Mr. Speaker, it is an honour to stand in the House to deliver my first complete speech following the recent election.
Like other members with their ridings, I would like to take one moment to thank the voters of Lac-Saint-Louis for showing their confidence in me once again by re-electing me to represent them in the House of Commons for the fourth time since 2004. It is a privilege and responsibility that all members of the House understand deeply, having been through this common experience of being chosen by one's fellow citizens, friends, neighbours and constituents to represent them in the House.
To get back to the topic at hand, the 2011 budget redux, I would point out that June 6 was an important date in tax history in Canada, tax freedom day. Every year tax freedom day occurs at a later date because of bracket creep. As incomes go up, people move into higher brackets and are paying more and more tax.
This brings me to a related point, which is the fact that individual taxpayers are carrying more and more of the tax burden in this country and corporations are carrying less and less. I would like to draw the attention of the House to an article that appeared in Le Devoir back in March.
The article was by Hélène Buzzetti and the headline said: “Corporate tax cuts meant that more than 50% of federal government revenues in 2010 came from individuals.”
The article goes on to say that individuals are paying 50% of government revenues. Some would say that is because corporations are paying a smaller percentage as a result of the recession, which has reduced corporate profits and therefore corporate taxes. Yet if one looks at the projections for 2012-13, when the government sees a return to better economic times, even then individual taxpayers will collectively be paying 49% of the tax revenues of this country. In some ways one could say that by allowing the federal corporate tax rate to continue to drop, the federal government is really giving us a budget that increases the tax burden.
What I find interesting in the government's argument is that it likes to have it both ways. It likes to tell us that when things do not go well, it is the fault of the international economy and fact that demand south of the border is not as strong as it should be and that we therefore suffer the consequences in terms of lower employment and corporate profits. Then, on the other hand, it wants to take credit for everything good that happens. It says that if we cut corporate taxes, we will have greater employment. However, there is a contradiction there.
The fact that employment is not growing as fast as it could is because of the recession south of the border and that we are an exporting nation. Cutting the corporate tax rate will not spur companies to invest. Anyone who has taken economics 101 knows that investment responds to heightened confidence and heightened confidence is a result of heightened demand.
Therefore, as long as markets in the Untied States remain soft, there will not be an incentive for the corporate sector in Canada to invest. In fact, we have seen evidence of that because corporations collectively have been sitting on about $400 billion of cash. That means they have all the money they need to invest, but they are not investing because the economic climate in the United States is not encouraging them to invest. It is not a question of there not being enough money to invest; and even if a company did not have large cash reserves, it could borrow at historically low interest rates. The reason companies are not doing that as much as they should is the situation with demand in the United States.
Another point I would like to raise in regard to corporate tax cuts is something that has not really been discussed because it is a bit technical. When the corporate tax rate is reduced in Canada, so is the dividend tax credit that individual taxpayers apply on their taxes for the dividend income they receive. That is because of the relationship between the corporate tax rate and the dividend tax credit. Therefore, if corporate tax rates are reduced, the dividend tax credit is reduced. In fact, taxes will increase for Canadians.
The other issue that is quite important to keep in mind is that when a multinational corporation pays tax in Canada, it gets a credit on its U.S. corporate income tax. If it pays less corporate tax in Canada, that credit will not be as great. So the company's lower corporate income tax paid in Canada will be offset by higher corporate income tax paid to the U.S. Treasury. That dampens any positive effect that reducing corporate income taxes could have.
An interesting point from an article in the The Economist in May is that when taxes on a company's profits go down, most of them are paid out in the form of dividends to shareholders. For example, there was a study done by Kristin Forbes, a former member of George W. Bush’s Council of Economic Advisers, which found that for every extra dollar of foreign profits American firms brought home because of lower taxes abroad, or for whatever reason, American firms tended not to invest but to pay out from 60¢ to 92¢ more to shareholders.
To say that if we reduce corporate taxes all of a sudden there will be an investment boom is really not a proper conclusion to draw.
The other issue, for example, is that our corporate tax rates are much lower than those of our competitors, so there is no reason to drop them more at this time. It will not have any impact on corporate behaviour. One can look at Dell Computers, which moved out of a low corporate tax rate country to a higher corporate tax rate country. It went from Ireland to Poland where the corporate taxes were higher. That negates the argument that the government makes about attracting investment. Why did it go to Poland? It went to Poland because it was searching for a lower wage rate. What really attracts companies is not so much lower tax rates, but lower wage rates.
I think members would agree that the mission we have given ourselves as a country is not to become the lowest wage country in the hemisphere. That is not where we are headed. We are trying to produce the most innovative products and services that we can using our brain power. In other words, we want to encourage economic growth through innovation.
How do we do that? We invest in education. We make sure that all of the best minds in Canada who want to go to university can have a chance to go to university. That is what we were trying to do in our Liberal platform in the last election with our philosophy that if a student gets the grades, he or she gets to go. That is why we were offering students $1,000 a year for every year of CEGEP and university that they complete. That would have been very valuable for students and for their families, the middle-class families that the party opposite claims to have a monopoly on representing. Those families are facing higher tuition fees. In Quebec, tuition fees will be going up $400 to $500 a year for the next few years. Families need some relief. We were ready to give them relief through that $1,000 a year that we were going to give their sons and daughters to help pay for their tuition. That is what we need to do. We need to innovate. We need to encourage innovation. We encourage innovation by opening our universities to the broadest pool of minds possible.
There is another way to encourage innovation and that is to invest directly in research and development facilities. We have not encouraged basic research to the extent that we should if we want to be a leading nation in the international economy of the 21st century.
Do members know that the last Nobel Prize for Medicine Canada received was in 1923 and it went to Banting and Macleod for the discovery of insulin. That means there is something wrong. We are not innovating the way we should.
I would like to propose that we invest in something called the Canadian molecular biology laboratory, which is a concept that is being advocated by a McGill scholar and friend of mine Dr. John Bergeron, who has seen the model work in Europe. Europe has a molecular biology laboratory and it attracts the best minds from across the world to work on molecular biology science, which produces dividends in terms of drug discovery later on. That is particularly important to my constituency which houses a number of brand name pharmaceutical companies which could benefit from some spinoffs in the area of basic research and molecular biology.