Madam Speaker, on behalf of the Progressive Conservative Party I am pleased to speak to the initiative found in Motion No. 357.
The Progressive Conservative Party certainly supports any initiative that offers flexibility to the Canadian public in preparing for retirement. However there are many alternatives to Motion No. 357 that should be considered in this context.
Tax reform as always warrants serious consideration. For example, eliminating the capital gains tax, which is something the Progressive Conservative Party strongly advocates, in addition to alleviating the tax burden on those saving for retirement, will also stem the flow of skilled workers to the United States. We see capital gains as a very regressive and punishing tax for Canadians.
Canada is losing too much of its knowledge and too many of its workers to our southern neighbour. This has serious implications for our long term economic health. Government policy should be geared toward ending brain drain as quickly as possible. Canada's brain drain is a problem of quality, not quantity. Those leaving for the United States surely represent a valuable section of Canada's human resources pool.
The current Prime Minister has suggested that Canadians should leave the country if they are unhappy with Canada's tax. This surely is a further sign of arrogance and disconnect on the part of the Prime Minister with respect to Canada's youth. When Canada loses it brightest and best young people, it loses the capital and the talent essential to generate a higher level of productivity. We know we need to be more productive in this country.
The elimination of the capital gains tax is also the most direct way to unlock and speed the flow of private equity financing. A study in the United States demonstrates that eliminating the capital gains tax completely in that country would lead to a $300 billion increase in national output. That amounts to nearly one million new jobs and an additional $46 billion in tax revenues due to the economic growth.
The United Kingdom, Germany, Norway and Sweden have adopted a more aggressive tax cutting strategy than Canada. Germany reduced its capital gains by 50%, Great Britain by 75%. Norway has eliminated completely all forms of double taxation on capital income. We should look to those countries for inspiration.
President John F. Kennedy spoke disparagingly about the capital gains tax as early as 1963. He stated:
The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital, and the ease or difficulty experienced by the new ventures in obtaining capital.
Allan Greenspan, the chairman of the federal reserve, stated in 1997 shortly after the United States capital gains rate was cut:
If the capital gains were eliminated, we would presumably, over time, see increased economic growth which would raise revenues for the personal and corporate taxes. Its major impact is to impede entrepreneurial activity and capital formation.
The Progressive Conservative Party also strongly supports the Standing Committee on Finance's recommendations to eliminate the remaining capital gains tax for gifts of listed securities. This is the single most important step the government can take to improve funding for the charitable sector and in so doing strengthen Canada's social support network.
Time and time again we are seeing charitable organizations doing the work that used to be assumed by government. We certainly should be, at the very least, getting out of the way of their ability to raise capital for worthy causes in this country.
Numerous presentations have been made to the House of Commons finance committee by the non-profit sector urging the permanent elimination of the capital gains tax on gifts of publicly listed securities. The government has made permanent a reduction to capital gains tax on publicly listed securities, but that was simply a baby step in the right direction.
The Canadian philanthropic sector, Canadian charities whether a university foundation, the United Way or a hospital foundation, is at a competitive disadvantage when competing with funds currently being drawn in places in the United States and the United Kingdom and those outside Canada.
The government has not worked with the non-profit sector to make it easier for Canadian institutions, the non-profit sector, universities, hospitals, foundations and charities to raise money that is necessary, particularly during the period of decreased federal and provincial funding.
The elimination of personal capital gains tax would also dramatically strengthen Canada's venture capital community.
A look at reducing income tax among others is also needed. In the old economy the purpose of taxes was to redistribute income. In the new economy high taxes redistribute people. When Canada's tax policy dictates that workers earning just $100,000, which sounds like an exorbitant amount, pay half their income in taxes, those highly valued workers will certainly look elsewhere. By comparison, in the United States we would almost have to go to an income range approaching $400,000 to reach that same income tax bracket.
This is particularly risky for Canada in the digital economy where valuable intellectual property, assets, expertise and energy depart with every professional who crosses the border.
In the United States the highest rate of taxation does not apply until income reaches the range of $400,000. An American earning $100,000 will pay only one-quarter of that amount. It takes a considerable degree of patriotism and choosing Canada's quality of life over that of sheer return to make the choice to stay home. Although many Canadians continue to stay home, they do so at a competitive disadvantage. We should do everything we can to get out of the way of disincentives that drive our best and brightest outside of Canada for them to achieve their potential.
The people who are tempted to leave are those with fewer roots in our country and less attachment to some of the lifestyle advantages. They are often young people who the country needs to grow and prosper. They are young people like our pages who are here working very hard to further their careers while studying, who work every day to help members of parliament with their daily duties.