberal scheme where if we make more and more the Liberals take a higher and higher percentage of it. We propose to take a constant percentage. Therefore, it is a truly—and what is the opposite of a regressive tax system—a progressive tax system. Those people who make $20,000 would pay zero. As the income goes up, the total amount that is paid in taxation goes up in a really nice continual curve. It does not have big leaps.

We hear these horror stories about people who got a raise or overtime pay but had less on their paycheques than if they had not worked that extra time. They got into a higher bracket. That will never happen with our system because it is a linear system.

It was a very good question and I appreciated the opportunity to answer it.

[Grant Hill, Reform, Macleod, AB]

Madam Speaker, one other thing my colleague from Elk Island did not mention is the impact of the underground economy on our tax system. Many people in the country feel our tax system is so unfair that they actually hide income. They put it under the table. That is part of this fair 17% solution which very few of my colleagues across the way seem to understand. If people feel the tax system is fair, they are far less likely to go through the process of hiding their income. Could my colleague comment on that?