Madam Speaker, some members will remember that for me the cause of retirement incomes is a cause célèbre, maybe not a very positive one during the last election campaign, because I made the error of giving a very ill-advised interview to a hostile newspaper person not recognizing that I was not speaking to someone with whom I should enter into a debate on how we can improve things.
I find the various viewpoints very interesting, particularly those of my NDP friends. I am absolutely amazed that they could so totally miss the point of what we are talking about today. This is a pre-tax paid plan. In other words, we pay the tax upfront and the government gets revenue now instead of having to wait for it, but the NDP says that it is not fair. I do not know why they make that conclusion because this is giving people a further option.
When it comes to retirement incomes, we must as a government address this issue with a view to improving the purchasing capacity of our seniors when they retire. In the fall of 2000, when this reporter phoned me to ask how things were going in my riding, I told him that one thing I was hearing from seniors was that they were having trouble making ends meet, and we need to fix that.
Seniors across this country have month by month incomes that are barely sufficient to pay their property taxes or rent, utilities, food and clothing. Many of them cannot afford to do a number of things they would like to do because of this.
One lady called me. She said that when she and her husband were working they skimped and saved to provide for their retirement but, unfortunately, her husband passed away. Her roof was leaking and she needed $3,000 for repairs. Lo and behold, when she withdrew $3,000 from her RRSP account, the government took 40% of it. Therefore, she had to make another $3,000 withdrawal. She told me she was worried that she would run out of money before she died.
That is a real concern to me. It is so important for us to think about this issue. I really appreciate my colleague bringing this motion to the House today so we can begin to address this issue. What can we do to improve it? What can we do to provide for our seniors on retirement an income which is adequate to meet their needs after all taxes have been paid, regardless of this scheme, whether the taxes are paid in advance, as is in the scheme proposed by my colleague today, or whether those taxes are paid in retrospect?
The parliamentary secretary says that the Canada pension plan is the answer; it is one of the pillars. If one does the mathematics on it, it is pretty well the worst retirement investment a person can make. My calculations showed that instead of getting an annual income of about $9,000 a year, as one does with the Canada pension plan, one could actually get an income of up to $10,000 a month if that money were adequately invested over a person's lifetime. That is a huge difference. We need to look at that. We always are considering the taxes on this and when they are collected.
The NDP is totally wrong in thinking that increasing tax rates also increases tax revenue. There is a very well known economic theory, by a Professor Laffer so it is called the Laffer curve, which states that somewhere between an income tax rate of 0% and 100% is a maximum rate.
It is easy to think about this. I want members to think about someone selling something. For example, a hockey team owner is thinking of selling tickets to hockey games. We are thinking of hockey in Canada these days. He decides to charge zero dollars for the tickets. The place will be packed and the fans will be cheering and his income will be zero, because zero dollars per ticket times 40,000 tickets equals zero. Let us say on the other hand that he decides to charge $10,000 per ticket. I suppose there would be a few really rich people who would like to show off their money who would bring their two or three kids or relatives and pay $40,000 to go to a hockey game at night. At that price I think there would probably only be four people in the stands and the rest of the seats would be empty. For all practical purposes, we could say that if the rate per seat is high then the number of seats purchased will be zero, and again we have zero times the number which is zero. With zero dollars per ticket, the income is zero. With $10,000 per ticket the income is as good as zero. However, in between there is a number.
Let us take it up $1 at a time. Let me use a 40,000 seat stadium as an example, where it costs $1 per ticket. Now the income is $40,000. If ticket prices were increased to $2, I would venture to say that the stadium would still be full. Then there would be an income of $80,000. Ticket prices could be increased to $3 with still no change in the number of people buying them, and the individual would be making $120,000. At those low rates, increasing the amount per seat will not do anything other than double or triple income every time, but there comes a place somewhere between zero dollars per ticket and $10,000 per ticket where income reaches a maximum. After that, a further increase in price reduces income because people stop going.
The same thing is true with tax rates. If we had a 0% tax rate, government revenue would be zero, our economy would be doing great and maybe we would not need any taxes because we could look after ourselves and our neighbours. Everybody would have jobs. For those who were disabled and did not have any jobs, we would look after them, because we are good charitable people in this country. Maybe we have too much government, but I still believe we need to have a government that functions in certain areas.
On the other hand, if we had a tax rate of 100% government tax revenue would be zero because nobody would get up in the morning and go to work. There might be a few workaholics who would go out and earn $100 and then send it to the government. Interestingly, somebody e-mailed me a new simplified tax form consisting of two lines. I presume he did this because it is tax season. Line number one asked how much money was earned. Line number two said to send it in. However, if the 100% rate scheme were adopted government revenue would be zero. It must be somewhere in between.
I would like to inform members of the NDP that sometimes reducing tax rates by 4% or 5% can actually increase government revenue. This has been proven. Why would we not do it? Why would we not reduce tax rates, leave more money in the hands of the people and let them look after themselves in a better way? Meanwhile this would increase tax revenues so the government could do more. It is just an oversimplification to think this stuff is linear, as we say in mathematics. Indeed, it is not linear at all.
As a parliament, we need to commit to looking at retirement incomes, at the different plans that are available, at the different ways of taxing them, and we certainly are as a party, but the objective is and always must be this: How can we set things up so that on retirement our seniors have a maximum amount of income after all of those taxes so they can meet their needs and live in comfort? I do not think we want to say they should live in luxury. They should live in comfort with their needs being met and without having to worry where the next meal is coming from or whether they can afford a new shirt.