Mr. Speaker, I am pleased to rise in debate on Bill C-22. I spoke at the initial reading before the House. I would like to reiterate in closing the debate the opposition of the official opposition to the bill.
Often we are criticized of opposing for the sake of opposition. In fact I think we have a record of supporting about half of the government bills which are introduced, those which we think are sensible and lend incremental improvements to public policy. Bill C-22 falls far short of that standard in many respects.
It purports to legislate tax changes announced in the economic statement of last October. The economic statement, which was hurriedly put together by the finance minister on the behest of the Prime Minister immediately before an election, did not take into account the new economic circumstances in which we now find ourselves. At that time the finance minister was projecting a nominal GDP growth rate or real growth of 3.5%. It is now evident that given the downturn in which we now find ourselves, that economic growth for the current calendar year will be more like 2.5% or perhaps lower. It undoubtedly will have a substantial affect on the government's fiscal situation and the revenues available to it. It will also place an upward pressure on spending.
In the face of this new economic uncertainty in which we now find ourselves, the government has not responded at all. It has acted irresponsibly. The last full budget we had was in February, 2000. It now appears likely that there will not be a full budget presented to the House until February 2002. This would constitute the longest stretch of a budget not having been presented to parliament in the history of the Dominion.
At a time of economic uncertainty, when we see the United States continuing to go into possibly a technical recession, we see our third largest trading partner, Japan, in the midst of an economic and fiscal crisis. We see the possibility of Latin America veering off its economic course. Let us be objective and realistic about this, not pessimistic. Objectively there is the very real potential for more troubled economic times within the foreseeable future, yet we have no budget to take that into account.
The finance minister will apparently make one of his smoke and mirrors presentations with video charts and focused group language tested by his friends at Earnscliffe consulting at considerable taxpayer expense. He will that on Thursday. However it will not be a serious economic budget. It will not take into account the new circumstances. It certainly will not deal with the very serious corrosive problem of runaway Liberal spending which is now setting into the fiscal status of the federal government.
In the fiscal year just ended, 2000-01, it appears that the total program spending will have grown by about 7.1%. This is a huge increase at a time when inflation plus population is growing at a rate of just under 3%. In other words, spending under the government is growing more than twice as fast as the population and inflation. It is doubling the need for growth set by our economy, our inflation and our growth of the population. The projection for the foreseeable future is that spending growth will continue at a rate of at least 5%. We think it will likely be substantially higher than that given the track record of the government to date. This is simply not sustainable.
We had in the last fiscal year $11.1 billion in supplementary estimates above and beyond what was originally projected by the government a year ago in its main estimates. We had money which was been announced and not properly authorized or put through the estimates process in advance. We had the phenomenon known as March madness where the government spent as much as 70% more in the last month of the fiscal year than it did in any other month of the year. There was much as $16 billion in spending this past March.
The warning bells are ringing that spending is growing out of control. I can understand the political dynamic within which the Finance Minister must operate. I suspect he has tried his best to maintain the big spending old style Liberal habits of his colleagues and is simply losing that debate around the cabinet table in the caucus room now. The special interests in his caucus, the Minister of Canadian Heritage and the Minister of Industry and their big spending friends, continue to grapple for millions more taxpayer dollars. We see this in the fiscal bottom line.
The point is that every additional dollar in discretionary, unnecessary and wasteful spending that is committed by the government is a dollar taken away from perspective tax relief for working families to create new and better jobs. It is a dollar taken away from debt reduction to secure our long term economic future and pay down our still enormous national mortgage.
My colleagues opposite will say that the bill before us gives effect to tax changes and therefore there is still room for new spending. This ignores the economic reality in which we find ourselves. The reality is the bill purports to authorize $100 billion in tax reductions which is just complete nonsense.
When we clear away the smoke, the mirrors and the fudge it budgeting, when we take out the spending increase in the child tax benefit which is an entitlement program, it is a spending program not a tax cut, when we net out the $29 billion Canada pension plan premium increase, the largest single tax increase in Canadian history, an increase which has caused most Canadians so far in this calendar year to see their tax level go up after advertised tax cut and when the impact is taken out of de-indexing the tax system which is not a tax cut it is just a non-increase, we find that the real net tax cut over the ensuing five years is less than $50 billion.
Liberals do not increase taxes but all of a sudden they want to take credit for that as a tax cut. I am afraid it simply does not wash. If we tried that kind of accounting as a CFO at a company, we would end up making licence plates in a provincial institution. The net tax relief is half of what is advertised in the bill. That does very little to correct the significant disadvantage we continue to face vis-à-vis our major competitors and trading partners.
Canada continues today to have the highest personal income tax to GDP ratio in the G-7. In laymen terms that means we have the highest income taxes of any major country in the world; 14.1% of GDP. Even if we take the Finance Minister's bogus $100 billion figure and subtract that from our current tax burden, we still end up with Canada at a PIT to GDP ratio of 12.4%, the highest in the G-7.
It is substantially higher than that of the United States even today. Our major trading partner will be cutting taxes by at least $1.35 trillion U.S., not Canadian dollarettes, over the next 11 years, thus rendering the Canadian tax system even less competitive.
This would not be a problem if it did not have an effect on our standard of living, but it does and very substantially. Canada continues to see its rate of growth in labour productivity, an absolute key indicator of growth in our standard of living, at one-third the level of the United States.
I have raised this issue in the House during question period. The finance minister says our productivity is growing. Yes, it is, barely, by roughly 1.5% a year, while we see productivity gains in the United States of 4%. That means the U.S. is producing more and doing it more efficiently. It is creating more wealth which is shared by more people.
Why? It is not because Canadians are not hard working. They are hard working and well educated. It is because we penalize too many Canadians for working hard, taking risks and investing and saving. The very economic behaviours which create wealth and raise our standard of living are penalized by our punishing tax regime.
The government's bill would raise the basic personal exemption level to $8,000 under which a taxpayer would not pay taxes. The government claims this is a great act of progressivity. However it falls far short of what it ought to be doing to rescue low income Canadians forced on to the tax rolls by bracket creep. The government has benefited from this tax on inflation during the last eight years of its mandate. The government has put an additional 1.9 million low income people on to the tax rolls by way of bracket creep.
The Canadian Alliance proposes to raise the basic personal exemption to $10,000 and match it with a $10,000 spousal equivalent. We would no longer have second class citizens when it comes to the tax code. Stay at home parents would no longer be regarded as having less economic value than their income earning spouses. We would also have a $3,000 per child tax credit, which would mean that a family of four under our system would face zero taxes on their first $26,000 of income. That would remove at least 1.4 million low income Canadians from the tax rolls.
I find it galling to see Liberals pat themselves on the back about how progressive they are and how they favour the poor when in fact they oppose measures like this one, measures which would give real relief to the working poor and people on fixed incomes. That is another reason we oppose the bill.
We are not just penalizing people at the low end of the scale. Through the bill and in its economic statement of October the government would raise income thresholds at which people are taxed at higher levels at marginal rates. That is a baby step in the right direction but we are still miles from the threshold levels for marginal rates as set in the United States.
People do not enter the highest tax bracket in the United States until they earn over $250,000 U.S., or well over $350,000 Canadian, whereas one enters that bracket in Canada upon earning $100,000 Canadian. Bright young entrepreneurs who work hard, succeed and get ahead are penalized by the government the moment they break into six figures, but people in the United States earn three to four times that before being hit by the highest marginal rate.
I can feel my Liberal colleagues' soak the rich, politics of envy gene kicking in. They want to stand and say that the rich should pay their share. Successful Canadians do pay their share. The top 10% of income earners earn about one-third of the income in the country and pay about half the income taxes. The top 1% of income earners earn about 9% of the income and pay about 20% of taxes.
Those who create the most wealth and are successful pay a hugely disproportionate share of taxes. I am not necessarily arguing with that. However they would create more wealth, invest more, take more risks and ultimately create more jobs if we raised the income thresholds for the marginal rates substantially higher as is the case for many of our competitors.
The Canadian Alliance Party thinks the optimum tax policy is not to penalize people for working hard. We would adopt the generous exemptions I have outlined plus eventually a single rate which is progressive. We propose a rate of 17%. That would mean a family of four with $26,000 in income, given the generous credits we have proposed, would pay zero taxes. A family of four with $52,000 of income would pay 17% on only the taxable half of its income. It would pay an effective rate of 8.5%. A family of four with a multimillion dollar income would effectively pay 17%. My colleague from Toronto—Danforth who is the principal advocate of this idea knows full well that it is progressive.
We have serious concerns about the inability of the government to get tax policy right. Not only are we falling behind in terms of productivity growth. We are doing so in terms of competitiveness. We are not keeping up.
We are not keeping up on corporate taxes. According to a major study done by KPMG that appeared in the Economist last month, we have the highest corporate income taxes in the OECD at 42.1%. Our personal income tax burden, relatively speaking, is at least 21% higher than in the United States. In terms of competitiveness we are now ranked seventh by the World Economic Forum compared to the first place United States. Ireland, which is now in fifth place, has leap frogged over us. We have fallen behind in standard of living.
This is reflected in the value of our currency which is hovering at an all time low. Our currency has lost 25% of its value during the tenure of the Liberal government. It has a value of 65, 64 and sometimes 63 U.S. cents. That is an embarrassment and a reflection of the impoverishment of this nation under the policies of the Liberal government.
We oppose the bill and call upon the government to control spending. It must stop these crazy 7% annual increases in spending and allow it to remain constant. Spending must grow in relation to population and inflation growth so that we do not have net cuts in spending. We could let it grow at a gentle curve commensurate with the size of the country and the level of inflation.
Doing that during the five year period outlined in the finance minister's statement would mean an additional $58 billion for tax relief for working families, for job creation and for debt reduction to secure our long term future. That was the $58 billion missed opportunity of the finance minister's statement of last fall which he will reiterate on Thursday. It was a missed opportunity to create more wealth and pay down the huge national mortgage.
Often when we talk about the debt the finance minister jumps up and says we have reduced it. That is not true. The debt is about $60 billion higher today than when the finance minister took office in 1993. He has increased the debt. He has not paid it down. Public sector financial liabilities total about 106% of our gross domestic product. That is the third highest in the G-7 and the OECD.
The government says we can afford to increase spending by 5%, 6% or 7% a year and ignore the debt. However private sector economists have projected that we will be in a planning deficit by fiscal year 2004-05.
What does that mean? It means that in order to finance these reckless increases we will need to eat into the government's emergency reserves, the so-called prudence and contingency reserves. Those moneys are not supposed to be spent by reckless members of the Liberal cabinet. They are supposed to be set aside in case the economy shrinks.
The Liberals are already eating into the contingency reserve of 2004 based on very optimistic economic growth projections. If the economy turns down, the surplus that taxpayers have worked so hard to obtain will disappear and the promised tax relief will go down the sinkhole with it.
We are here today ringing alarm bells about the government's return to fiscal irresponsibility. We plead with it to look not just at the next two years but at four or five years down the road and what will happen if spending continues on its current trajectory. Therefore I move:
That the motion be amended by deleting all the words after the word “That” and substituting the following therefor:
Bill C-22, an Act to amend the Income Tax Act, the Income Tax Application Rules, certain Acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another Act related to the Excise Tax Act, be not now read a third time but that it be read a third time this day six months hence.
