House of Commons Hansard #72 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was c-22.


Income Tax ActPrivate Members' Business

October 30th, 2006 / 11:05 a.m.


Jeff Watson Conservative Essex, ON

moved that Bill C-305, An Act to amend the Income Tax Act (exemption from taxation of 50% of United States social security payments to Canadian residents), be read the second time and referred to a committee.

Mr. Speaker, I am very pleased to rise today to speak to Bill C-305, an act that is designed to lower from 85% to 50% the inclusion rate for the amount of income taxable for Canadian seniors who collect the U.S. social security pension.

I spent a lot of this past weekend in reflection, thinking about things that are important. I thought back to about 10 years ago and how very different things were for me, when I was unmarried and worked at a job scrubbing giant inflatable balloons as they came back from parades. Ten years later, some things have changed in my personal life. I am now married with four kids. I am no longer scrubbing inflatable balloons but have the great privilege of being a member of Parliament representing the communities of Essex.

Sadly, 10 years later some things have not changed. Bill C-305 exists because an injustice was committed a little more than 10 years ago and still needs to be righted.

As I said earlier, Bill C-305 is about lowering the inclusion rate from 85% to 50% for retired Canadian seniors who collect a U.S. social security benefit. This follows on the heels of two previous private members' bills, one by the member for Calgary Southeast and my own private member's bill in the last Parliament, Bill C-265, which passed second reading, as members of the House may know, and went to the finance committee, where it died a very slow death.

There are a lot of new members in the House since the last election and there may be Canadians looking in on this debate this morning who may not know exactly where this particular bill fits in history, so I want to take a few moments to go back and look at how we got to where we are today.

A major change occurred on January 1, 1996, for about 85,000 Canadian seniors in Ontario, Manitoba, British Columbia, Quebec and New Brunswick, who lived in Canada but happened to work in the United States and upon retirement collected U.S. social security cheques. What happened on January 1, 1996, is that their entire retirement changed. They were given a pretty substantial tax increase that changed the economic presumptions for their retirement years.

Of course, that all started three weeks before January 1, a week before Christmas in 1995. When most kids were writing letters to Santa Claus about all the good things they would like, these seniors received letters from a government agency informing them that in three weeks the way they were taxed was going to change.

We have a Canada-U.S. tax treaty that exists for some very important reasons. The two countries came together and agreed, for example, on how a Canadian resident in the United States, or an American who collects CPP, the Quebec pension plan or old age security, was going to be taxed and treated. We had to define on this side how we were going to treat Canadians who collect U.S. social security pensions or Americans who happened to be resident here as well.

At one time, these seniors were not taxed at all but in 1984 two protocols to the Canada-U.S. tax treaty changed the way they would be taxed. They were taxed in the country of residence, not in the source country, where the benefit came from. The maximum inclusion rate was set at 50%, so half their income would be included for taxable purposes. That was the situation that existed from 1984 to 1996.

Then came the third protocol, in the dreaded Christmas letter that these seniors got. The change was that their taxation would be done in the source country, where the benefit came from. They would have 25.5% of their income withheld at source.

Let us imagine this change. There was literally no time for these seniors to respond. There was no ability to cushion against the shock of such a change. There was no control over the benefit they received because it was withheld at source, so what they would get is all they would get. It was a tremendous and very drastic change that happened over that Christmas season. Starting January 1, suddenly 25.5% of their income was withheld at source and they got a much smaller pension cheque.

At that time, a citizens' group mobilized in the region. Canadians Asking for Social Security Equality mobilized very quickly and in large numbers, because many seniors were affected. In our region, I think the member for Windsor—Tecumseh will recall some of the meetings at the time. They came out in the thousands and forced the government of the day to go back to the table and renegotiate with the United States.

In Canada at the time, the finance minister, the current member for LaSalle—Émard, was looking to balance his budget. In the United States, President Clinton was looking to balance his budget and saw an opportunity to tax the richest of the seniors in the United States. He saw this as his opportunity to do that.

Therefore, we had a fourth protocol negotiated between the two countries. It changed back to residence taxation instead of these seniors being taxed in the nation where the benefit came from. But something interesting happened. After these seniors were promised that this was going to be a revenue neutral change, many of them were expecting that we were going back to the 50% inclusion rate. They had a really nasty surprise. The inclusion rate was set at 85%. It did not go back to the way it way before January 1, 1996, so instead of the wrong being righted, it was compounded.

It would be nice to point out, of course, that the finance minister of the day left a convenient loophole for family ships not to be taxed. That was in the same piece of legislation, the same treaty whereby these poor seniors were getting a whopping 70% tax increase. What a cruel irony that the rule-maker got to make the rules in his favour while thousands of seniors, who do not have any ability to make or change rules but are affected by them, had a tax increase instead.

As for Canadians Asking for Social Security Equality, what an incredible group. They mobilized in four successive elections, in 1997, forcing the government of the day to go back and renegotiate, and in 2000, 2004 and 2006. I say this with some bittersweet feelings. This group is very successful at mobilizing and at keeping this issue before candidates, prospective members of Parliament and prospective governments. However, I was talking not long ago with some of the folks doing the phone calls. With every election and every phone call, the cold hard reality is that yet another member is deceased, and another and another, or the latest ailment or disease is afflicting the few who survive.

Of course, this news kept coming, election after election. I can tell members that CASSE does not want to mobilize for another election. Quite frankly, its members should not have to. In my opinion, it is time to pass this private member's bill and get on with this measure. Or also, I would be pleased if this wound up being a line item in a budget, something for which I am working hard.

These seniors have been waiting a long time. They are looking for justice. Who are these seniors? Let us go back and look at what that generation achieved. Certainly they worked in the United States, but they lived in our communities. They built our communities across Canada. Talk about great foreign investment: they went to the United States, brought back their wealth and invested it in our communities here.

Let us go back and imagine these seniors in their prime. World War II has ended. They set about growing families and building homes and barns, hospitals and fire halls in their communities, delivering the services that were necessary and starting the businesses that employed others. They built community centres and churches, improving the quality of life in their communities. They went to work in the auto factories, building the cars their generation would drive. They worked the fields, harvesting and sending product to market.

Former NBC news anchor Tom Brokaw called these seniors “the greatest generation”. I do not call them the greatest generation; I call them the selfless generation, a good example to my generation. They were the dreamers. They had a good vision for this country. They were the builders. With their bare hands and their hard work they built this country and made it what it is today.

Those people were selfless because they thought about the generations to come. They did not think about what they wanted or what they could get from everyone else. They thought about what they could save and invest in their children and grandchildren. That is the kind of thinking of this generation. They planned for their own self-sufficiency. They did not ask anybody else to do anything for them. They saved their pennies. They worked hard. They did not just suddenly get to retirement and wonder who would take care of them. They were thinking long before that. This is why this was such a cruel thing. They knew that if they lived to a certain age they would need to save enough to be fine when they retired.

They were the givers. They gave to others and to charities. They started community groups that worked hard to meet the needs of people in their community. They were fundraisers. They went out and raised money for all kinds of noble purposes in their community. They were the generation that never asked for anything in return.

What happened to these seniors? Many have been forced from their modest accommodations into nursing homes or forced to move in with siblings who were also senior citizens. However, this move was symbolic of something, I think, much deeper. They have been forced from independence to a situation of dependence, which is what this tax increase did.

Seniors have been forced into making choices that they never thought would happen. They do not know whether to pay for their prescription drugs this month or to pay the gas bill to keep the gas on in their homes. They do not know whether they should buy groceries or pay the electric bill? The wonder if they can buy a gift for their grandchild's birthday or if they can lend money to their son or daughter who is in a bit of financial difficulty. This is the generation that saved and planned so they could give to other generations but they cannot make those choices any more. That is what this tax increase did to them.

They are bitter. They were misled. They were told that things would go back to the way they were before. It never happened. Their esteem and their future plans for retirement have been shattered through no fault of their own.

There are several roots to bitterness but one of them is the feeling that we are owed something.

While tax relief for any senior is good thing, and I support those measures, for these seniors they are owed something. They are owed a change, a change that will help them heal and help them get to back on top of their lives.

I am calling on members of this House to come together and to find the will to act now so that these seniors get back on top. We owe it to them.

Income Tax ActPrivate Members' Business

11:15 a.m.


Larry Bagnell Liberal Yukon, YT

Mr. Speaker, the last time an initiative like this was brought before Parliament, some members of Parliament raised a number of serious concerns. Just to help convince those members, I wonder if the member could just enumerate those concerns and explain why they are not valid and why they should not be used to stop the passage of this act.

Income Tax ActPrivate Members' Business

11:15 a.m.


Jeff Watson Conservative Essex, ON

Mr. Speaker, actually, in the last Parliament when this bill was before the House and it went to committee, I was asked by the office of the finance minister of the day to meet with some of his officials and finance department officials. I heard the same thing that I heard many times in the chamber during that debate. One of the things they had raised with some amount of concern was that a Canadian who collects Canada pension plan living next door to a Canadian who collects a U.S. social security cheque, the Canadian who collects the U.S. social security cheque is already getting a 15% benefit and this would create a situation somehow of greater inequality.

I challenged the members at that time or certainly had challenged the thinking under that.

First, no one has ever complained that the senior citizen living next door was receiving a much better benefit than they themselves were getting. There is no great clamour in the streets. Nobody is saying that we need to raise their taxes to create a situation of equality.

Second, this is going back and addressing a wrong that was created. We need to go back and revisit this issue and make the proper change for those seniors.

I take the position that raising taxes on somebody after they have retired is something cruel and it must be reversed.

If we want to create a situation of greater tax equity between two neighbours living next door to each but collecting a different pension benefit, maybe we should be looking at lowering the inclusion rate for taxation for seniors who collect the Canada pension plan. I would say that is a much healthier way of creating a situation of tax equity rather than creating harm on a particular group and raising their taxes to create equality.

Income Tax ActPrivate Members' Business

11:20 a.m.


Alex Atamanenko NDP British Columbia Southern Interior, BC

Mr. Speaker, I had an aunt who lived with me until she passed away in 1999. She collected social security from the United States and I did not quite understand the mechanism. I knew she received a cheque but I did not realize the procedure.

I do not understand what the difference is now in what he is proposing. If we were to take a social security pension of $300, what would the difference be according to the proposed legislation from what it is now? I want to get this a little clearer in my mind and I would appreciate some clarification on it.

Income Tax ActPrivate Members' Business

11:20 a.m.


Jeff Watson Conservative Essex, ON

Mr. Speaker, this measure is designed to do one thing and one thing only, which is to lower the amount of income that is included for the taxation of a benefit. Let us take a number like $15,000. If that were my benefit, instead of having 85% of it eligible to be taxed, we are now only talking about having 50% of it eligible to be taxed.

If we were to apply this to Americans who collect the Canada pension plan, they are taxed as if they were receiving a U.S. social security benefit over there. What this means in their law is that most seniors would not even be paying tax.

The current rate is 85%. In the United States only 6% of seniors would be taxed at the highest level. More than half would not even pay a cent of tax and the rest would be somewhere in between that. If it were 50%, the way it was before, virtually no seniors would be paying tax.

Income Tax ActPrivate Members' Business

11:20 a.m.


Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I am pleased to speak to Bill C-305, which has been before Parliament before. I took the opportunity to look back at some history and noticed that this bill passed at second reading and was sent to committee where it died. Some members of Parliament are fortunate enough to get high enough in the lottery so their bills can be considered, but I have a great deal of sympathy for those members who face the worst possible outcome of not getting them through the entire legislative process before an election is called.

Bill C-305 raises an important question. I think the member has a reasonable argument but he will need to convince members about some of the differences that have occurred since the time we entered into a tax treaty with the U.S. in 1984.

Before I became a member of Parliament, I had a CA practice in which I did tax returns mainly in Canada but had some experience with United States returns. The member will know that the tax systems between the two countries are very different. The Americans charge a capital gains tax on the sale of a home, but they also have mortgage interest deductibility. They have deductions for taxes paid to other jurisdictions. They also have joint filing for couples. However, members should understand that it is not the filing of one tax return for two people using the same tax tables as one person. It is a separate schedule of taxation for joint filers. It is not exactly seamless but at least it is a bit better than what we have here.

I would not even try to do a quantitative analysis about the tax burden between Canada and the U.S. Our health care system is paid by our tax dollars, whereas it is not in the United States. The cost of buying health insurance in the United States is very prohibitive for many people. I just want to point out that there are some differences.

Interesting enough, the tax treaty treatment of U.S. social security payments received by Canadians who worked in the U.S. and are eligible for U.S. social security are outside the ambit of the traditional tax treaty treatment.

Something that is important for members to acknowledge is that this is not a simple issue. It is a complex issue. Members need to understand where we started so that when we look at where we end up to determine whether or not there is an inequity compared to where we started as opposed to whether there is an inequity compared to somebody else? That happens to be the crux of the issue here.

The member's argument has basically been that people receiving U.S. social security were treated in a certain way back in 1984 when in fact they were taxed in the country in which they were resident. Any payments received from the United States were taxed in Canada. It had a 50% exclusion rate which meant that if someone received a U.S. social security benefit of $100, they person only had to include 50% of that in his or her Canadian income tax return.

That changed in 1996 when the third protocol was negotiated. It was decided to change where the taxation would occur. It was changed so that a Canadian receiving a U.S. social security benefit would actually be taxed in the United States which had a withholding tax of 25.5%. I could go into the details of how the differences were worked out but I do not believe that is the fundamental issue.

The member referred to what happened on April 9, 1997 when the fourth protocol was negotiated with the United States. It reverted back to where the tax benefit would be taxed in the country of residence. However, it did not restore the 50% exclusion rate that was in the 1984 tax treaty.

Therefore, we have a situation where in 1984 only half of U.S. social security payments were included in Canadian income taxes. In 1997 it was all included, except for a 15% exclusion. This was basically to mirror the withholdings that generally would happen when a United States corporation would pay, for instance, investment income to a Canadian where there was withholding at source.

If we look at some of the machinations that the finance department had to go through in terms of the tax equity between two countries in dealing with payments to non-residents or to foreign jurisdictions, we can see that it really is not very easy to explain. One of the things I conclude from this is that the inequity the member is referring to is the fact that back in 1984 there was a 50% exclusion rate. He would like to have it back now because in both instances individuals were taxed in the residence of the person who received the money. That is a non sequitur. It does not follow because there were other things that were taken into account.

The inequity is not an inequity between a Canadian receiving U.S. social security payments and an American receiving Canada pension plan payments. Argument has been made that, and if we look at the Debates from the last Parliament, the Americans have a different system. They have to make $59,000 before they have to start including any, and even then there is an exclusion rate.

Why are we comparing, or trying to compare, Canadian tax burden to U.S. tax burden for the same receipt of U.S. social security payments? It is not possible to do that in a clear fashion. In fact, here is the real comparison that we should be looking at. If a Canadian receives a Canada pension plan of $100 and has to include that $100 in his or her income tax return, why is it that a Canadian receiving U.S. social security payments should only include one-half of the amount in the Canadian income tax return?

In fact, two people receiving a $100 benefit, one paid by Canada and one paid by the U.S., would be treated totally differently. In fact, the inequity that is being proposed by this bill would increase, but if we make the argument about a Canadian receiving U.S. social security compared to an American receiving social security, it is suggested that we should have this changed so that it gets us back to what we had in 1984.

Members can see this is very convoluted. Having said that, this issue has gone on for some time and I do know that the member and many members in this place have expressed some concern about the tax burden of Canadians who receive foreign pension payments. It is not possible to actually explain it to members in the two hours of debate.

I suspect that there may be an appetite for this matter to go to the finance committee to get the full details out. The finance department has to explain all of the implications that it took into account in negotiating for separate protocols since 1984 on how to deal with these matters.

Further, I would respectfully suggest to the member that in consultation with finance officials, he may be able to provide members with some analytical samples which could show, in very simple terms, the difference in the tax burden today between a Canadian receiving CPP and a Canadian receiving U.S. social security payments.

He may also want to consider that, in my view and I think many share it, the best outcome of a private member's bill is to get the government to adopt it as its own and to make appropriate other consequential changes, or maybe inconsequential changes, which will make absolutely sure that there is as little inequity between taxpayers as possible.

Income Tax ActPrivate Members' Business

11:30 a.m.


Robert Bouchard Bloc Chicoutimi—Le Fjord, QC

Mr. Speaker, I am happy to speak about this issue today. I also had the opportunity to talk about Bill C-265.

This is not the first time a bill on taxing social security payments has come before this House. In November 2004, my Conservative colleague was on this side of the House, and we shared his joy when his spouse gave birth to a child. Naturally, we congratulated him.

Today, I congratulate him on again raising this issue by introducing Bill C-305. The purpose of this bill is to reduce the tax rate from 85% to 50% for Canadians and Quebeckers who receive United States social security payments.

At first glance, this bill might not seem very important. But this issue affects thousands of Quebeckers and Canadians. For over 20 years, we have been looking for an equitable way to solve the legislative problem facing Quebeckers and Canadians.

Why could Canadian and Quebec citizens who receive payments from the American government not benefit from the same conditions as American citizens who receive a pension from the Canadian and Quebec governments?

To help members understand where we are at today, I will give some background on this issue. Four protocols have been negotiated between the United States and Canada. I want to talk about the fourth protocol, signed in July 1997 with a number of other countries, including the United States. Under this protocol, only the country of residence is able to tax social security benefits. Since then, Canada has been able to tax American benefits paid to residents of Canada and Quebec.

The problem is that the protocol gave Canada, under the U.S. Social Security Act, the right to increase the tax rate from 50% to 85%. Bill C-305, before us today, would correct this situation.

The Bloc Québécois supports the bill, because it rectifies an error the previous government made in 1997. Several thousands of Quebeckers left their families to go work in the United States, often for years, and have been punished by the provisions of this legislation. These are people who, in many cases, were close to their roots and did not want to leave their country for the United States.

The 1997 legislative amendment enabled the federal government to bring in a lot more revenue at the expense of a population that could be considered vulnerable and economically weak. It is important to understand why Bill C-305 is now before the House and how it corrects a past blunder.

As I mentioned, historically, four protocols have modified the Canada-United States tax convention. In 1980, the income tax convention provided that social security benefits are taxable only in the originating country. It was only sometime later that the benefits were initially taxed in the United States.

The portion of benefits deemed taxable rose from 0% to 50%, depending on the taxpayer's net revenue and when the benefits were paid.

Modest income families and individuals were generally exempt from paying taxes on their benefits. In March 1984, a second protocol modified the Canada-U.S. tax convention. This agreement made social security benefits taxable only in the taxpayer's country of residence. From then on, 50% of the benefit amount was exempt from taxation.

For example, an American citizen residing in Canada was taxed on 50% of the benefits received from the United States. Bill C-305 is designed to return to this situation.

A third protocol was signed in March 1995. It gave the country paying benefits under social security legislation the exclusive right to tax those benefits.

This means that the United States taxed social security benefits paid to Quebec and Canadian residents at a rate of 25.5%, while Canada did not tax benefits received by American taxpayers.

Finally, the fourth agreement to amend the tax treaty was signed in July 1997. It provided that benefits paid under U.S. social security legislation to a resident of Canada would be taxable only in Canada, as if they were benefits under the Canada Pension Plan, except that 15% of benefits were made tax exempt in Canada.

Under this agreement, the tax rate became 85% of the payments made to Canadian residents.

However, the last agreement provides that the benefits paid under Canada's social security legislation to a resident of the United States are taxable only in the United States.

Essentially, the purpose of Bill C-305 is to reduce from 85% to 50% the tax rate on United States social security payments received by Canadian taxpayers.

For over 20 years now we have been trying to find a fair and equitable solution for all Quebeckers and Canadians dealing with this problem.

Thousands of Quebeckers and Canadians live near the border and have been suffering the never-ending repercussions of these tax reforms over the past 20 years.

Of course, this measure does not come without a price, but it is a small price to pay considering the thousands of people who have sacrificed their lives and their families to work far from home and their loved ones. These people wanted to stay here and keep their identity.

We, the Bloc Québécois, support lowering the tax rate on benefits paid to taxpayers, from 85% to 50%, because it corrects certain injustices. For this reason, I would like to congratulate the hon. member for his bill, which we will support.

Income Tax ActPrivate Members' Business

11:40 a.m.


Joe Comartin NDP Windsor—Tecumseh, ON

Mr. Speaker, this bill deals with an issue which I spoke to in the 2000, the 2004 and now the 2006 parliaments. I raised this issue in 2001, in the very first speech I made in the House.

As we heard from the member for Essex, the author of the bill, this matter has been outstanding for over 10 years. It is a history of injustice, a history of governments changing the rules after the fact. In effect, whether intentional or simply systemic, it is an attack on our seniors, as we heard from the member for Essex, a generation of whom this country has every reason to be supportive and protective, and not to misuse or abuse. That is what happened in 1996. Part of this is a mistake that was made by a number of officials at that time, officials who, to this day, still refuse to admit that mistake, but it left a great number of our seniors vulnerable.

Basically they had lived under a tax system and had taken deductions at 50% instead of the full 100% as we have for RRSPs in Canada. They had planned their retirement based on having a certain level of income. A great number of them, including those who unfortunately have passed away, said that they could live to a certain standard if they had this income and they retired on that basis. Then in the 1996-97 period, the Canadian federal government put into place a new regime which seriously impaired their ability to live that lifestyle.

I am speaking as a lawyer. This is about a deal that was made. The seniors have lived up to it but the federal government has not. The United States federal government has, because there were corresponding responsibilities as we entered into amendments to our tax treaties with the United States. It had certain responsibilities as to how it would treat the recipients of Canada pension. The United States federal government has lived up to that. It did not change the responsibility of Americans receiving Canada pension benefits while living in the United States. We did and we changed them quite dramatically, especially when we consider how vulnerable a large number of those 85,000 were at that time and how dependent they were on that income.

By the standards of the income that members of Parliament receive, we are talking a pittance. The average recipient of social security receives less than $100 a month, which does not sound like a lot of money. It is less than $1,200 a year, but when one is living on a basic fixed income, that is a very significant amount of money.

I am going to tell two stories of our experience in this regard in the Windsor area. I was canvassing one time during an election campaign. At one door I met a man who told me that his brother lived with him. The brother used to live on his own but he could not afford to any more. He was one of those recipients. When the extra tax was taken from him, he no longer could live on his own. He would not even come out of his room, except to use the washroom. The man would take food to his brother in his room. I wanted to talk with the brother and asked if he would meet with me, but he would not. That is typical.

Then there is my friend at church who, to this day, even at church, still curses the former prime minister who originally was from my riding. She is a very saintly woman but she and her husband were both recipients. They came back from the United States, bought a house and had a mortgage to pay. When the tax grab by the federal government came in, they no longer could afford the house and they had to sell it. As saintly and holy a woman as she is, she retains that anger.

Income Tax ActPrivate Members' Business

11:45 a.m.


Leon Benoit Conservative Vegreville—Wainwright, AB

That was the last government.

Income Tax ActPrivate Members' Business

11:45 a.m.


Joe Comartin NDP Windsor—Tecumseh, ON

Mr. Speaker, I hear from a member of the Conservative Party that was the last government, but it has now been repeated by the present government.

I want to be very critical of the government. The Conservatives stand every single day in the House and talk about being a new government. This change could have been made in the budget. Then it would not have been necessary for the member for Essex to bring forward this private member's bill. The government had the opportunity.

The current Prime Minister was in my city during the election campaign in January. He promised that this change would be in the budget, but the member for Essex has had to bring the issue forward once again. The Prime Minister's parliamentary secretary had private members' bills in the House twice and he could not get the Prime Minister and the finance minister to put this into the budget.

We are not talking about a lot of money. Some $13.5 billion was put toward the debt. This injustice could be corrected by an amount in the range of $25 million a year, or smaller given the number of people who have passed away. The new government has not done that and I am calling on it to do so. There will be another budget in February or March 2007. We do not need this private member's bill for the government to do that.

What is the Parliamentary Secretary to the Prime Minister, the member for Calgary Southeast, going to do if the budget comes down in 2007 and this is not in it. I have to ask the same thing of the member for Essex. What is he going to do? He is in government now and has the opportunity, finally, to do this. The Liberals would never do it. Both of those members are in government and have the opportunity to correct this injustice.

Then maybe that saintly lady from my church will stop cursing in church. Maybe she will have some peace. That incident was compounded by the fact that at the same time that this was happening, her husband contracted a serious illness and passed away within a year. She is a very bitter woman, but she is not the only one in this country.

As the member for Essex mentioned, he and I have been at a number of meetings in the last three years. The meetings are getting smaller because so many of the seniors have passed away. That bitterness and anger is there. We owe them a lot and we have fallen down. This injustice needs to be corrected, not five years from now when most of them will be gone, but immediately.

If the Minister of Finance is not prepared to stand in the House and say it before the budget, he has to guarantee that it will be in the budget. If not, there will be political ramifications in Essex and Calgary Southeast and any number of other ridings that the Conservatives hold in this country.

Income Tax ActPrivate Members' Business

11:50 a.m.

Calgary Nose Hill Alberta


Diane Ablonczy ConservativeParliamentary Secretary to the Minister of Finance

Mr. Speaker, I welcome this opportunity to comment on Bill C-305. The subject of the bill is the income tax treatment of social security benefits that some residents of Canada receive from the government of the United States.

I applaud my colleague, the hon. member for Essex, for his initiative to provide a higher standard of living for Canadian retirees. Indeed, this government has taken action directly to raise their standard of living. It is, of course, important to approach such issues in a disciplined and focused manner. We have to set priorities and take action where we see the potential for the greatest gains overall, gains in terms of fairness, gains in terms of raising standards of living, and gains also in terms of unleashing Canada's long term economic potential, something that will be essential if we were to guarantee secure support for all tomorrow's seniors and today's seniors as well.

One of this government's key priorities is tax relief. Canadians have been shouldering an unduly heavy tax burden for far too long, but we are working hard to lighten that load. In budget 2006 we delivered on our promise to double the pension income that can be claimed tax free to $2,000. This relief will benefit the nearly 2.7 million taxpayers who receive eligible pension income and it will take 85,000 of them completely off the tax rolls. That is certainly not all. Retired Canadians, like other Canadians, will benefit from many of the tax relief measures in our first budget. This includes dropping the GST rate by one percentage point to 6%, effective last July 1.

The GST cut will make a real difference to Canadians. In fact, it will benefit all Canadians by close to $9 billion over two years, even those who do not earn enough to pay personal income tax. In fact, the National Anti-Poverty Organization, as well as academics and think tanks have undertaken research on the distributional effects of various tax cuts. They have found that lower income families pay about 8% of the money collected from the GST, but only half a per cent of income taxes. Conversely, the richest families, those with incomes over $100,000, pay about 4% of all GST and 10% of income taxes.

In consequence, according to the National Anti-Poverty Organization, the general principle is clear. Families with incomes under about $50,000, which include many, many seniors, will gain more benefit from reductions in the GST than from reductions in income tax.

Also, even though we reduced the GST rate, we have kept the GST credit at current levels to further protect low and modest income Canadians, including seniors. In fact, including the GST cut, budget 2006 delivered almost $20 billion in tax relief for individual Canadians over two years. That is more tax relief in one budget than in the last four budgets of the previous government.

All Canadian taxpayers, including seniors, will benefit from permanent increases in the basic personal amount, the amount of income Canadians can earn without paying federal income taxes. By 2009, this amount is legislated to reach $10,000.

All taxpayers will also benefit from the permanent reduction to 15.5% in the lowest personal income tax rate. This is the rate that applies on the first $36,400 of income.

Providing a secure retirement for seniors will also mean investing to ensure a strong, productive and growing economy in the future. It is vitally important that Canada's economy is poised to meet the challenges of an aging population in an increasingly competitive economy. Again, this government is taking action, focusing our investments on the highest priorities.

Budget 2006 proposed measures to help federally regulated, defined benefit pension plans make an orderly return to full funding while protecting the security of pension benefits. Budget 2006 also took important steps toward building a competitive tax system. This is a key priority if Canada is to continue on the path to more and better jobs and stronger economic growth.

For a start, we delivered on tax relief that was only promised by others, but never delivered. In particular, we eliminated the federal capital tax as of January 2006. We will eliminate the corporate surtax, starting in 2008. We will reduce the general corporate tax rate. These proposed reductions will allow Canada to regain the solid statutory tax advantage that we had prior to the 2004 tax changes in the United States. This is important since 85% of Canada's trade, and we are a trading nation, is primarily with the U.S.

In terms of health, budget 2006 provides $1 billion over the next five years to improve Canada's ability to respond to a pandemic or other health emergencies to which seniors may be particularly vulnerable. We have set aside an additional $52 million per year for the next five years to implement a Canadian strategy for cancer control.

Finally, seniors deserve to feel safe in their homes and communities. The 2006 budget provides over $200 million in funding to vigorously combat crime. This includes funding to hire an additional 1,000 RCMP officers and federal prosecutors. It includes enhanced training for the RCMP and also provides funding for crime prevention in communities.

Early in my remarks I flagged the importance of identifying priorities and acting on them. All the things I have mentioned, reducing the tax burden, increasing spending on health and on ensuring safety in our communities, including ensuring that our economy continues to flourish, and supporting the benefits we provide to seniors and to other Canadians, are very important. We must ensure that we not only identify priorities but have the importance to act on them as well.

This brings us back to the private member's bill before us today. My hon. colleague from Essex has raised an important issue. We believe this issue deserves to be considered, along with many other potential budget priorities that are on the minds of each and every member of the House. The goal must always be to proceed in a fair and balanced way for all seniors and for all Canadians.

Income Tax ActPrivate Members' Business



The Acting Speaker Conservative Royal Galipeau

The time provided for the consideration of private members' business has now expired, and the order is dropped to the bottom of the order of precedence on the order paper.

The House resumed from October 27 consideration of the motion that Bill C-28, A second Act to implement certain provisions of the budget tabled in Parliament on May 2, 2006, be read the second time and referred to a committee.

Budget Implementation Act, 2006, No. 2Government Orders



John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, I am very pleased to rise to resume our opposition to the budget bill. Earlier in the original debate, I characterized the budget as being meanspirited, dishonest and visionless. In the days that have elapsed since that original statement, those three characteristics have only increased in magnitude.

In terms of meanspiritedness, at the time I referred to cuts to the most vulnerable in Canadian society, such as the cut to the Kelowna agreement, the cuts to the child care agreements, the abandonment and elimination of some of the most productive programs in natural resources, in energy efficiency, such as EnerGuide, and the increase in income tax applied to the lowest income Canadians. All of this is meanspirited.

Since that time, the meanspiritedness has gone up a notch, if that is possible, with the announcement of all the cuts a few weeks ago by the Minister of Finance and the President of the Treasury Board, cuts that are difficult to exceed in terms of the degree to which they impact the most vulnerable in our society. These include cuts to literacy programs, to museums and to the Status of Women. The original contention that this was a meanspirited budget has simply escalated in the intervening days and weeks.

It is no less the case today than it was before that it is also a dishonest budget in the sense that, while it purports to cut income tax, it in fact raises income tax. Relative to what Canadians were actually paying in 2005, the income tax rate has gone from 15% to 15.5%. In addition, rather than taking Canadians off the tax rolls, as the budget purports to do, it does the reverse. It adds Canadians to the tax roll by reducing the basic personal amount that Canadians are allowed to deduct at tax time.

Therefore, it is a meanspirited budget and it is a dishonest budget.

However, what I really want to focus on today is that it is a visionless budget. It is visionless in terms of the central challenge facing any government of our country, and that is our long term prosperity, competitiveness and productivity. The government does not seem to understand that the world does not owe Canada a living, therefore, it has to be the central responsibility of any finance minister to prepare our country for the competitive world that we face in coming years. The budget does absolutely nothing to that end. In fact, it is counterproductive.

If we look at the four largest spending items in the budget, none of them has anything to do with productivity or competitiveness. The four include a big increase in defence spending, GST cuts, narrowly based tax credits, scattered all over the place, and the child benefit of $100 per child. We can debate the merits of these four items and in some cases there may well be merits, but not one of them has anything to do with improving the prosperity, the competitiveness, the productivity of our country as we enter a period of challenges vis-à-vis the emergence of China and India as global economic powers and the aging population.

A responsible government has to take concrete actions to deal with this economic challenge to our country. The government in its budget did nothing. Worse, we know the finance minister will have his November economic update and he will talk about productivity and competitiveness. The problem is that the fiscal cupboard is bare. He has spent the vast majority of the money in this budget in unproductive ways, on GST cuts, universal child benefits, defence and narrowly based tax credits, none of which have anything to do with productivity. Now having spent the money, the horse having left the stable, he is going to try to tell us that he really cares about productivity and competitiveness, having devoted his funding to things that have nothing to do with this.

It is worse again because he still has two liabilities out there on which he has not yet spent money, neither of which has anything to do with productivity, but which will claim large amounts of future budgets. I refer, first, to the second GST cut of $5 billion or $6 billion a year, depending on when he does it. I refer also to the fiscal imbalance where the Prime Minister made commitments in the election to fix it. He has not given any money yet to the provinces. In fact, he has taken money away.

Those two fiscal items of fixing the fiscal imbalance and cutting the GST will weigh heavily on future budgets. Neither of those two items have anything whatsoever to do with productivity.

The notion that GST cuts, which are cuts to consumption tax, do nothing for productivity, every economist in the world, with the exception of the Prime Minister, agrees, whether it is the OECD, the IMF, or recently Dale Orr, the chief economist for Global Insight who said:

Some in the business community and some in the media are quick to identify a productivity/economic growth agenda with tax reductions.

This is a bad mistake.

It is a bad mistake to think that GST cuts have anything whatsoever to do with improving the productivity and the competitiveness of our country.

I would also add that we recently had two weeks of hearings of the finance committee across the country. I asked this question and I did polls of our witnesses, one in Vancouver and one on the opposite coast, in St. John's. In each case there were about eight witnesses, with widely disparate interests and priorities. I asked them if they thought it was a good idea to do the second GST cut that would crowd out so many other possible initiatives which would cost approximately $6 billion in additional funding per year. All the witnesses in Vancouver and St. John's were unanimous in saying that the government should not do the second GST cut because there were so many other much more important things that could be done with those funds.

A recent survey of leading Canadian business executives asked about priorities for income tax cuts, which we the Liberals wanted to do, versus a GST cut. Support for GST cuts has plummeted in recent months among the chief executives surveyed, while support for income tax cuts has gone in the other direction.

I have no hesitation for one nanosecond, and neither does the official opposition, to oppose the budget. It was meanspirited on the day it was given. The degree of meanspiritedness has been ratcheted up by these cuts to literacy and other programs, affecting the most vulnerable Canadians. It is dishonest because it purports to cut income tax when it raises income tax.

Perhaps most important and fundamental for the future of our country is it is a visionless budget which does nothing for our productivity and future prosperity. It does not acknowledge that the world does not owe Canada a living and it spends the money in unproductive ways with future huge liabilities for fiscal imbalance in the second GST cut, leaving very little money left for the Minister of Finance's economic update. Given that he has spent the money and given these liabilities still have to be paid, the statement will be words, but they will be hollow words because he has spent the money in unproductive ways.

For all these reasons, we on this side of the House will oppose the budget.

Budget Implementation Act, 2006, No. 2Government Orders

12:10 p.m.


Bradley Trost Conservative Saskatoon—Humboldt, SK

Mr. Speaker, I listened with interest to my hon. colleague's remarks. I must first note that calling other members and their motions “meanspirited and dishonest” lowers the decorum of this place. I would exhort my hon. friend to use less controversial language so the decorum of this place may be improved.

My question for the hon. member is on the point that he continually criticizes these things. We are in a minority government. There may be another election next spring.

I have two basic questions.

First, by some miracle, if the hon. member's party happened to form the government again, would he guarantee to reverse the cut to the GST and bring it back up? Would the hon. member guarantee that the Liberals would reverse the tax credits?

Second, if in the next budget the government presents next spring, there were across the board income tax cuts, broad categories, raising the basic deduction, would the hon. member then commit to supporting that? This seems to be the thrust of his objections to the current budget.

Budget Implementation Act, 2006, No. 2Government Orders

12:10 p.m.


John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, with regard to decorum in the House, I was simply stating the facts. I think members on that side of the House, with their canine references, are not really well placed to provide lessons to us on that subject.

How can we reverse a tax cut when it was not a tax cut; it was a tax increase? I do not know how many times we have to repeat this point before it sinks in to the opposition. The opposition raised income tax.

The choice before us, were we to form a government, which I think we have a very good chance of doing, would be whether we reverse the income tax hike imposed by the Conservative government. One cannot say for sure right now, but we would certainly wish very much to reverse that income tax hike imposed on the lowest income Canadians and at least reduce the income tax rate from the 15.5% where it stands today, after the budget, back to 15% where it was before the budget was enacted.

Budget Implementation Act, 2006, No. 2Government Orders

12:10 p.m.


John McKay Liberal Scarborough—Guildwood, ON

Mr. Speaker, I listened to the hon. member's speech quite carefully and agree with every word that he said. He and I went across the country together as part of the finance committee. He did in fact conduct these mini polls and they were overwhelming in their consistency.

I want to pick up on this mishmash of tax credits, GST, child benefits and things of that nature, regardless of their political merits. I want the hon. member for Markham—Unionville to comment on why this is mishmash and myriad of tax credits, which adds to the confusion of tax filers, is actually worse than doing nothing.

Budget Implementation Act, 2006, No. 2Government Orders

12:10 p.m.


John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, the hon. member will remember that we had a very good presentation by the head of the chamber of commerce for Kitchener who explicitly criticized the government for this mishmash of a tax credit here for textbooks and a tax credit there for transit, things which were ineffective. For instance, in the case of transit, the studies show that some 95% of the recipients would use those services anyway. The least effective way of helping students is some sort of tax credit on textbooks and does not help access one little bit.

However, the point that this chamber of commerce representative made is that we want simplicity in our tax system. If we have a myriad of tax credits requiring a mounting bureaucracy to administer and to make judgments, for example, is dance eligible, is horseback riding eligible, is soccer eligible, all of these unproductive activities detract from a productive tax system and this witness, and many other witnesses as well, made strong cases for broad-based tax relief.

Let the government get out of the decision making process of families, of soccer versus horseback riding, versus music, versus dance. Let the government not be such a social engineer. Let families make their own decision and let the government administer broad-based tax relief. That was always the philosophy of our government. That was the philosophy of the witnesses who spoke to us. That is the way to ensure greater productivity, and a streamlining and a simplification of the tax system rather than a complicating, bureaucracy-enhancing level of more and more silly little tax credits.

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


The Acting Speaker Conservative Royal Galipeau

The hon. member for St. Catharines, for a very short question.

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


Rick Dykstra Conservative St. Catharines, ON

Mr. Speaker, I must rise to pay little homage to the review or the so-called poll that my good friend on the finance committee, the member for Markham—Unionville, actually held. He only held it in very specific spots of the country. He asked if those who wanted to abstain could abstain. Province after province and, quite frankly, chamber of commerce after chamber of commerce in provinces across the country supported the cut.

Why, if the cut did not work, according to the member, in 2006, would it have worked in 1993 when the Liberal Party of the day promised to get rid of the GST and not just reduce it?

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


The Acting Speaker Conservative Royal Galipeau

The hon. member for Markham—Unionville for an even shorter answer, please.

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


John McCallum Liberal Markham—Unionville, ON

Mr. Speaker, neither of us were in politics in 1993 and it sounds like the two of us were not in the same room when I did these polls. With group after group, there was either unanimity in opposing the GST cut, and once in a while a few people abstained, perhaps because they feared the--

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


The Acting Speaker Conservative Royal Galipeau

Resuming debate, the hon. member for Winnipeg North.

Budget Implementation Act, 2006, No. 2Government Orders

12:15 p.m.


Judy Wasylycia-Leis NDP Winnipeg North, MB

Mr. Speaker, I am pleased to have an opportunity to participate in the finishing touches on the Conservative budget of May 2.

The bill we have before us today is one of a number of budget implementation bills that deal with the Conservative plan for this country and, as my colleagues from the Liberal Party have said, it is truly a budget without vision. It is truly a budget that is meanspirited, short-sighted, and will hurt Canadians in ways too numerous to mention in the short 10 minutes that I have. Needless to say, when we opposed the budget on May 2, we indicated our general position on the budget, so we oppose this bill.

The part that I find the most interesting, having listened to my colleague, the Liberal finance critic, is the similarity between the Liberal budgets of the last 10 years and the Conservative budget of May 2. It is hard to really tell the difference.

When the Liberal finance critic stands up and talks about a meanspirited budget, I can only think of half a dozen Liberal budgets. When the finance critic for the Liberals stands up and says this budget lacks vision, I can only think of Liberals and a decade of leaderless budgets. When I think of meanspirited, callous, short-sighted, and hurtful budgets, I think of Liberals and Conservatives.

I cannot tell the difference between this budget of May 2 and what the Liberals handed Canadians over the past decade, both equally hurtful, both equally lacking in vision, and both equally missing the mark in terms of what this country needs at this moment.

We described the Conservative budget on May 2 as being a missed opportunity. That it was, just like the last several budgets of the Liberals were missed opportunities because we have been in a significant surplus situation for a good number of years. We have actually considered how Canada could reap the benefits of this new-found wealth, and how for once in this period of 13 or more years, we would see money actually invested in things that matter to Canadians. Money invested in those areas would actually grow the economy, get people working again, and allow people to juggle work and family responsibilities with some comfort and some ease. It would also see that money generated back into the economy in terms of more taxes being paid, a better quality of life for all Canadians, and a benefit for all of us, in fact, the debt going down.

Instead, again we are faced with the same simplistic approach that the Liberals have used for a decade, being used now by the Conservatives, They are using the simplistic approach of simply taking any dividend, any surplus, and putting it against corporate tax cuts and benefits for the wealthy in this country, and putting the money against the debt. That is the simple scenario. That is what we get with Liberals and Conservatives, nothing more. There is no sophisticated analysis, no ability to think in terms of a balanced position, and no understanding of real economics in terms of what it means to actually pay down a debt and how to pay down a debt.

We keep getting efforts that in fact set Canada further and further behind. They are efforts that cut off our nose to spite our face. If we were to take every penny of our dividend and every cent of our surplus, and put it into corporate tax cuts or against our debt, we would do nothing to get ordinary Canadians working to their fullest potentials, contributing to the economy, and paying taxes, and thereby growing the economy and bringing down the debt. That is what we in this party have asked for during the last decade.

We have not asked for a complete allocation of money to go toward program spending. We have not said to not pay down the debt. We have said bring some balance to this place. As long as we have a surplus situation, we should make an annual contribution of significance toward the debt. We should take another part of that surplus and invest it in programs that have a dual purpose: first, they should help Canadians deal with difficult economic and social problems, and second, they should help them contribute back to the economy. They should help them participate in the economy so that we all benefit.

Every economist in this country will demonstrate for us and Conservatives and Liberals right across the board that we do not pay the debt down much faster than a few seconds by putting all of our money against the debt and none into programs that grow the economy.

It is a simple economic fact that if we were to take money and invest it in areas that help people achieve employment that matches their skills, we would reap some benefit. If we were to help women, who would now like to use their skills to get into the workforce because quality day care is available, we would reap the benefit. If we were to put money into pollution saving technologies, we would not only save costs in terms of our health care system but we would invest in a whole new direction of economic growth.

A new set of possibilities opens up this whole area for new green technologies. It will be a new economy that our young people can participate in and feel good about their participation. They will not feel like they are just another cog in a wheel and not feel that they have to handle two or three part time jobs in order to provide for their families. They will not feel they have to give up their quality of life or participation in their community or their church life. They would not have to give up being good parents; being there for their children at school, in their sports days and other activities; and being able to do it all without feeling guilty, without feeling depressed, and without feeling hamstrung by virtue of what the government has done to our economy.

We are here today to make one more plea to the Conservatives because there is a new opportunity unfolding. As my colleagues on the Liberal side have mentioned, we have just criss-crossed the country to hear from Canadians about the next budget. We have heard again what we have heard over the last number of years. Canadians want some of their money invested in programs that will help themselves, their families and other Canadians. They do not want a government to simply ram through a budget and with some deal-making get the Bloc on side to sustain the government, only to see programs that they believe in cut back.

They are appalled number one, by the low balling of the surplus dollars that we have seen now repeated by consecutive Liberal and Conservative governments, which means we as parliamentarians and as Canadians do not have an opportunity to actually deliberate upon where the money should go when there is a surplus. Number two, we have seen through consecutive Liberal and Conservative governments money slip out of this country into tax havens. We just saw it in the news this week. Under the Conservatives, we have $2 billion of lost revenue because Merck Frosst, a large brand name drug company, has shipped that money into a Barbados tax haven to avoid paying taxes. That is just like the Liberals did for years. We saw in the Auditor General's report comments to the effect that tax arrangements for foreign affiliates have eroded Canadian tax revenues of hundreds of millions of dollars over the last 10 years.

Finally, just like Liberals, we have seen with Conservatives that once the budget is through, they slip through cuts to programs that in fact have no mandate. They do not have to return to Parliament but they do it anyway. They cut literacy, job career placement programs for young people, housing, child care, women's resource centres, volunteer initiatives, social economy initiatives, and housing co-ops. They cut anything that is important to the life, breath and depth of our communities. That we speak against.

We speak against this measure, we speak against this budget bill, and we speak against this tradition of meanspirited, visionless budgets by Liberals and Conservatives.

Budget Implementation Act, 2006, No. 2Government Orders

12:25 p.m.


Laurie Hawn Conservative Edmonton Centre, AB

Mr. Speaker, I always listen with interest to my hon. colleague's impassioned speeches. She is very good at that and I know she cares about the issues deeply, but unfortunately I also think she has a tendency not to let the truth get in the way of a good story.

Even though we have saved $1 billion, 37% of which was money that was not spent at all and 63% of which in total was money that was either not spent at all or spent with no return on investment, what she neglects to say is that at the same time we have increased program spending by 4.5% to deal with some of the issues that she feels are so important. I do not disagree that they are important.

I think we do know how to pay down debt. We reduced the debt by $13 billion, freeing up $650 million next year and every year thereafter for program spending, which I am sure the hon. member would have good ideas on how to spend. I am interested that she can speak for every single economist in the country from coast to coast as well.

We have looked at other examples around the world. Ireland is a good example from some years past. It bit the bullet, took some very tough measures and is now one of the strongest economies, with the kinds of social services, education benefits and so on that I am sure the hon. member and everybody here would like to see. I am wondering if she has any comments on the Irish example and how that may or may not apply to hard lessons for Canada, to things we might consider.