Madam Speaker, before we broke for question period I was detailing some of the difficulties our population was facing because of the type of budgetary processes we have had over the last number of years while this government has been in power. I was explaining how the financial positions of a number of Canadian families have altered to a significantly lower level.
I would now like to address the question of wealth. I will cite only one statistic. In 1999 the top 10% of Canadian families had a medium net worth of $703,500. The lowest 10% had a negative net worth of approximately minus $2,010. The top 10% are wealthy and the bottom 10% are in a negative position. That is the type of society that has been created by these types of budgetary processes.
The other point I would like to address concerns the capital gains break that the government has given mostly to the wealthy. The tax rate on capital gains had been set at 75%. The bill would reduce that to 66.7%, which is a substantial reduction.
It is interesting to note that as the bill was working its way through the process, there was other work going on as well. Neil Brooks, a tax expert, was making a compelling case against the capital gains tax break in the Senate committee. He pointed out the impact this capital gains tax break had on substantial wealth. He made the argument that it violated the fundamental tax principle, which is that taxpayers with the same ability to pay should pay the same regardless of their income sources. He went on to point out that its impact encouraged speculation not just in the stock market but in real estate, commodity futures and collectibles. We have seen some of the negative consequences of that type of speculation, especially in the stock market in the last six to twelve months.
Professor Brooks made another point, which was a bit more subtle but still important. As we encourage the type of investment that results in capital gains, it takes away from other areas of the market and the economy. He said that this provided incentives for the conversion of dividends and even labour income into capital gains as opposed to allowing those to continue, and the benefit that it would give to the economy generally. His final point was that it also complicated the tax system and actually reduced tax revenue.
It is important to appreciate the size of the gain. In 1996 taxpayers with incomes of more than $250,000 a year reported average capital gains of $74,000. That was almost 500 times the average capital gain of $150 reported by taxpayers earning between $20,000 and $40,000. That is the kind of system the bill would encourage and continue.
We heard from some of the other speakers today that over the next five years the bill would reduce taxes by $100 billion. Of course the government takes great credit for this. I would like to go back and look at that.
On the simple basis of fairness, does it make sense to be doing this? Do those tax breaks do anything at all to reduce the inequality that I mentioned earlier in my address? The answer is no, it does not. In fact it perpetuates and increases the inequality between that lower 10% or 20% of the families in Canada and the upper 10% and 20% of the families in Canada. It will follow an American model that is even worse than what we have now, but toward which we are very rapidly going. This will result in the same type of inequalities from which that country suffers.
The other point I would make about the $100 billion is that it just cries out, as I made the point earlier, of the hypocrisy of the government supporting the motion we had on safe water earlier this week, then not spending it on an infrastructure program that was at all meaningful in terms of treating our water and our sewage, thereby creating a safe water system for all of Canada. This government level is the only one that has the ability, in terms of revenue, to deal with the problem.
In that regard, it is not as though it can claim any ignorance of the need for these funds. I have already mentioned that the Canadian Federation of Municipalities had a figure out there for some time of $16.5 billion that would be needed over the next 10 years. I mentioned earlier that CMHC, Canada Mortgage and Housing Corporation, had a study three years ago that set out the need for $4 billion a year in infrastructure over the next 15 years to deal with the water problem and crisis and to provide the country with safe water.
Somehow the government missed those two studies, those figures and that information. We had Walkerton and that was before the bill was introduced. We saw the tragedy in that community as a result of an unsafe water system.
In conclusion, it is a bill that obviously my party cannot support and is one that we will vote against for all the reasons that I mentioned today.