Mr. Speaker, I would like to congratulate my seatmate on an excellent analysis of why Bill C-2 is so flawed and why the previous government's economic record was so good. The member has a lot of material to work with.
I am sure that members, at least on this side of the House, will be familiar with the last two “Fiscal Monitor” releases, which showed that the Conservative government left the Liberals with a surplus. At the time the Liberals took over, the Government of Canada was running a surplus. We know there will be a deficit and that this deficit will be a direct result of the choices the Liberal Party has made, and not because of anything the previous government did, because we left the books in such great shape.
The tail end of my colleague's speech centred on the tax-free savings account, and I would like to speak to that as well.
Canada used to have a lifetime capital gains exemption. I believe at the time it was phased-out by a previous government, it was a $500,000 in lifetime capital gains. It meant that any Canadian could buy and sell shares, equities, or investment real estate properties, and when they sold, a good chunk of it would be tax free, and there were a lot of reasons for that.
There is a huge economic incentive to protect capital gains in that way, and the first aspect I would like to touch on is the idea that inflation is a tax.
When one has a capital gain, a good chunk of that notional gain is due to inflation. In other words, if I buy $100 worth of equities today and 20 years from now they have gone up 20%, when I sell them, I have to pay taxes on that gain even though a good chunk of that has been the normal inflation that the Bank of Canada actively seeks with its mandate to achieve a 2% inflation target. Therefore, the $120 that I sold the equities for is not really $120, because a good chunk of the value of it has been eaten away by inflation, but I still pay the taxes as if I had the benefit of the entire 20%.
What the tax-free savings account does, of course, is protect all of the growth, both inflation and real growth, from the tax man. Therefore, if I have equities in a tax-free savings account and it does go up by 20% over a period of time, then, yes, a good chunk of that is inflation, fake growth and not real, a kind of a tax and devaluation of something that I own, but it is protected at the very least from paying taxes.
Ordinary Canadians cannot protect themselves from inflation. It is a tool of government, a tool of the Bank of Canada, and it is done for many different reasons.
There is some debate as to the benefits of having an inflation target, but nonetheless ordinary Canadians can do nothing about it. They can try to protect themselves in terms of where they put their money, they can try to find investments that offer some kind of predictable return, but they cannot control what the folks at the Bank of Canada do, and it in turn certainly cannot control the mandate it is given by the government. However, the tax-free savings account, at the very least, offered a little bit of a shelter against the negative impacts of inflation when it comes to paying taxes, as one would not have to pay tax on that fake growth.
Mr. Speaker, I see we are approaching statements by members.