Debates of June 10th, 2014

Opposition Motion—Income Splitting

[Gary Goodyear, Conservative, Minister of State (Federal Economic Development Agency for Southern Ontario)]

Mr. Speaker, I want to congratulate my colleague for what I see as a great speech. I want to congratulate her for bringing together the bigger picture that this government is attempting to do, which is to create a very efficient way of running the country, keeping health care transfers at the highest level ever, social transfers to the provinces, but also reducing taxes in every area we can think of. She makes a valid point that people know how to spend their money better than any government.

In Ontario, for example, we have a provincial government which has tax rates that are out of control. Electricity rates are the highest in North America. People are taxed to death and see money wasted every day.

I wonder if the member would comment on all of the tax initiatives that this government brings forward, and not just this one. It is about the whole picture of making Canadians lives much better.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Mr. Speaker, even if I had all day, I could not possibly speak to all the tax cuts, in detail, the government has delivered.

Yesterday, and throughout the week, the Minister of State for Finance has made it clear that we are in a leadership position in terms of reducing taxes. We are asking all other levels of government to reduce taxes on Canadian citizens as well. That is our plan, and it is going to work.

[Susan Truppe, Conservative, Parliamentary Secretary for Status of Women]

Mr. Speaker, I am pleased to have this opportunity to address the motion before us.

I would like to take my time today to describe how our government's economic policies have strengthened Canada's middle class. We all know that a strong middle class is vital for Canada's economy. However, while the NDP and Liberals claim to advocate on behalf of the middle class, it is our government that is delivering results. Consider the following: a recent Statistics Canada study revealed that since this government has taken office, the middle class has flourished significantly, and I quote:

The median net worth of Canadian family units was $243,800 in 2012, up 44.5% from 2005 and almost 80% more than the 1999 median of $137,000, adjusted for inflation.

Another study, one from The New York Times, indicates that Canada's middle class is better off financially than that of the U.S.:

After-tax middle-class incomes in Canada—substantially behind in 2000—now appear to be higher than in the United States. Further, since 2006, Canadian families in all major income groups have seen increases of about 10% or more in the take-home incomes.

These statistics are remarkable in their own right, but they are even more impressive when we consider the global economic challenges Canada has navigated during this period. Indeed, we experienced the worst global recession since the Second World War, yet our economic performance during both the recession and the recovery is among the strongest in the world.

Over one million net new jobs have been added since the height of the recession, the vast majority of which are full-time and in the private sector. This is one of the strongest job creation records in the G7.

At a time when Canada's financial systems were brought to the brink of bankruptcy, Canada's banks remained the soundest in the world. When other countries increased taxes, our government kept taxes at record lows. In fact, the federal tax burden is at its lowest level in 50 years.

Unlike the opposition, we believe that leaving more money in the pockets of hard-working Canadian families is a good thing. That extra money provides flexibility to make the choices that are best for them. It also helps build a solid foundation for future economic growth, more jobs, and living standards for all Canadians. That is why our Conservative government has proudly introduced close to 180 tax relief measures since taking office, reducing taxes in every way the government collects them.

What is more, Canadians at all income levels are benefiting from tax relief, with low- and middle-income Canadians receiving proportionately greater relief, as the Parliamentary Budget Officer recently confirmed. Indeed, Canadian families in all income groups have seen increases of about 10% or more in their take-home pay since 2006. In 2014, the average Canadian family is saving close to $3,400 in taxes, while one million low-income Canadians have been removed from the tax rolls altogether. This is historic tax relief.

Unfortunately, the tax-and-spend opposition continues to oppose each and every one of our tax cuts. Let me take this opportunity to remind it of some of the tax reductions it voted against: cutting the lowest personal income tax rate to 15%; increasing the amount Canadians can earn tax free; reducing the GST from 7% to 5%, putting more than $1,000 back in the pockets of an average family of four in 2014; and establishing the landmark tax-free savings account, the most significant advance in the tax treatment of personal savings since the RRSP.

In addition, the opposition has opposed a variety of tax credits that recognize the costs borne by hard-working Canadian families, credits like the child tax credit, the children's fitness tax credit, the children's arts tax credit, the family caregiver tax credit, and the first-time home buyers' tax credit. They were against other target measures to help Canadian families, including the home buyers' plan, the adoption expense tax credit, and the medical expense tax credit.

We have also enhanced benefits for families and individuals, which the opposition also voted against. These include the universal child care benefit, which offers families more choice in child care by providing up to $1,200 a year for each child under age six, and the working income tax benefit.

More recently, in economic action plan 2014, our government proposed a number of measures to expand tax relief for health care services. These included exempting the professional services of acupuncturists and naturopathic doctors from the GST and HST.

To support people with disabilities, our government introduced the registered disability savings plan, or RDSP, in budget 2007. The RDSP is widely regarded as a major policy innovation and positive development in helping to ensure the long-term financial security of those with severe disabilities. Since becoming available in 2008, over 81,000 RDSPs have been opened.

These important measures are a handful of examples illustrating how our government has responded to the needs of Canadian families and has helped Canadians keep more of their hard-earned money.

However, as we frequently see, the opposition members reject our efforts to lower taxes for Canadians. They prefer that we adopt dangerous economic policies such as a carbon tax that could kill businesses, investment, and jobs and hurt Canadian families to further their own misguided agenda. We will not engage in reckless spending that would inevitably be paid for by middle-class families. Unlike the opposition, we believe in spending taxpayer dollars efficiently, effectively, and only when necessary. After all, Canadian families know the importance of living within their means, and they expect governments to do the same. That leads me to my final point.

Perhaps one of the most profound ways we are helping Canadians is by making sure that future generations will not be paying for past obligations of their parents and grandparents by returning to balanced budgets in 2015. By returning to surplus, we would ensure solid, stable prosperity for all Canadians well into the future. Indeed, balancing the budget and reducing debt would ensure that taxpayer dollars would be used to support important social services such as health care rather than for paying interest costs. It would preserve Canada's low-tax plan and allow for further tax reductions, fostering growth and the creation of jobs for the benefit of all Canadians. It would also strengthen the country's ability to respond to longer-term challenges, such as population aging and unexpected global economic shocks.

This government understands the importance of middle-class Canadians, and as our actions have shown, we have listened and we have ensured a middle class for this country that will continue to lead the world. We will continue with our low-tax plan, unlike the tax-and-spend Liberals and New Democrats, whose high-tax, high-spending agenda would threaten jobs and set working families back.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, we have a debate today on income splitting as proposed by the Conservative government: a $5-billion scheme the Conservatives have said they campaigned on and that they are going to bring in next year. Is it the Conservatives' plan to actually not talk about income splitting all day? We have had two speeches so far, 10 minutes each, with lots of opportunity for my friend across the way who just spoke, and the one prior, and maybe future Conservatives, to actually say what they think about income splitting, because that is the debate today. They can talk about all sorts of things, and they can use all the political rhetoric they want. However, this is the question I have for my friend. As is currently proposed by the Conservative government, is she in favour of income splitting, yes or no? That is all.

[Susan Truppe, Conservative, London North Centre, ON]

Mr. Speaker, I would just like to say that the comments of the member opposite sort of crack me up, especially in his speech earlier. Those members stand here and rhyme off numbers. They pretend they want to help Canadians, but then the NDP member for Skeena—Bulkley Valley mentioned something about a woman's place being in her home. For the record, I just want to say that this government has done more for women and girls in Canada than any other government. Fortunately for Canadians, those members will not see this side of the House.

As I mentioned earlier, the average Canadian family is saving close to $3,400 in taxes, while one million low-income Canadians have been removed from the tax rolls. That is what tax relief is about, and that is what we want for Canadians, but then, the member opposite continues to oppose each and every one of our tax cuts. Let me remind members of some of the tax reductions they voted against: cutting the lowest personal income tax rate to 15%—

[The Acting Speaker, Conservative, Bruce Stanton]

Order, please. I am just going to take some time for more questions and comments.

The hon. member for Kildonan—St. Paul.

[Joy Smith, Conservative, Kildonan—St. Paul, MB]

Mr. Speaker, I commend my colleague for her very insightful speech, because it listed all the things our government has done to help all families, including middle-class families, with middle-class families now prospering more than ever before in this country. I would like the member to please tell us what has been done for seniors and for those who are disabled, because I did not hear that in the speech.

[Susan Truppe, Conservative, London North Centre, ON]

Mr. Speaker, I would like to thank the member for Kildonan—St. Paul, who does an outstanding job for her constituents and for women across Canada.

In terms of seniors, the government introduced pension income splitting and doubled the maximum amount of income eligible for a pension income credit to $2,000. We increased the maximum guaranteed income supplement earnings exemption to $3,500 and introduced the largest increase for the lowest-income GIS recipients in a generation in our economic action plan 2011. We also removed 380,000 senior citizens from the tax rolls completely.

In response to persons with disabilities, the enabling accessibility fund has funded over 1,300 community-based projects, totalling over $89 million, since its inception. In our economic action plan 2014, we propose to connect persons with disabilities with jobs by providing $50 million over three years to the ready, willing and able initiative of the Canadian Association for Community Living and $11.4 million over four years to support the expansion of vocational training programs for persons with autism spectrum disorder, led by the Sinneave Family Foundation and Autism Speaks Canada.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, given that we are talking about tax policy and whether a particular tax policy is regressive or progressive, and we believe that income splitting, as designed in the Conservative platform, is a regressive tax policy, would she agree that making the non-refundable tax credits such as the caregiver tax credit, the children's activity tax credit, the volunteer firefighters tax credit, and all those tax credits that currently do not benefit low-income Canadian families, fully refundable, thus enabling low-income families to benefit from them as well, would render our tax system more progressive?

[Susan Truppe, Conservative, London North Centre, ON]

Mr. Speaker, the tax credits the member opposite mentioned are a measure welcomed by many Canadians. I would like to provide some statistics from a report on financial security from Statistics Canada. Statistics Canada found out that the median net worth of Canadian families was up 44.5% from 2005 and almost 80% more than the 1999 median, adjusted for inflation. This is a significant improvement in the wealth of Canadian families, which are benefiting from the policies and tax credits of our Conservative government.

Income inequality has not increased in Canada since 2006, and the proof is in the numbers. We have cut taxes 160 times, saving the average Canadian family over $3,400 a year, and poverty is at a record low for all Canadians, including children and seniors.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, I rise this morning to speak on this NDP motion on income inequality and income splitting.

This is a two-part motion. The first part is a statement that acknowledges the harmful effect of the increase in inequality on Canadian society and tries to assign blame solely to the Conservative and Liberal governments. The second part is a condemnation of the Conservatives' election promise on income splitting.

I would like to address these two parts in order.

First, in terms of income inequality, I agree with my colleagues in the NDP that rising income inequality is a crucial issue for Canadian families. I also agree that it is harmful to our society and that as members of Parliament, we ought to address it. That is why two years ago, I moved a private member's motion directing the House of Commons finance committee to conduct an in-depth study of income inequality. In the wording of that motion and in my speeches in this place I avoided partisanship and as such obtained support from members of Parliament from all political parties, including sufficient support from Conservative members to actually pass that motion.

The purpose of that study was to identify solutions and to put Parliament on a path of progress toward greater equality of opportunity in Canada. At the time, I asked that all members of the House put partisanship aside and work together on this issue, and we were successful in having the finance committee conduct a study. In the end, the finance committee spent just a small fraction of its time on income inequality compared to its other studies. Despite that, the committee's report to the House identified a number of credible solutions that would improve equality of opportunity for Canadians across the country. It included solutions such as increasing the availability of affordable early child education and care programs, a recommendation that was supported by a variety of witnesses, including the Canadian Medical Association, Canada 2020, TD Economics, and the Canadian Council on Social Development.

The report also showed the extent of the problem. It showed that income inequality and equality of opportunity have worsened in Canada over the last generation. The fact is that they have deteriorated under the federal and provincial governments of all parties.

Let us be clear that federal and provincial governments have a shared responsibility for social investment and tax policy and have a responsibility to create conditions for social equity and economic growth and opportunity. This shared responsibility includes all governments, federally and provincially, including NDP governments, although the motion specifically chooses to say “Liberal and Conservative governments” without acknowledging that in fact this is not a partisan issue.

If we are going to deal with this issue effectively, we need to accept that income inequality has grown in Canada, just as it has grown in most of the industrialized world. There are a number of reasons, but some countries are doing a better job than others in maintaining equality of income and equality of opportunity, and those best practices and ideas are what we should be looking at. If we look at Canada's record of rising income inequality, we see that our colleagues in the NDP have taken a selective view of the facts. I encourage them to avoid this temptation, because if we look at the evidence available to us, we get a different perspective.

We can look at Canada's provincial Gini coefficients. StatsCan tracks the annual Gini coefficients for every province back to 1976. Members of the House will already know that the Gini coefficient is the most common way to measure income inequality, with zero representing a completely equal society in which everyone receives the same income and one representing a society in which all the income would go to one person or family.

When the New Democrats look at these Gini coefficients, they want to focus on total after-tax income. This measurement looks at the inequality that remains after governments have redistributed income through taxes and transfers. The drafters of today's motion and anyone else who wants to follow along at home can find provincial Gini coefficients for total after-tax income on the StatsCan website in CANSIM Table 202-07051.

The data show us that when the NDP was most recently in government in B.C., from 1991 to 2001, income inequality among B.C. families went up by more than 15%. That is a drastic increase, to borrow a phrase from today's motion. That is after taxes and transfers are factored in.

For individuals living in B.C., the Gini coefficient went up by more than 12%. That is a drastic increase. Ten years of NDP rule left B.C. with the highest rate of income inequality of any province in Canada. That is despite the fact that the NDP inherited the fourth-lowest rate of income inequality when it took office in B.C. Today B.C.'s Gini coefficient sits slightly lower than it did when the NDP left office. Thankfully, I guess, if we were in the blaming business, which I do not think we ought to be, the current Liberal government has been able to undo some of that damage when it comes to income inequality.

The NDP record on income inequality is not much better in Saskatchewan. After 16 years of NDP rule, the Gini coefficient for Saskatchewan households climbed by more than 8%, which is another drastic increase. Even in Manitoba, the most recent data show that income inequality for households is up by 2.5% since the NDP have taken office.

I am only using these examples to point out that the NDP ought not try to make this a partisan issue, because by doing so we distract this House from dealing with the issue itself. The NDP has intentionally tried to prevent a consensus in this House on the issue of income inequality by playing politics and partisanship with us.

The Conservatives would say that income inequality is not an issue. They are wrong. The NDP will try to make it an issue of class warfare and try to divide it along party lines. I think that is also wrong if we are serious about the issue. The issues of rising income inequality and inequality of opportunity are too important and the consequences of inaction too dire for us to be engaged purely in partisan bickering. Canadians will be better off if we work together to understand how we can reduce income inequality and strengthen equality of opportunity. Therefore, I encourage all members of this House to accept the record of their respective parties and let us focus on the future and develop the best public policy responses to this important issue. We need to move on together and work on solutions that can strengthen equality of opportunity.

We also need to address what is probably the worst example of inequality in our country, aboriginal and first nations Canadians. There is a demographic, social, and economic time bomb represented by, among other things, the fact that 400,000 young aboriginal and first nations members will be entering the workforce in the next 10 years. If they have the skills they need to compete and succeed, it would be a good thing for our economy. If they do not, which is the case with many, it will be of dire consequences to our economy and our society. We need to close the first nations and aboriginal non-first nations education system funding gap. That is something we ought to all agree on across party lines.

These are important issues, and the cost of inaction is significantly high. We have heard from the Conference Board of Canada and from the former dean of the Rotman School of Management, Roger Martin. We have heard from the former governor of the Bank of Canada, now Governor of the Bank of England, Mark Carney. All have said that those who say income inequality is not an issue are wrong and that those who want to make it an issue of class warfare are wrong.

We have to focus on equality of opportunity. They have all warned us that rising income inequality and inequality of opportunity will limit economic growth and prosperity and that rising inequality will tear at our social fabric. It causes future generations to lose hope, and it is notable that for the first time a majority of Canadians now believe that today's generation will be worse off than their parents. Rising inequality weakens the public trust in our institutions. As parliamentarians, we must be careful and avoid policies that would lessen equality of opportunity or deepen inequality.

Inequality can rise when governments lose sight of how their policies affect equality of opportunity. For example, the proliferation of non-refundable tax credits is contributing to greater inequality. These tax credits exclude low-income Canadians from any benefit. Another example of a measure that will increase income inequality is the Conservatives' income-splitting scheme, which is, of course, the subject of the second part of today's motion.

In the last general election, the Conservatives vowed to bring in income splitting as soon as the budget was balanced. It was a cornerstone of their 2011 election platform. Some estimate its cost at $3 billion per year, and I have heard potentially $5 billion. It is clearly the Conservatives' biggest election promise so far.

During the election, the Prime Minister said that once the budget is balanced, income splitting “...should be one of our highest priorities”. According to the fine print, couples with children under 18 would be allowed to split up to $50,000 of income each year for tax purposes. However, since the election, both the C.D. Howe Institute and the Canadian Centre for Policy Alternatives have published thorough reports showing massive flaws in the Conservatives' plan. They have shown how the Conservatives' promise to bring in income splitting would disproportionately benefit high-income earners at the expense of the middle class and low-income earners. The C.D. Howe Institute has called the Conservatives' income splitting a flawed idea that excludes 85% of Canadian households from any benefit whatsoever.

However, it is not that these low- and middle-income Canadians would be just completely left out of the deal; worse than that, they would end up having to pick up the tab through reductions in social investments that could benefit them, and ultimately they would pay higher taxes in other ways. In the words of the C.D. Howe Institute report, the Conservatives' promise:

...would offer no tax reduction for the great majority of Canadian households, while the government revenue loss would lead to either a curtailment of public services or an increase in their tax burden to make up the shortfall.

In other words, most Canadians will pay for this expensive Conservative tax cut through higher taxes or reduced services or both.

Let us look at some examples of how a family might or might not benefit under the Conservative scheme.

In the Conservatives' budget, they like to give examples of how a family might be impacted by their plan. They even give these family members names. In fact, if we flip to page 190 of the latest budget, we will see that Blake earns $48,000 and Laurie earns $72,000. Blake and Laurie and their two children represent the Conservatives' idea of an average middle-class family. In fact, they are on the higher end of the average, and the Conservative's claim about their savings from previous budgets are a bit skewed.

However, even in the Conservatives' idyllic vision of the middle-class family, Blake and Laurie would not get a penny from the Conservatives' expensive promise to bring in income splitting. Even the fictitious family that the Conservatives cite in their budget would not benefit from income splitting.

If Blake and Laurie would not get anything under the Conservatives' scheme, and the scheme costs $3 billion per year or more, then who would benefit?

Well, under this scheme, the Prime Minister, who earns $320,000 per year and has a stay-at-home spouse, would actually save $6,500 per year. Meanwhile, a Canadian who has a stay-at-home spouse and who earns the average industrial wage would save less than $10 per week. Most households would get absolutely nothing, including households run by a single parent, a person who is struggling to make ends meet, who has no one else to rely on, and who cannot access good-quality child care and early learning.

Former finance minister Jim Flaherty understood the shortcomings of this plan when he said in February that income splitting needed a long, hard analytical look to see who it affects and to what degree, because he was not sure that overall it would benefit our society.

Shortly after Mr. Flaherty made this statement, The Globe and Mail agreed. It published an editorial against the idea, saying:

But Mr. Flaherty is right. Income-splitting needs to be reconsidered, or abandoned in favour of a better use for the federal surpluses that should begin to appear next year. If the government wants to cut taxes, this isn't the way to do it.

The Tory proposal was ill-considered from the start.

With their income splitting scheme, the Conservatives made a major campaign promise that just was not thought through at the time. Today, with the resources of government and the Department of Finance, the whole government approach, and the capacity of government to research the best practice approaches from around the world and develop sound policy, there is no excuse for the Conservatives not to step back from this and develop a better way to reform our tax system to render it more progressive. We are not in the heat of an election right now.

We have not had a significant study of our personal tax system since 1971 with the Carter commission. Everything has changed in the decades that have ensued in terms of both the global economy and the Canadian economy. Surely there is room for a thorough study of our tax system so as to create a tax system that is fairer, more progressive, and potentially even more globally competitive.

We can look at some examples. Germany has a robust economy, but at the same time, it does not have the same levels of income inequality that we have seen grow in Canada. What is it doing in terms of apprenticeship? What is it doing in terms of skilled trades? What is it doing in its tax system that we could learn from?

The Nordic countries are other examples. Scandinavian countries are sound economic models. They have good growth, and even competitive corporate tax rates in many cases. They also make good investments in progressive social policy, like early learning and child care, as examples.

The Liberal Party is open to supporting tax changes that would benefit middle income Canadians. We introduced the working income tax benefit in the last mini-budget in the autumn of 2005 when the member for Wascana was finance minister. That was an example of progressive social policy that helps people get over the welfare wall.

The child tax benefit was introduced by a Liberal government but continued and expanded under the Conservative government. It is another example of a progressive tax policy that has benefited a lot of Canadian families.

Compare those with the non-refundable tax credits that I mentioned earlier that do not benefit low income Canadians and do not change people's behaviour. If high income earners have children in hockey, they are going to benefit, but even if they do not receive it, their children would still be in hockey.

We ought to be thinking about the low income families for whom a direct benefit might make the difference toward their children being in an activity that could change their lives and improve not just their childhood but put them on track to a productive and healthy life. These are the people we ought to be most concerned about, because they are falling through the cracks, and that comes at a huge social and economic cost, not just to those families but to all of us.

We cannot support an income splitting scheme that would help high income earners and shift the burden to the already struggling middle class and low income families who are having trouble making ends meet. We cannot support a tax cut that would so clearly lead to greater income inequality and inequality of opportunity.

This brings me to the motion before the House today.

We agree that increasing income inequality and a growing inequality of opportunity is harmful to Canadian society. We agree that the Conservatives' income splitting scheme excludes the vast majority of Canadians from any benefit whatsoever and that it could lead to greater income inequality.

Finally, the fact is that Canada has seen a drastic increase in income inequality under federal and provincial governments of all stripes. This debate ought not be simply about assigning blame but instead be about recognizing the problem and working together across party lines to find solutions. Therefore, the Liberal Party supports the motion.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, I thank my colleague for his speech. I was on tenterhooks waiting to find out if the Liberals were going to support the motion.

I understand that there are, perhaps, some hurt feelings, because the motion, as it reads, talks about how recent Liberal and Conservative governments have increased income inequality in Canada. My friend from the Liberal Party wants to debate whether that is a partisan attack or a statement of fact.

The statement of fact is that income inequality has increased dramatically under successive Liberal and Conservative governments. The member then went on in his speech to say that it was more the fault of the provinces, when the Liberals were in power, I suppose. It was not at all connected, in the Liberals' view, to the fact that the Liberal federal government cut transfer payments by as much as 40% to those same provinces. Maybe there is a connection. We argue that there is.

I am very glad that the member was declarative about the Liberals' support for the NDP motion to say that the $5-billion price tag to this income splitting scheme would be unfair. We have heard from two Conservative speakers so far who have yet to declare the Conservative position on income splitting at all.

I wonder if my friend could add to the debate and speculate as to why my Conservative colleagues have such a hard time making their opinions known about whether this $5-billion scheme is supportable or not.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, I have a couple of points on this. I really wish that the New Democrats would actually focus on the issue at hand, which is dealing with income inequality and creating public policy to do that. This motion could have been amended to add “and NDP governments” and it would have been perfectly legitimate, but the question is how productive that is when we ought to be seeking consensus across party lines on this and dealing with the issues that are important.

The member took a swipe at the Conservatives. The Conservatives have not been definitive here today, but I know there were more than 20 Conservatives who voted for my motion to study income inequality at committee. I know that many members of the Conservative Party have a sense that there is a growing inequality of opportunity, that it is wrong, and that we need to do something about it.

In the wording of motions and in our conduct in the House, we should try to appeal to people's better angels from time to time, as opposed to driving divisive wedges between the parties, and actually work together to develop solutions. There is a lot of common ground between the NDP, the Conservatives, and the Liberals when it comes to equality of opportunity. If we frame it as such, we can gain better consensus and build better public policy that respects all parties but, more importantly, deals with an important issue facing Canadians.

[Pierre Poilievre, Conservative, Minister of State (Democratic Reform)]

Mr. Speaker, the Conservative Party believes in family tax fairness and choice for parents. That is why we brought in the universal child care benefit. Instead of giving money to bureaucrats, researchers, and activists who failed to create day care spaces for years, we give it directly to parents so that they can choose what kind of child care we want. That is the fundamental debate we have.

On the question of income splitting, more popularly known as family tax fairness, I support it. I believe it is fair that a single-income family earning $60,000 should pay roughly the same taxes as a dual-income family earning $60,000.

We know from the public opinion data that, overwhelmingly, parents favour the option, if they have a choice, of having one parent in the home in the very early years. However, right now, it is difficult for people to afford to do that, except for the very rich. We want to make that a possibility for all of those families who would choose it, regardless of their income.

I wonder if the member across will support family tax fairness and support the Conservative proposal for that fairness.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, sometimes, what really frustrates me on issues like this is that we have the occupiers in the NDP and the tea partiers in the Conservatives, without the capacity of actually working together on some of these issues.

The minister referred to early learning and child care. I remember being in the House when he used to call it a national babysitting program. The reality is that early learning and child care are important social investments that create more competitive economies in places like the Nordic countries, for example. He may dismiss these wild-eyed activists, like Margie McCain or Dr. Fraser Mustard, but the reality is that the quantifiable data demonstrates that investments in early learning and child care not only create more social equity but create a more competitive economy.

It is fine to demonize, marginalize, and stigmatize that type of research, but there are just as many economic advantages to those kinds of progressive investments as there are social advantages.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Mr. Speaker, first I would like to congratulate my colleague on his long-time focus on the issue of income inequality. The hon. member has been talking about income inequality since before the issue started to rise in awareness and started to make headlines.

My question is this. Would the hon. member not agree that income inequality is bad not only for the economy but for democracy? If there is not a strong middle class with purchasing power, then that slows economic growth. That is the importance of reducing income inequality for the economy. However, it is also important for our democracy, because if income inequality grows, people become very skeptical about whether their government has their best interests at stake. Therefore, there is a double whammy when there is increasing inequality. One is on the economic front and the other on the democratic front.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, the member, my colleague and friend, raises an important issue and that is that, if people feel that the system is broken, that there is no way they can benefit from the system, not only can they give up on the economic system but they can choose political alternatives or opt out completely from the whole political system. We see disfranchisement today with a lot of young people, and the fact that only 22% of first-time eligible voters actually vote may be related to the economic challenges young people face today. They do not hear enough discussion in this place and other legislatures across the country on actually dealing with the issues they face, whether it is their education or their capacity to find work.

The issue of unpaid internships is one that we have dealt with at various points in the House. The fact that a privileged child from a wealthy family can have a swish unpaid internship when a middle class or low income child or adolescent has to go to work at whatever they can do, that deepening of inequality of opportunity at that stage in their lives is really bad for both the economy and society.

I can go further as well. Later today, the Liberal member for Toronto Centre will be speaking. She is a global expert on the whole issue of inequality and the author of the book Plutocrats. She will bring her particular insight, which comes from an international perspective on the issue. I would urge all members of Parliament to be here to listen to her discourse later today. It will provide an international perspective and apply it to Canada, as we consider what are the best ways forward and what countries are doing a better job combining robust pro-growth economic policy with good social and progressive tax policies.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I am on the Standing Committee on Finance with my colleague from Kings—Hants, and I would not want to leave out an important point, which is that the Conservatives blame the provincial governments for income inequality.

If the motion states that it is the federal Liberal and Conservative governments, that is because the Liberal government reduced spending in the 1990s by 40% for transfers like the Canada social transfer, which includes health care and social assistance.

I know that my colleague was not there. Yet the Liberal government at the time must take responsibility, which is why it is included in the motion.

However, when he spoke about common ground between the Conservatives, the New Democrats and the Liberals in the House on the issue of income inequality, it is clear that in committee the Conservatives denied the perception that we had of income inequality.

Would my colleague like to comment on the findings in the report of the Standing Committee on Finance and also on this perception that the Conservative government has of income inequality, which differs from ours and even from that of the Liberals?

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, the Liberal government under Jean Chrétien inherited the largest deficit in history. At the time, some difficult, but necessary decisions had to be made.

We take responsibility for that. We are not here to blame any party. Every federal and provincial government has to take responsibility for the decisions it makes and do its job by creating progressive policies for the future.

Today, I am a bit disappointed with this NDP motion because it is not necessary to be so divisive on an issue as important as inequality.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I am very pleased to speak to an extremely important issue that I think is going to be one of the election issues in 2015.

We know that this was a Conservative promise, one that was made without much regard for reality or the social impacts of income splitting.

I want to briefly summarize what income splitting is, even though other MPs are generally doing the same. Nonetheless, it is good to go over the basics and the reasoning.

In their 2011 election platform, the Conservatives proposed allowing individuals to transfer a portion of their income to their spouse, to a maximum of $50,000, in order to put themselves in a lower tax bracket. This applies to families with children, of course.

There are several problems with such a measure. At first glance, it seems like a good idea. I think the government is currently trying to rebrand this measure and find a different name for it. We heard the minister of state talk about justice or fairness for families. On the contrary, this measure is unfair to families. If we look beyond the issue of whether up to $50,000 can be transferred, we see that this measure mostly benefits people with high incomes. A number of studies—the most notable of which are those conducted by the Canadian Centre for Policy Alternatives and the C.D. Howe Institute—clearly showed that 85% to 86% of families will not benefit at all from this measure. It will benefit only 14% or 15% of Canadian families. How is that fair? It is not.

Clearly, this is an extremely costly measure for the federal government. It will be extremely costly in terms of the public services that will eventually be lost. The government is responsible for providing adequate funding, but the Conservatives have exactly the opposite philosophy in how they govern.

According to the two organizations' estimates, the measure will cost the various levels of government about $5 billion—$3 billion for the federal government and about $2 billion for the provincial governments. However these measures will benefit less than 15% of Canadians. Why are only 15% of Canadians benefiting? Let us look at those who will not benefit from this measure. I have a whole list. Clearly, income splitting will not do anything for single people because it affects families with children. It will not do anything for couples who do not have any children. It will not do anything for single-parent families, even though they could use a break, because the measure pertains to couples. Clearly, if a person does not have a spouse, income cannot be transferred. This measure will not do anything for families with children over the age of majority, even if those children are still dependants because they are going to school or they have a disability, for example. The taxation system provides for some tax credits in that regard, but the income splitting measure will not do anything for those individuals. Income splitting will not do anything for families where the parents have similar incomes. A family where both spouses are working and earning about $30,000 will not benefit from this measure at all. This measure does not do anything for parents who earn less than about $42,000 because they are in the lowest tax bracket. We can therefore see that the list of couples who will benefit from this measure is extremely small.

As a blatant example of inequity, consider the members of this House who have minor children and whose spouses or common-law partners are stay-at-home parents. We are people who would benefit from that. Here in the House, there are a number of members who are still young enough to have minor children. With our salary and a stay-at-home partner, if we can transfer up to a maximum of $50,000, we would personally benefit from about $5,000 in tax cuts. Do we want the $5,000? In society, that might benefit us personally. However, ultimately, we need the money far less than couples who, for instance, have trouble making ends meet and where each person has a salary of $20,000 or $25,000. Both must work to provide for their family. We therefore must think of the example we have here in this House.

In terms of the list of exceptions, I will move on to the question of good governance.

As I mentioned, income splitting would increase income inequality, since the wealthiest families would be the ones benefiting from it, as only one spouse needs to work and earns a salary that is high enough to provide for the family.

We are also wondering whether, after balancing the budget, the Conservatives are prepared to do without $3 billion in revenue.

The Conservative government often talks about the late Jim Flaherty, former finance minister. However, before he died, Mr. Flaherty had given the Conservative government a serious warning that this measure was extremely risky and that it had to be studied because it would only benefit a few segments of society, leaving out many families who would have far greater need of it.

In our view, this measure is completely inappropriate. At the time, Mr. Flaherty had warned the government that this measure was risky because, if the government wanted to balance its budget eventually, it had to make choices. Does the government want to throw the country back into deficit right away by providing additional tax cuts once it balances the budget, or does it want to use the surplus for other things such as debt reduction?

Since the Conservatives took power—so since the 2005 public accounts were released—Canada's debt has increased from $421 billion to $667 billion. That figure will be even higher this year. That is an increase of $256 billion—or over 60%—since the Conservatives took power. Do the Conservatives want to use the future surplus to pay down the debt? No, they are talking about offering tax cuts, which will create an even bigger deficit.

That is what happened when they lowered the GST from 7% to 5% and we saw our revenues drop by $8 billion a year. In 2008, even before the recession, the Conservatives had started running a deficit as a result of this measure and the additional corporate tax cuts.

The Conservatives brag about being good managers, but at the end of the day, they are the ones who put us in a deficit situation. Aside from the period between 2006 and 2008, when they came to power and eliminated the federal government's fiscal space, the last time a Conservative government introduced a balanced budget was in 1912—yet they brag about being good managers.

My colleague from Kings—Hants mentioned the provinces and income inequality, but he ignored the fact that transfers to the provinces were cut by 40%. These cuts obviously made things tough for the provinces. He blames the provinces for the increase in income inequality. He also blames Liberal, Conservative and New Democrat governments for a situation they inherited from the federal Liberal government at the time.

The NDP has a better record on balancing budgets than provincial and federal Conservative governments. The governments of Tommy Douglas, Gary Doer and Roy Romanow introduced balanced budgets for over 10 to 15 years, and meanwhile, the federal government was running deficits under the Liberals and Conservatives.

The NDP is, without a doubt, the party that is most likely to properly manage public finances for the public good and is considered as the party that properly manages taxpayers' money. After assessing the situation, the Department of Finance agrees with us.

The United States has income splitting, and I am certain a Conservative member will point this out. In fact, it is not so much that the U.S. has adopted income splitting, but rather that it has adopted a basic unit of taxation. Unlike Canada, where the individual is the basic unit of taxation, the family is the basic unit of taxation in the U.S. There are historical reasons for that approach.

In the mid-20th century, the United States needed to unify its taxation policies. A number of states considered the individual as the basic unit of taxation, while others considered it to be the family. Eventually, they had to simplify matters. A broad debate on taxation was held, and the outcome was a more or less simplified taxation system.

The process involved defining the basic unit of taxation. The U.S. decided that it should be the family. A number of commissions, including the Carter commission, and several committees studied the issue. The Carter commission was the last great commission to undertake a reform of the taxation system. After two years criss-crossing the country, the commission produced a report, which was greatly watered down by the subsequent Liberal government, this being the 1970s after all, but widely hailed by academics and tax experts. The report recommended that the individual be considered as the basic unit of taxation. This provision allows for a simpler tax system that everyone can agree on.

Now the government wants to allow people to use the family as the basic unit of taxation in some cases and the individual in others. This will further complicate the taxation system, and if only for that reason, this is not a desirable policy option.

The government boasts of having already introduced pension income splitting. The tax cost of this initiative is already higher that originally forecast. At the end of the day, as a result of pension income splitting, Canada will lose $1.2 billion in tax revenues while the provinces overall stand to lose about $500 million.

This example gives us a pretty good idea of what income inequality would look like. Let us consider for a moment how this measure affects seniors. If we divide pensioners into two groups, one-half having the lowest incomes and the other half having the highest, we see that the half with the lowest incomes benefited from only 2% of the tax cuts as a result of pension income splitting. That means that the half with the highest incomes benefited from 98% of the tax cuts. What is more, the 10% of pensioners with the highest incomes benefited from 31% of the tax cuts.

The example of pension income splitting illustrates the scope of the problem and how the income gap will widen, not only as a result of this measure, but also as a result of the Conservatives’ proposed initiative.

Now then, will the government move forward with this initiative? It will be included in the next election platform. However, if we are to believe the current Minister of Finance and certain MPs, it is clear the government appears intent on moving forward. Moreover, instead of addressing additional income inequality issues, it is starting to rebrand to economists, journalists, the media and society as a whole the totally unfair policy of income splitting, which has now acquired a bad reputation. It will rebrand it as an exceedingly fair policy.

I am truly flabbergasted to see how blind this government is to such clear facts and figures. I am far less hopeful than my colleague from Kings—Hants, who spoke just before me, as to the will of the parties in the House to find some common ground for dealing with income inequality. It is clear that the Conservatives are turning a blind eye to this reality. For them, it is a matter of facilitating access to education and training. We are not opposed to that, but it will not be a cure-all. Initiatives have been taken in the past, and continue to be taken by this Conservative government and by various provincial governments, that increase the effects of income inequality. Some of the proposed initiatives, such as income splitting, will increase the problems, even exponentially.

When I talk about economists, it is quite interesting to see where these negative comments about income splitting are coming from. It is rare to see the Canadian Centre for Policy Alternatives and the C.D. Howe Institute agree, not only on the fact that this policy is harmful but also on the fact that it would have some financial ramifications.

I have a question for my colleagues who always boast of their sound management. Do they really want to take action that will once again put the federal government in a deficit situation, for the sole reason of bringing in a tax break that will benefit only 15% of Canadian households? Would they not rather show good governance and start tackling urgent issues?

We do not have any problem whatsoever with tax cuts for middle-class families, for families that need a break. However, such measures must be reconciled with measures to reduce the debt, which, may I remind you, has ballooned by 60% since the Conservative government was elected in 2006. Steps will also have to be taken after that to rebuild public services that have been devastated in recent years, especially since 2006.

Consider R and D, the environment and immigration, to name a few areas. All of these services to Canadians have been drastically cut, jeopardizing in the process services for which Canadians pay taxes and to which ultimately they are entitled. I suspect that one of strategies of the Conservative government, and of Conservatives in general, is to ensure a mismatch between the taxes paid to different levels of government and the services that Canadians receive for their tax dollars.

I know that a debate on immigration took place in the House until very late last night. I was astounded by a statistic I learned of during the 2013 holidays—if I am not mistaken— regarding a call centre in Montreal that was set up to respond to Canadians requiring a visa or experiencing immigration problems. The number of employees at the call centre was so drastically cut that 91% of telephone calls in December 2013 were lost in the system and never got through to an agent. In other words, only 9% of calls were answered by an agent.

How about we talk about the cuts to science made by the Conservative government? I know what the ramifications of these cuts are because there are a lot of scientists in my riding. Some scientists work at the Maurice-Lamontagne Institute. Others work at the Institut des sciences de la mer, ISMER, at UQAR. Still others work in a number of private sector companies that come under the umbrella of the Technopole maritime du Québec. A hub of expertise has sprung up in Rimouski and the lower Saint Lawrence valley in marine biotechnologies and maritime technologies in general. The cuts made by the government to the Maurice-Lamontagne Institute have resulted in an exodus of scientists from the region. This has hurt not only the region's economy, but also Canada’s reputation in the sciences.

Additionally, there were a number of measures imposed as part of the overhaul of the employment insurance system that are having a major impact on regions where the economy still relies heavily on seasonal employment. These measures are intended to diversify the economy, but that takes time. In reality, the measures imposed by the Conservative government are making the regions in question poorer. Ironically, the Conservatives’ slogan in 2011, at least in Quebec, was “Our regions in power”. Almost every measure imposed by the Conservative government has ended up hurting the regions and making them poorer.

I know that this issue will be a core plank of our election platform in 2015 in the lead-up to the next election. If what we are seeking is good governance, every measure to do with budget surpluses should be divided between logical tax cuts that benefit a broad cross-section of society rather than simply 15% of people, as income splitting would do, paying down the debt and reinvesting in a number of public services that have suffered considerably as a result of this Conservative government’s cutbacks.

This, therefore, is the principle of good governance that we espouse, and it corresponds to the good governance models of our New Democratic governments in the provinces. I hope that the government will listen to reason and scrap this ill-advised policy of income splitting in favour of adopting fiscal and economic policies that will benefit all Canadians and not just a small segment of the population.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, I would like to thank the hon. member for his speech and for the work he does on the Standing Committee on Finance.

I would like to address the income inequality issue that we studied at the finance committee. We issued a report and we talked about the need for support for general measures like health care, education, and social services that our government has funded at 6% year over year and 3% year over year.

We also talked about targeted measures like the working income tax benefit, which I believe has not been mentioned on the other side of the House. I would like members opposite to comment on the benefit of that program that specifically targets low-income working families and individuals to ensure that they get ahead.

I do want to focus my remarks and ask the member opposite to comment on pension income splitting. If I understood him correctly, he was in fact quite critical of the measure brought in by our government in 2006 to allow pensioners to split their income. In fact, he said this was sort of a foreshadowing of what would happen under income splitting generally. Pension income splitting has been a resounding success. I have certainly heard it across the country. Pensioners come up and say that they have been able to keep much more of their income in their pockets.

I would just ask the member to clarify NDP policy on this. The NDP opposed it at the time, but does the NDP still oppose pension income splitting, and would it reverse that policy if it were given the opportunity?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, I would like to thank the hon. member for Edmonton—Leduc, who is a highly respected member of the Standing Committee on Finance. His work is greatly appreciated by members of all the parties.

His question is relevant, but this is not necessarily about whether we would support it or not. My argument about pension income splitting focused on program logistics. Generally speaking, pensioners do not have as much income. Therefore, this will impact their income differently than it will the income of the general population.

If we look at the results, this program requires far more tax expenditures than initially forecast. There was no calibration at all.

Then, if you take everyone who is retired and divide them into two groups—one group for those with a higher income and the other with a lower income compared to the median—it becomes clear that 98% of the tax breaks will go to the 50% of pensioners who have a higher income.

Those who really need it, the people in the 50% with the lower income, will not benefit very much. It might lower their taxes by less than $20. Those who benefit are the retirees with a higher income.

It seems that calibration was not necessarily a consideration, and that is a very serious wake-up call for a much larger measure that would affect families with children.

[Francine Raynault, NDP, Joliette, QC]

Mr. Speaker, I would like to thank the hon. member for all his hard work at committee. All of his explanations were very clear.

Do we really need income splitting? I do not think so. This measure will cost $3 billion, yet 85% of Canadians will not benefit from it.

What is the NDP proposing to make life more affordable and to ensure that the largest number of people possible will have a better life and better living conditions?

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Speaker, the question is appropriate. I addressed this to some extent in my speech, and I can expand upon it now.

Making life affordable for people is something we are very concerned about. The NDP has come up with a number of measures under the leadership of the member for Sudbury and the member for Québec, who are doing excellent work on this.

These measures are intended to help not only Canadian consumers with respect to credit cards and ATM fees, among other things, but also small and medium-sized enterprises, an important economic driver that is often overlooked in our economic policies.

This measure will cost the Canadian government over $3 billion in lost revenue. It is imperative to know how those surpluses should be allocated. Since 2006, Canada's debt has increased by 60%. Sixty per cent since 2006. We need to start recognizing this situation.

I know that the former finance minister, Mr. Flaherty, cared about this situation. That is probably one of the reasons why he voiced strong reservations about income splitting.

With any future budget surplus, the Canadian government must consider paying down the debt and possibly cutting taxes, which will benefit many Canadians, as well as reinvesting in public services. After the huge cuts, they really need it. They have often been misguided by various departments.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Mr. Speaker, I would first like to say to my colleague that I listened with interest to his speech on income splitting.

I would like to know whether he thinks this measure is generating controversy among the Conservatives. Is he aware of anything like that?