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.