Mr. Chair, it is a great pleasure tonight to rise and speak to the main estimates and about what this Conservative government is doing to effectively manage Canada's economy. Under the leadership of our Prime Minister and finance minister, we have taken many important steps to improve the quality of life for Canadians over the last two years.
My remarks and my eventual questions to the finance minister will deal specifically with the tax-free savings account.
It is clear to Canadians that this government is taking a very different approach than the Liberals. Their Liberal vision for the economy simply repeats the same broken tax-and-spend and tax again mantra of the 1970s, along with a dangerous addiction to uncontrolled spending and reckless deficit spending.
It is a tax-and-spend philosophy that is leading the Liberals to call not only for a huge hike in the GST but also for what many have stated could be the single largest tax increase in Canada's history. The Liberal leader's new regressive carbon tax represents a huge tax increase for all Canadians. It is a tax increase that each and every Canadian will feel at the pumps, at the grocery store and each and every time they heat their home.
What is worse is that these tax hikes will have the most negative impact on low income Canadians, such as seniors living on fixed incomes.
With the potential Liberal GST hike and the new carbon tax, Canadians are being threatened by a Liberal government that will reach deeper and deeper into their pockets with a regressive, punitive tax that will directly cause the price of everyday items to increase.
For instance, as farmers see their costs escalate, the result will be higher food prices. Large purchases such as a new home or a new car would skyrocket to such new heights that they would fall out of reach for some. Indeed, the prices of everything we make or buy would jump.
Both the manufacturing and the shipping of products are tied to gas prices, making the cost of the products that we export more expensive and thus less attractive in many markets. This would create a huge disadvantage for Canada's manufacturing sector, a disadvantage that it simply cannot afford at this time.
Our Conservative government disagrees with the Liberals. We believe that Canadians should be allowed to keep more of their hard-earned dollars and to spend those dollars on what is important to them and their families.
That is why we have provided historic tax relief and cut the federal tax bill for families and individuals by $140 billion. This includes lowering personal income taxes and chopping the GST by two points.
We also believe that the federal government should undertake measures to assist Canadians to save, helping to make it easier for them to invest in their retirement or make those larger purchases of life, such as a new home.
In pursuit of this objective, budget 2008 unveiled the creation of the landmark tax-free savings account.
It was a little over 50 years ago on March 14, 1957, that then finance minister Walter Harris, a lawyer from southern Ontario with a record of balanced budgets and who ran for the leadership of a major political party in Ontario, stood up in the House of Commons to announce a new tax plan to help Canadians save.
At that time, the initiative was greeted with polite applause and passing interest as a measure mainly aimed at assisting those without workplace old age benefits to retire comfortably. From its humble beginnings, the registered retirement savings plan would go on to become an indispensable part of fiscal planning for every Canadian.
And for that, along with his military service in World War II, we thank and we pay tribute to Walter Harris. In the city of Oshawa today, the Walter E. Harris Public Elementary School bears its name in his honour.
Now let us fast forward to the present day and another lawyer from southern Ontario, another finance minister with a record of balanced budgets and another politician who has run for the leadership of a major political party in Ontario.
On February 26, 2008, our current finance minister, the member for Whitby—Oshawa, would stand in the same chamber Walter Harris did over half a century ago to announce the single most important personal savings vehicle since the RRSP of 1957.
Described by the C.D. Howe Institute as a “tax policy gem” and by the Canadian Federation of Independent Business as an “inspired measure”, the tax-free savings account will allow Canadians to set aside money in eligible investment vehicles and watch those savings grow tax free for a lifetime.
The tax-free savings account can be used to purchase a new car, to renovate a house, to start a small business or for retirement. In other words, this is tax-free money for what matters to individual Canadians.
An important feature of the tax-free savings account is that Canadians from all income levels and all walks of life can benefit. Starting on January 1, 2009, Canadians aged 18 and older can save up to $5,000 every year in a tax-free savings account.
While contributions will not be deductible for income tax purposes, investment income, including capital gains, earned in the tax-free savings account will not be taxed, even when withdrawn. Funds can be withdrawn from the savings account at any time for any purpose, tax free.
Naturally, not everyone is able to save each and every year. The new savings account is flexible, allowing for a lifetime of savings. Those who cannot contribute $5,000 in a given year will be able to carry forward their unused contribution room to future years. In addition, Canadians may want to use their savings and the full amount of withdrawals, to be put back into the tax-free savings account in the future.
The Liberals across the floor must like it because this is the quietest they have been all evening.
We believe that within the next 15 to 20 years over 90% of Canadians will hold all of their financial assets in tax-efficient savings vehicles, either through existing tax-deferred plans or this new savings account. This is a significant achievement as our population grows older, and it will provide a lasting legacy for the generations that follow.
Couples often save and plan together, so Canadians can contribute to their spouse's or common-law partner's tax-free savings account depending on the spouse's or partner's available room.
Some people ask how the tax-free savings account is different from the RRSP. The basic difference is that an RRSP is intended primarily for retirement. We might say that the tax-free savings account is like an RRSP, but for everything else in our life.
The benefits of saving in a tax-free savings account are evident. Because capital gains and other investment income earned in the tax-free savings account will not be taxed, the person contributing $200 a month, for example, to a tax-free savings account for 20 years will enjoy additional savings of $11,045 compared to saving in an unregistered account.
And the tax-free savings account provides benefits for seniors. It will provide seniors with a tax-free savings vehicle and meet ongoing savings needs, something seniors have only limited access to once they reach age 71 and are required to begin drawing down their registered retirement savings. Seniors are expected to receive one-half of the total benefits provided by this savings account.
One of the best features of the tax-free savings account is that there is no impact on income tested benefits. As our government did with the GST cuts, we have taken the interests of low income Canadians into account.
There will be no federal clawbacks resulting from the tax-free savings account. This means that neither income earned in a tax-free saving account nor withdrawals will affect eligibility for federal income tested benefits and credits such as the guaranteed income supplement and the Canada child tax benefit.
For people with low and modest incomes, this will improve incentives to save. In fact, it is estimated that in the first five years over 75% of the benefits of this savings account will go to individuals in the two lowest income tax brackets.
In closing, Canadians will benefit from this in many ways, but perhaps more importantly, it provides Canadians with the ability to start saving early for future needs. It is not a surprise that Canadians are excited. In my remaining time, I would like the finance minister to speak to the reaction that he has heard on this fine initiative.