Mr. Speaker, I am happy to rise in the House today to speak to Bill C-26.
I want to first acknowledge that yesterday the Prime Minister held another news conference to celebrate his first year in office. While I am sure Canadians are getting a bit tired of the Prime Minister's endless PR stunts, it is even more frustrating that he is celebrating a record that is hurting Canadians.
Let us talk about that record: widespread job losses, massive tax hikes, more debt, higher deficits, no plan. It is not a rosy picture, which is why I, along with my colleagues on this side of the House, am a little surprised that the Liberal solution to higher taxes is yet another tax hike, but it is okay, they will call this one a CPP expansion, hide the details, and maybe Canadians will let it go.
The government seems to be selling us a line from the hit Dire Straits song Money For Nothing, but there is no money for nothing. This tax hike will cost jobs, wage growth, and GDP growth.
The Canadian Federation of Independent Business projects that by 2020 total employment in Canada will have dropped roughly 110,000 jobs because of the CPP expansion and higher tax. Two-thirds of small businesses surveyed indicated they would cut hours and wages to offset this tax hike. One out of every three are looking at lay-offs to offset it. The hike is also forecast to move wages lower by 0.8%.
Every time the Minister of Finance stands in the House he talks of the low-growth economy. He forgets to mention his own finance department says the CPP tax expansion will shrink the economy.
We stand opposed to all wasteful tax hikes designed to fund the Liberal government's continued expansion, and this CPP tax hike is no exception. In fact, it is worse, and let me tell members why.
There are several problems with the CPP tax hike besides killing jobs and stifling growth. First, quite ironically, it cancels out the Prime Minister's much beloved middle-class tax relief. Remember the 1.5% Canadians were supposed to see back? Shockingly, the government decided that maybe it likes having more money to take limos, have expensive meals, and take pretty pictures in exotic locales, so it designed a tax hike that will take away that tax relief. One thing the government never seems to realize is that government cannot give what they have not already taken from us.
Let us consider Martha and Henry. They are both middle-class wage earners who work hard and pay their taxes. Tired of being slammed with the new Liberal taxes and a slow-growth economy, Martha and Henry diligently save part of their paycheque every month. They cannot take another hit. However, because the government has priorities that are out of touch with Canadians, Martha and Henry can now see up to $2,200 more deducted every year, wiping out the meagre 1.5% saved with the much vaunted middle-class tax cut. Keep in mind that neither Martha nor Henry will see any of this money back for an extra 40 years.
The government will tell us that it is okay, because at least Martha and Henry will have something to show at the end. The problem is that the government assumes Canadians have no idea how to manage their extra money.
Where could the extra money have gone? Let me tell hon. members because it leads directly to the next problem with the CPP tax hike. The CPP as an investment vehicle is weak. According to the Fraser Institute, the average return, long term, on investment for Canada bonds is 3.5%. The return on investment for Martha and Henry's CPP investment on the new expansion is 2.5%. That is right, 2.5%, barely enough to cover inflation. This is not exactly ideal, because the CPP will need to cover far more than just inflation as more Canadians move into retirement over the next several years, or what is more likely is that the government will simply come back, hat in hand in the future, and demand more money from Canadians to cover the shortfall.
Why does CPP have such mediocre returns? Among a host of reasons, primary ones are high fees for asset management. Andrew Coyne of the National Post comments on a gathering momentum of more staff, higher pay, and rising operational expenses, and he concludes, all for no appreciable payoff for Canadians.
More worrying is that because finance ministers looking for cash have a strong tendency to lean on pension funds as a source of investment for infrastructure projects, the CPP would earn even lower returns. This tendency was confirmed by the Minister of Finance's own economic advisory council, which stated repeatedly that pension funds should be looked at as a source of untapped potential for infrastructure by government.
This approach undermines the independence necessary for a fund to be truly profitable and provide meaningful returns. Without that independence and with constant interference from the Minister of Finance to fund whatever project his government sees fit on a given day, the ability for pension funds to garner higher returns is undermined; hence 2.5%
It is fairly clear the government wants more cash and this CPP tax hike is the way it is going to get it.
I know what members are thinking, Martha makes a decent wage, could she not just move a little more of her income into a fantastic and well-received investment vehicle such as a TFSA? Sure, she could, but the same Fraser Institute, those pesky policy wonks, studied hard and found for every dollar increase in CPP contribution, private savings are reduced by 90¢, fully 90%. This is not a winning formula and misleads Canadians on the benefits of CPP.
Speaking of misleading, the next problem with this hike is that Canadians are rapidly finding out the finance minister is selling them a bill of goods. The finance minister wants to help the vulnerable and this is a good goal, a worthy goal. This goal will not be accomplished by a CPP hike and here is why.
First, CPP only pays those who pay into it. If I die tomorrow, my wife would not receive my CPP pension. If I invested this money in something smart like those fantastic TFSAs I mentioned earlier, my wife and kids would have a tidy sum to walk away with. However, because CPP has punishing rules for the survivor's pension, my wife would receive 60% of the CPP at best. If she collects CPP on her own, she would receive even less.
There are fewer retired Canadians living in poverty now than at any point in our history. For Canadians on our bell curve, our bell is located above the high average. The thing with bell curves is that they all have a tail on the lower end, but the solution is to help the lower end and it is not to move the rest of bell even lower. Those struggling at the lower end of the tail need help directly. Lowering the rest of the bell to meet the tail does not help anyone.
The shame of the bill and the whole deceit of it is that this added CPP expansion will do nothing to address those seniors living in poverty. It is misleading for the finance minister to tell Canadians that this CPP expansion helps those who need help, because it does not.
It is simple. We could double or triple the CPP payouts, but if people have never paid into it, they get nothing. A huge amount of our seniors who are living in poverty are in that position because they, for whatever reason, did not contribute or contributed little to CPP during their working years.
We want to help those who need it. We want to help the widowed grandmother struggling to get by on a fixed income or the disabled grandfather trying to make ends meet. We want to help Martha and Henry ensure that they are planning for their retirement. We want them to use those TFSAs and RRSPs and invest their savings in the market because the market earns far more than 2.5%. A simple ETF invested in the Standard & Poor's 500 would yield a far greater return and allow Martha and Henry to access their savings at any time.
We want to help those who are struggling at the lower end. This is why the previous government expanded the GIS. It is why the previous government expanded the tax-free savings account to $10,000. It is why we introduced income-splitting for seniors and why we lowered the mandatory withdrawal rate for registered retirement income funds. These are evidence-based policies that benefit every senior today and we are proud of our record to help the most vulnerable.
We do not believe it is fair for the finance minister to mislead Canadians, raise taxes on workers, and leave the most vulnerable behind.
That the amendment be amended by adding after the words “seniors in need” the following: “; and (d) will impede Canadians' ability to save for the future.”