moved:
That this House approves in general the budgetary policy of the government.
Mr. Speaker, I wish to table the budget documents for 2008, including notices of ways and means motions. The details of the measures are contained in these documents.
I am asking that an order of the day be designated for consideration of these motions.
I also wish to announce that at the earliest opportunity the government will introduce bills to implement the measures in this budget.
The budget is balanced, taxes have been cut and Canadians will now have a powerful new incentive to save money tax-free, the tax free savings account that we are announcing today.
Our government is meeting the challenge of global economic uncertainty with a plan that is real, a plan that is responsible and a plan that is working. The fundamentals of the Canadian economy are strong. We are running surpluses and paying down substantial amounts of debt. We are reducing the tax burden to the lowest level since the government of John George Diefenbaker.
Inflation is low and stable, interest rates are low and unemployment is the lowest it has been in 33 years, but Canada is not an island.
Challenges from abroad impact us here at home: the economy in the United States, our biggest trading partner, is slowing down; there is volatility in global financial markets; some sectors of our economy are struggling; and the overall Canadian economy will likely grow more slowly over the next two years.
Meeting these challenges is critical not just for our country, but for our families.
We have come to a fork in the road. Some would have us go down the path to higher spending, higher interest rates and higher taxes, perhaps even an increase in the GST. However, that approach is misguided.
There is another way. Our government is taking the path that requires focus, discipline and prudence and we know where we are going and we have a plan to take us there: Advantage Canada. It is an economic plan rooted in reality, a plan that is responsible, a way forward for the long term.
Our government recognizes the coming challenges and we move forward with a sense of purpose and determination. We have been preparing for the prospect of slower growth, laying stronger economic foundations and keeping our eye on core federal responsibilities.
Last spring, in budget 2007, we brought in temporary tax help for manufacturers with a $1.3 billion accelerated capital cost allowance incentive.
In the fall economic statement, we acted decisively with $60 billion in tax relief, including a further reduction in the GST, a reduction in personal income taxes and historic reductions in business taxes.
In fact, this year alone our government is injecting $21 billion of stimulus into the Canadian economy. As a share of the economy, this is significantly greater than the stimulus package offered by the U.S.
In January, we announced the community development trust to support workers and communities already feeling the pinch.
We are also providing additional support for Canadian farm families: better access to $3.3 billion in advances to cope with extraordinary market pressures in the livestock sector and $50 million to help the hog sector adjust to new market realities.
Some say that we should not have provided tax relief for individuals, families, workers and seniors. They call it blowing the surplus. It takes a certain kind of Ottawa politician to view giving people their hard-earned money back as blowing the surplus.
Today, our government is proud to say Canadians pay less tax: a $2,000 tax credit for every child in every family; the Canada employment credit; a fitness tax credit for kids; pension income splitting for seniors and pensioners; and the GST reduced to 5%.
In the weeks to come, Canadians across the country will file their tax returns and they will see the $2.9 billion of retroactive personal tax relief announced last fall. We did not wait, we acted, and Canadians can see the results.
To date, our government has taken actions that will provide nearly $200 billion in tax relief over this and the next five years, $140 billion of which will be for individuals. And taxes will continue to decline, thanks to our tax back guarantee.
As we pay down the federal debt, interest savings are being returned to Canadians in personal income tax relief. We are reducing the federal debt by more than $37 billion, including $10.2 billion this fiscal year. As a result, by 2009-10, personal income tax reductions provided under the tax back guarantee will amount to $2 billion. Instead of a year-end spending spree, we are giving Canadians a direct stake in and a direct benefit from debt reduction.
If we are to help families prepare for the long term, we must ensure Canadians have the right incentives to save for the future. Saving is not always easy but it is important. Unfortunately, for too long, government punished people who did the right thing.
As one of my constituents recently said to me, “I go to work. I collect my pay. I pay my taxes. And after I pay my expenses each month, I try to put some money away. I do not have a lot. But I am reaching my goal”.
“Yet, the federal government taxes me on what I earn on my savings and my investments. Savings and investments I socked away with after-tax income. Why am I being punished for doing the right thing?”
He is right. And we are going to change that.
The government will unveil the single most important personal savings vehicle since the introduction of the RRSP, and that is the new tax-free savings account. This flexible, registered, general purpose account will allow Canadians to watch their savings grow tax free. It is the first account of its kind in Canadian industry. This is how it works.
First, Canadians can contribute up to $5,000 every year to a registered tax-free savings account, plus carry forward any unused room to future years.
Second, the investment income, including capital gains earned in the plan, will be exempt from any tax, even when withdrawn.
Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for.
Finally, the full amount of withdrawals may be re-contributed to their tax-free savings account in the future to ensure no loss in a person's total savings room.
An RRSP is primarily designed for retirement. In many ways, a tax-free savings account is like an RRSP for everything else in one's life.
It is a powerful incentive to save: to help young people saving for their first car; to buy a first home; to help seniors stretch their retirement savings further; or to help people set aside a bit of cash each month for a special project, to help their kids, or to simply treat themselves.
To make it easier for lower and modest income Canadians to save, there will be no clawbacks. Neither the income or capital gains earned in a tax-free savings account, nor the withdrawals from it, will affect eligibility for federal income tested benefits such as the guaranteed income supplement.
The generations that came before us deserve to live their retirement years with dignity and respect.
Many seniors are living on a fixed income. Oftentimes, they find it difficult to make ends meet. This year alone, our government is providing about $5 billion in tax relief for seniors and pensioners, including a doubling of the pension income amount to $2,000; increasing the age credit amount by $1,000; increasing the age limit for maturing RPPs and RRSPs; and for the first time ever in Canada, pension income splitting for seniors and pensioners.
However, we can do more to support our seniors. Today we are increasing the guaranteed income supplement exemption to $3,500 from the current maximum of $500. This will benefit low and modest income seniors who choose to continue working.
Financially, it can be challenging for seniors but it can also be challenging for those living in northern and isolated communities. To help offset the higher cost of living, we are increasing the daily amount of the northern residents deduction by 10% to $16.50. This increase will bring the maximum amount of the residency deduction to $6,022.50. This is long overdue.
As I say, this is long overdue. The northern residents deduction has not been increased since finance minister Michael Wilson stood in this place and delivered his budget in 1986.
Our government is also committed—