moved that Bill C-2, an act to amend the Income Tax Act, be read the second time and referred to a committee.
Mr. Speaker and hon. members of this esteemed House, I appreciate the opportunity to discuss the merits of the middle-class tax cut the government introduced in December and that this bill, Bill C-2, would enact.
On January 1 of this year, nine million Canadians received a tax break. Our government was elected on a plan to grow the economy, and these changes are an important first step in that plan.
Our government believes that a strong economy starts with a strong middle class. Canada's middle class has gone too long without a raise, and in challenging economic times, we have taken action to help them.
The global economic downturn has presented some new realities for the Canadian economy. This means that our plan to grow the economy is now more important than ever.
As we pursue this plan, we will continue to keep Canada's debt-to-GDP ratio on a downward track. We will be prudent in our expenditures and will return to a balanced budget by the end of our mandate.
The government's job is to help Canadians succeed. We are lucky to have one of the most highly educated and talented workforces in the world. In order to harness the power of our people to build a stronger and more prosperous country, we need to improve direct support to the middle class and those working hard to join it. The legislation before the House today does just that.
This bill would cut the tax rate on income earned between $45,282 and $90,563 in 2016 by 7% and would introduce a new tax rate of 33% on income earned above $200,000.
The middle-class tax cut and accompanying changes will make the tax system fairer. Specifically, the bill proposes to reduce the second personal income tax rate to 20.5% from 22%, introduce a 33% personal income tax rate on individual taxable income in excess of $200,000, return the tax-free savings account annual contribution to $5,500 from $10,000, and reinstate indexation of the tax-free savings account annual contribution limit.
Let me elaborate on the three points. First, the personal income tax rate changes took effect on January 1 of this year. As I mentioned at the outset of this speech, it is expected that about nine million Canadians will benefit from this measure this year.
Second, in conjunction with this tax cut, the government is introducing a new personal income tax rate of 33% that will apply to individual taxable income in excess of $200,000. We are asking the wealthiest 1% of Canadians to pay a little more to help the middle class and those working hard to join it. This means that only Canada's top income earners are expected to pay more tax as a result of the government's proposed changes to personal income tax rates. As with other bracket thresholds, the $200,000 threshold would be indexed to inflation.
Third, the government is returning the tax-free savings account, TFSA, annual contribution limit to $5,500 from $10,000, effective January 1, 2016. Let me reassure all members of the House that this change is not retroactive. The TFSA annual contribution limit for 2015 will remain at $10,000. I should also note that the limit is cumulative and builds over time.
Eliminating the previous government's increase to the TFSA contribution limit is consistent with our objective of creating a tax system that is fair and that helps those who need it most. Keeping the limit at $10,000 would have helped Canada's wealthiest save more while costing the federal treasury hundreds of millions of dollars over the next five years.
We know that only 6.7% of eligible Canadians contributed the maximum in 2013. Doubling it did nothing for the 93.3% of Canadians who could not max out their contributions with the existing limit. Indexation of the TFSA annual contribution limit will be reinstated so that the annual limit maintains its real value over time.
While these three elements are what I expect will be discussed during the parliamentary debate, I would like to highlight some of the other measures that are included in today's legislation.
Today's bill proposes to change the current flat top-rate taxation rules applicable to trusts to use the new rate of 33%.
The bill sets the tax on split income to the new rate of 33%.
The bill amends the charitable donation tax credit to allow higher income donors to claim a 33% tax credit on the portion of donations made from income that is subject to the new 33% marginal tax rate.
The bill increases the special refundable tax and the related refund rate imposed on investment income of private corporations to reflect the proposed new 33% personal income tax rate.
The measures included in this legislation are a priority for this government. However, there are many unique issues that confront Canadians today. That is why reaching out and listening to Canadians is so important. We have a plan to grow the economy, and we need the input of Canadians to learn how to best implement our plan in their cities and communities.
Over the past few weeks, my parliamentary secretary and I have heard from Canadians about what we can do to help the middle class right across the country.
We asked Canadians directly how the government can support them and grow the economy. We met with people from all walks of life: business leaders, farmers, small-business owners, members of our indigenous communities, and community leaders. I also engaged with students by holding a Google hangout and two Facebook live events that attracted a total audience of more than 80,000 Canadians. I am encouraged that young Canadians have found new reasons to become engaged with their government. Our goal is to listen and engage with Canadians on the issues that are important to them, and it has, to date, been a very successful endeavour.
As part of these consultations, I was pleased to have spoken to the member for Milton and the member for Rimouski-Neigette—Témiscouata—Les Basques, my colleagues across the aisle, and I assure the House that their input will be thoughtfully considered.
Although we are both back in Ottawa now, these consultations continue online. Since the opening of the online consultations, we have already reached over 150,000 Canadians and have received over 3,000 submissions, in fact 3,400 submissions as of today, from Canadian individuals and groups, more than twice the submissions, almost three times the submissions, in fact, received last year under the previous government.
It was especially important for me to hear from Canadians about the effect the economic situation is having on them. The stories I have heard have reaffirmed for me the importance of our plan to grow the economy in the short, medium, and long term.
Collaboration is a critical element of our plan to deliver real change in a way that takes into account the priorities and opinions of Canadians. As we implement our plan, we will continue to be open and transparent every step of the way.
This legislation is an important first step to help strengthen the middle class. It puts more money in the pockets of Canadians to save, to invest, and to grow the economy, but it is just a first step. In budget 2016, the government will introduce a new Canada child benefit that will lift hundreds of thousands of Canadian children out of poverty and will help nine in 10 Canadian families with children to be better off. It will replace the universal child care benefit, which is not tied to income, and it will simplify and consolidate existing child benefits while ensuring that help is targeted at those who need it most.
Taken together, the measures we intend to introduce will help grow our economy to the benefit of all Canadians. The government will invest in our economy, in our communities, and in Canadians themselves. We will make transformative investments in infrastructure that will increase the productive capacity of our economy while improving the day-to-day lives of Canadians.
After 10 years of weak growth, we have an ambitious economic agenda to grow the economy and the mandate to implement it. It started in December with this middle-class tax cut and will continue with the introduction of the Canada child benefit and our historic investments in infrastructure over the next decade.
I encourage all members to support this legislation and to help us deliver on our plan to support the middle class and those working hard to join it.