Debates of Jan. 29th, 2016

Income Tax Act

[Adam Vaughan, Liberal, Parliamentary Secretary to the Prime Minister (Intergovernmental Affairs)]

Madam Speaker, I heard reference from a member opposite about the need to tour the member's home province to inspect and understand a deficiency in infrastructure spending.

Is the parliamentary secretary aware that in the previous year the former government promised $1.5 billion in expenditures under the Canada build fund to Quebec, but according to records that have now been tabled with the House, zero dollars were actually signed in agreement?

In other words, the surplus that the Conservatives like to pretend happened within the six month period, is entirely predicated on large promises, in this case, $1.5 billion to the province of Quebec, but zero dollars in agreements of cost shared infrastructure programs, as they complain about unemployment. They spent zero dollars in Quebec last year.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Madam Speaker, I commend my colleague, who has a great deal of expertise with regard to infrastructure and the municipalities.

Unlike the Conservative government, we do not see infrastructure as an expense, but as an investment in our future generations and the environment. I therefore commend my colleague for the work that he has done, and I hope that the Conservatives will learn from what we are going to do about infrastructure.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Madam Speaker, I would like to welcome two of my constituents visiting from Edmonton.

I will be splitting my time with the hon. member for Perth—Wellington.

The bill we are discussing today proposes to amend the Income Tax Act. It would reduce the second lowest personal income tax rate from 22% to 20.5%, and introduce a new personal marginal tax rate at 33% for taxable income in excess of $200,000. Additionally, it would amend the act to reduce the annual contribution for tax-free savings accounts from $10,000 to its previous level with indexation of $5,500.

The question that must be asked is this. Why make these changes? Are they for the good of the country or are they political posturing?

Underlying the proposed legislation are opinions that investment in the middle class is the best way to generate economic growth and development, and that TFSAs disproportionally benefit wealthier Canadians. Quite simply, that is wrong.

These income tax changes would not be revenue neutral, as the member opposite claimed when the change was an election promise. These changes would plunge the country further into deficit spending.

As a father, I have worked hard to teach my children about the importance of living within our means and to be careful with their money. It may be a cliché, but I have told them that money does not grow on trees. By implementing these proposed changes, we would be sending my sons the opposite message. We would saying that being fiscally responsible does not matter.

Tax breaks for the middle class are not in themselves sufficient to stimulate the economy. We cannot spend our way to growth, and we cannot increase tax our to prosperity. What is needed is an economic plan, not politically motivated and hastily conceived legislation. By increasing government debt, these changes would negatively impact all Canadians. The bill lacks a concrete, targeted plan to stimulate economic innovation. In effect, it ignores the pressing need to develop these initiatives.

The Parliamentary Budget Officer is quite clear that these changes are not a revenue neutral election promise, but a drain on the public purse. According to PBO research, the bill's proposed income tax bracket changes would lower government revenues by $8.9 billion over six years. This may not be important to those who believe the budget will balance itself. However, for those of us who live in the real world, numbers matter.

Based on Finance Canada's estimates, the new Liberal tax plan amounts to an average $6.34 a week extra for those individuals who qualify. We know this small tax break is not enough to grow our economy. Nor does throwing money at the middle class stimulate growth and innovation. Perhaps the government should be less worried about the income tax and focus on creating jobs so more people will be paying in.

The Liberal tax plan would raise taxes on higher-income earners, those who traditionally create jobs and grow our overall economy. By increasing taxes on these job creators, we are discouraging success and are punishing those who have done well for themselves.

The lack of transparency surrounding the cost of these changes is cause for serious concern. Canadians have the right to know how the taxation system impacts them and the country. This is not just about the present, but about the future of Canada.

The PBO's financial calculation drew from behavioural considerations of how people at different income levels might respond to the tax changes. It included taking steps toward lowering tax payments. Other reports have pointed to a high likelihood of brain drain for professionals in the upper tax bracket. People may choose to leave Canada for employment elsewhere rather than pay high taxes.

Apparently, the current government could not anticipate that. When facing a tax hike, some people will work to find ways to reduce their taxes. That is simple human nature.

In popular debate, in the media, and in academic research, a brain drain out of Canada is cited as a very real possibility and a logical outcome to these changes. Most doctors, lawyers, and other skilled professionals are found in the upper tax brackets, and their departure could be very dangerous for Canada.

Tax avoidance through reporting less income, using tax planning techniques to reduce the tax burden, working fewer hours, or even not seeking job promotions are very real possibilities.

Progressive income taxes like this reduce the return on education, since high incomes are associated with high levels of education. Such taxes reduce the incentive to build human capital.

The consensus among experts is that taxes on both corporate and personal income are particularly harmful to economic growth, as economic growth ultimately comes from production, innovation, and risk-taking.

Tax-free savings accounts are effective saving tools for all Canadians. They can be used to reduce economic vulnerability and dependence upon government. Limiting their usage will negatively impact Canadians across the socio-economic spectrum. It is not only the rich who open TFSAs but Canadians of all ages and all walks of life. Moreover, limiting the potential for TFSA contributions would result in greater vulnerability and dependence of Canadians. TFSAs are used widely by many Canadians. Thus, these policies affect an extremely wide variety of citizens.

According to the Parliamentary Budget Officer, Canadians have the largest personal debt of any G7 country. I find it strange that any Canadian government would introduce measures that would discourage savings, yet in reducing the tax-free savings account limits, the government has done just that instead of encouraging thriftiness, living within one's means, and saving for a rainy day.

The current government wants to spend its way out of debt. Two and two does not add up to five, and wishing it were so does not make it so.

For many years I was a businessman, owning and operating a number of small businesses. I can assure members that a business with spending that consistently exceeds revenue does not stay open very long.

As custodians of the taxpayers' hard-earned funds, it is our responsibility to act responsibly, not recklessly, with the nation's finances.

These new measures will affect all taxpayers as governments move deeper into deficit and the national debt grows increasingly larger. Someone at some point will be called upon to foot the bill. When our children and grandchildren are struggling to maintain essential services and climb out from under a mountain of government debt, they will be asking why we failed to act in a responsible fashion. What will we tell them? Will we tell them that we truly believed budgets would balance themselves?

For the good of Canada, this bill needs to be defeated.

[Pablo Rodriguez, Liberal, Parliamentary Secretary to the Minister of Infrastructure and Communities]

Madam Speaker, when Mr. Mulroney's Conservative government lost the election in 1993, it left a $42.5-billion deficit. We had to deal with that situation. When Paul Martin's government was defeated, we left the Conservatives a $13.2-billion surplus. Nine years later, the Conservatives are again wreaking havoc, and once again, we are going to have to deal with their deficit.

Will we always have to come behind and clean up your mess?

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Order, please. I hope the member was not referring to me, that you were trying to clean up my mess. Therefore, I would again remind the member to address questions to the Chair.

The hon. member for Edmonton Manning.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Madam Speaker, the members opposite sound as if they are the gods of saving and leaving money for others, while we know their history very well.

They keep referring to the past. They keep referring to what governments have done. They were never able to tell us, not in 100 days, what the complete plan is. What is it they are trying to do?

We would like to hear from them what the plan is, in dollars and cents.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Madam Speaker, I find it fascinating how the Conservatives always speak on behalf of their grandchildren. It is about the debt we are going to leave to our grandchildren, how we have to stand up and fight for our grandchildren.

That was a government that ridiculed the Canada pension plan day after day in the House. Even today they are telling us that the TFSAs are better than the Canada pension plan. They are telling their grandchildren that if they make a lot of money they do not need to worry, but hard-working Canadians without defined pension plans are on their own.

This has been the operating culture, to undermine and attack pension systems in our country while we have an ongoing pension crisis. I do not know what world my colleague lives in, but wherever I go I am meeting people in their fifties who are telling me that they do not have enough money to retire, that the Canada pension plan is not sufficient, and that they do not have the company pension plan that existed before. They are asking how they are going to get by.

The member is hiding behind his grandchildren. When was the last time the Tories ever looked to anything for the future?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Madam Speaker, all members should worry about their grandchildren.

By the way, as proud Conservatives, we do spend based on what we make. We make money, then we can spend money. We do not spend out of the pocket of the future generations. Our grandchildren matter to us.

[Todd Doherty, Conservative, Cariboo—Prince George, BC]

Madam Speaker, again, I have more of a comment.

For our hon. colleagues across the way, I just want to make note of the document we are referring to, which as of about an hour ago was still on the Department of Finance's website. It is one of its documents, “The Fiscal Monitor”, a publication of the Department of Finance, as of November 2015. The Conservative government left Canada with a $1 billion surplus.

The question I have is this. Is it misinformation, is it confusion within the ministry of finance, or did the Minister of Finance just misread his cue cards from the PMO?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Madam Speaker, obviously, I will repeat what my hon. colleague has said: we left a surplus. We operated with a surplus. We had the best economic performance. No one can deny that. In fact, a government that never ever was able to bring facts to the table has no right to say anything or to criticize the position of the past government.

[Karen McCrimmon, Liberal, Kanata—Carleton, ON]

Madam Speaker, we have to correct the record. We have to challenge it. We cannot let erroneous statements stand.

We do not measure deficits or surpluses in parts of a year. We can measure deficit months, if the member wants. Let us do that. I will go back, and I will look over the last nine years and discover how many deficit months there were.

There is $150 billion of debt for our grandchildren.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Madam Speaker, the hon. member wants to go back nine years to look into the facts and figures. There is a figure here on the website telling Canadians and the world that we left them with $1 billion. Can you assure that news to us, and make sure that you admit it?

[The Assistant Deputy Speaker, NDP, Carol Hughes]

Once again I would like to remind the members that they are to address the questions or comments to the Chair. Resuming debate.

[John Nater, Conservative, Perth—Wellington, ON]

Madam Speaker, I am pleased to rise in the House today to speak to Bill C-2, an act to amend the Income Tax Act.

Since this is the first opportunity for me to address the House at some length, I would like to take this opportunity to thank the good people of Perth—Wellington for bestowing on me the honour of serving this House as their member of Parliament. In all I do, I pledge to the good people nothing but my hard work on their behalf.

As all members know, none of us can do this job without the love and support of our family. I am certainly no exception. I could not have gone through this 11-week campaign without the love and support of my wife Justine, who has been ever patient; my darling daughter Ainsley, who was a lot younger when we started the campaign and is growing like a weed; our extended family, my parents Bill and Darlene and my in-laws, John and Laurie; and our countless campaign team members, including people like Keith and Matt, Tim and Tim, Sue, Irene, Cynthia, Lee, and Ross.

The members of that team have all been with me throughout the campaign, working from sun-up to sundown on my behalf and on behalf of the good people of Canada to advance their vision for a more perfect country. They campaigned through all weather conditions, from the heat of the summer to snow our last week in the campaign. They were there with me and with us throughout the campaign.

The great riding of Perth—Wellington comprises a number of municipal organizations. We have seven lower-tier municipalities, two single-tier municipalities, two county governments, and dozens of small towns and villages. During the campaign, we criss-crossed it all. By election day, we had knocked on over 30,000 doors from Harriston to Harmony, Mount Forest to Milverton, from Stratford to Staffa to St. Marys, and all points between.

We heard one consistent message at the doors: families were concerned about the economy and they were looking to the government to extend a helping hand. At every doorstep, in every community hall, in every church basement, and on every main street, voters were not hesitant in expressing their views. They appreciated programs like pension splitting for seniors, income splitting for families, the universal child care benefit, and the first-time homebuyers' tax credit. Each of these initiatives provided targeted tax relief to Canadians who actually needed it.

Now we have a new government, and I think it is important to highlight some of the contrasts between the current government across the way and our previous Conservative government.

When our former Conservative government came to office in 2006, we also introduced a Bill C-2. That bill was the Federal Accountability Act. It strengthened conflict of interest rules, expanded access to information to crown corporations, increased transparency in lobbying activities, and overhauled political financing rules to ban not only corporate donations but union donations as well.

Now, let us fast-forward a decade and here we are with another Bill C-2. However, let us make no mistake. This bill is nothing but smoke and mirrors in an effort to implement a misguided and misleading Liberal campaign promise. Under the provisions of this Bill C-2, the most benefits would go to those people making a significant amount of money. Those making over $100,000 a year would be quite happy with the measures that would be brought forward in Bill C-2. However, for those families who are struggling, for those families in Perth—Wellington who are trying to get by on $40,000 or $45,000 a year, this bill would do absolutely nothing.

I said, when I was first elected to this place, that I would try to work collaboratively and co-operatively with all members of this House, but I simply cannot support a measure that is not in the best interests of my constituents. Let us look at my riding of Perth—Wellington and the people who have given me the honour of representing them. Under the provisions of this Liberal bill, as many as 84,000 of my constituents would see no benefit from the bill. Nearly 80% of the residents of my riding would have no tangible benefit from Bill C-2. That is why I am voting against it and why I think all members on this side of the House will be voting against it. We understand that we need to make bills and policy in the best interests of our constituents who have sent us here to speak on their behalf.

My riding is overwhelmingly made up of middle-class Canadians. They are people like Steve and Bettie from Listowel who have three children and are trying to save for their children's education and pay their bills. This bill would do nothing for them, but it would give people making $200,000 a significant tax break. This is wrong.

What is more, Canadians were told during the election campaign that these measures would be revenue neutral. We have found out that this simply is not the case. The parliamentary budget officer said that these Liberal measures would actually add $1.7 billion to the structural deficit that Canada's new Minister of Finance is quickly building.

Where will this $1.7 billion come from? Will the Liberals cut the tax credit for first-time homebuyers? Will they cut the tax credits for families who put their kids in sports and artistic activities? Will they cut tax credits for students or apprentices? We simply do not know, because they have not told us.

It is not just income taxes. Bill C-2 would reduce the contribution limit for tax-free savings accounts for more hard-working Canadian families and seniors. TFSAs have quickly become one of the most effective and popular savings tools. They allow families to save more for a rainy day, whether it is a down payment on a new home, money to make much-needed renovations to their existing home, or to plan for their retirement.

Do not just take my word on it. Experts in the business community recognize the value of a higher contribution limit for the TFSA. In fact, one chief actuary from a well-respected HR firm said, “I think it’s really quite a positive move for retirement security in general...”. Who said that? It was the chief actuary from the Toronto based HR firm Morneau Shepell. I would encourage our finance minister to perhaps talk to his former colleagues about the benefits of the TFSA and the increase in contribution limits for all families.

During this past election, I spoke often about TFSAs and often got the most positive response from young people, those who recognized this was an effective tool for them to save for their future. It is ironic that the Liberal government, which claims to represent the millennial generation, would rather give millennials a selfie than an effective and worthwhile savings tool.

In December, I received an email from a constituent, Tyler, from Mount Forest. He told me the reduction in the TFSA limit would personally affect his ability to save for the future. This is simply not right.

Bill C-2 does nothing to provide meaningful tax relief to the Canadians who actually need it. It leaves way too many Canadians out in the cold. That is why I am proud to vote against the bill and in favour of my constituents in Perth—Wellington who will not benefit from it.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Madam Speaker, the hon. member across the aisle mentioned income splitting for families as a measure that helps Canadians who need it the most. However, in March of last year, the Parliamentary Budget Office declared that income splitting for families would only benefit 15% of Canadians, those who needed it the least.

He also mentioned the TFSA and that he had millennials tell him how the reduction in contributions would affect them. I do not know many millennials who contribute $10,000 a year to their TFSAs. In fact, I do not know of any.

How many of his constituents would have been helped by income splitting for families when the Parliamentary Budget Officer stated clearly that it would only benefit 15% of the richest Canadians?

[John Nater, Conservative, Perth—Wellington, ON]

Madam Speaker, as I said in my speech, my team and I knocked on over 30,000 doors and income splitting for families was the most common issue raised at the doorstep. They saw it supporting their families. They saw it as a worthwhile mechanism to put more money into their pockets and the pockets of their families.

It allows families to make decisions on how best to raise their kids and how best to provide for their families, whether one parent stays at home, whether a father or mother, or whether one parent goes to work on a part-time basis. It allows them to decide how they will raise their families. It gives them the option, rather than the government telling them the option.

In terms of the TFSA, we need to remember as well that this contribution room does not disappear. Millennials recognize that they are 40 years away from retirement and that the room in the TFSA will never disappear. It gives the option for them to contribute years down the road, to withdraw and re-contribute again.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Madam Speaker, I was glad to hear the member talk about the less advantaged folks in Canadian society who would not get anything from the bill. I am glad to see he will join me in recognizing that Liberal MPs are basically giving themselves the maximum tax benefit.

One of the duties of the opposition is to also offer proposals. Therefore, will he join us in lowering the first income tax bracket from 15% to 14%?

[John Nater, Conservative, Perth—Wellington, ON]

Madam Speaker, I am a Conservative. I believe in lowering taxes. Therefore, it is worthwhile to look at all opportunities to lower taxes for hard-working Canadians and those who actually need it, lower income Canadians, not the wealthy, as the Liberals across the way would do.

[The Assistant Deputy Speaker, NDP, Carol Hughes]

The member will have two minutes and 10 seconds remaining in questions and comments at the next sitting of the House.

It being 2:30 p.m., this House stands adjourned until Monday at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2:30 p.m.)