Alex Shepherd

[Year 2000, February 10th, 1999]

Mr. Speaker, my question is for the President of the Treasury Board.

There are fewer than 215 working days until the year 2000. I know the minister has given us his assurance in the House regarding the government's preparedness for the Y2K on the operability of the government's computer systems, but what concrete third party proof can he give the House that the government's payment systems will be fully operable when the clock strikes January 1, 2000?

[Finance, February 1st, 1999]

Madam Speaker, I will be sharing my time with the member for Mississauga South.

Throughout this debate there has been the odd mention from time to time of the issue of bracket creep. This issue is close to my heart and is something I would like to use my time to discuss. I do not think many people really understand this issue. This is a cancer which exists within our taxation system. It is as deadly as a cancer because it has crept through our taxation system in a slow and insidious way. It was ironic to hear the Conservative member talk about going back to our old ways because we have to go far back to understand how this insidious cancer became part of our taxation system.

Back in 1984 the then Conservative government stated that it would not allow indexation of tax credits and tax exemptions to occur unless inflation exceeded 3%. Back in 1984 the rate of inflation was 10%, so obviously people were getting a degree of relief, that is that portion which exceeded 3% at that time. There was very little debate about the issue of bracket creep.

However, today we note that it is the stated policy of the Bank of Canada to keep our inflation rate within a narrow band between one and two percentage points. Needless to say because inflation is less than 3%, there is no indexation.

What does this all mean to the average taxpayer? Let us say that someone earned about $2,000 a month in 1992 and that person paid $800 in rent. By 1998, assuming they had kept up with inflation and indeed a lot of people have not been able to do even that, their income would have risen to $2,360 and their rent would have been $944. The reality is of course that that person is no better off. The dollars they bring into their household buy less goods.

Revenue Canada taxes this incremental increase as if it were real income. In this case the tax may be as much as 50% or $180 per month for something that quite frankly has never happened. In real terms their income did not rise and the dollars will not buy even the same amount of goods because we have implemented a tax on them.

To give another example which is a practical one, a family with two dependants from 1992 to 1997 saw their income rise by $900, but their income taxes actually went up $1,400. This is the double compound effect which is known as bracket creep. These are not wealthy people. They are not the idle rich. They are in fact middle to low income earners. We should be ashamed of what we are doing to them.

The impact on the truly high income earner is almost negligible. As one's income gets very high, personal exemptions are less and less of concern because they represent such a small quantum of deduction.

I have done a number of graphs on this. They show that there is about $840 million worth of revenue we bring in to our coffers from this insidious tax called the bracket creep.

The other aspect of bracket creep is that it creates a burden for people. Indeed we can look at marginal rates of tax. I will give a quick explanation of what a marginal tax rate is. It is that tax on an extra dollar of income, not on the dollars that one has already paid or may have been eligible for, but the extra dollar that one pays tax on.

With respect to bracket creep, over the years we have slowly amplified this marginal tax bracket on low income earners who go from basically paying no tax—people who earn under $8,000 a year are not taxed—to paying some tax. Suddenly, not only do we get the normal taxation coming into effect but we also have the problem of bracket creep. As a consequence income earners earning approximately $20,000 suddenly find themselves earning an extra dollar which costs them 50 cents on the dollar.

Imagine the impact this has on many low income families. The reality is that it is very difficult for them to get out of their so-called poverty trap. I do not have to remind the House that Statistics Canada regards the low income cutoff of $20,000 to be poverty.

I had a phone call from a constituent the other day. He told me how he had become disabled and earned only $12,000 a year. Miraculously he was able to get a part time job and double his income to $24,000. When he looked at his take home pay, he quickly came to the realization that he had hardly progressed at all. I told him that he suffered from bracket creep but I had not been able to come up with a cure.

The people are not versed on the virtues of fundamental economics but they know something is terribly wrong. From low income seniors to the working poor we are fleecing them to the tune of $840 million a year, $840 million of tax money on income that never happened. It is a tax illusion.

I remind this House that a voluntary tax compliance system is operable only when people believe the system is fair.

Some have suggested a piecemeal approach to this such as giving increased child tax credits and other benefits directed at this group. This is just what it entails, a piecemeal approach, a band-aid to cover a cut when the wound is still infected. Put them back on the treadmill for a few more years and this insidious aspect of bracket creep will catch up to them again. This may be the expedient solution but it is certainly not the right solution.

Last month we read of the survey on Canada as reported by the OECD. It had some alarming conclusions about the Canadian economy. It stated that our standard of living would likely decline so much so that by 2015 Canada's standard of living would be lower than the average of all OECD countries.

There are many reasons for this but I would like to read one of them, which is that indexation has pushed 1.4 million low income individuals on to the tax rolls over the 10 year period ending in 1998. Over 1.9 million individuals have been pushed from the lowest marginal tax bracket to the middle bracket while 600,000 were pushed from the middle to the higher income brackets.

We live in a remarkable time. People's income is not increasing. Indeed it is declining. Taxes are going up. Savings are being reduced and people are turning more and more to consumer credit just to stay afloat.

Personal credit is reaching alarming levels made only possible by lower interest rates. One hundred and sixteen per cent of disposable income now goes toward personal debt. This is unhealthy. A country that cannot save and maintain its level of disposable income is a country that is not progressing but on the decline.

Some have suggested other methods to reduce taxes, for instance the 3% surtax. This will affect people with incomes in excess of $50,000. One of my dreams for our budgetary process is to adequately address the issue of bracket creep.

I hope in the short period of time I have had I have been able to enlighten if not all at least some of our members of parliament and some of the people watching us of what is meant by bracket creep and how it affects the average income earner.

I hope that one of the things we will be able to address in this budget is some move to eliminating the whole concept of bracket creep.

[Women's Hockey, February 1st, 1999]

Mr. Speaker, no other sport defines our nation as does hockey and no other sport is more exemplary of our culture and our pride in our country. That is why I was especially proud that my own Durham federal Liberal riding association was able to sponsor the Olympic women's Team Canada versus Team Finland hockey game in Oshawa on January 20 last month.

I want to thank the Minister of Canadian Heritage for being part of the ceremonies. It was the first time Team Canada has played in the Metro Toronto area. The minister's commitment to fostering and advancing our unique culture in the mainstream of public life was recognized by all.

With standing room only, 4,000 Durhamites in a sea of Canadian flags was an inspiration for us all. A great display of skill and perseverance ended in a six-all tie that was a real fan pleaser.

I extend thanks to the CHA, the staff of the Oshawa Civic Auditorium, the Minister of Canadian Heritage, the Clairington women's hockey association, the Clairington girls' hockey association, as well as all the other women's and girls' hockey associations that made this event a great success.

[Finance, February 1st, 1999]

Mr. Speaker, I listened intently to the leader of the New Democratic Party. I am reminded of listening to Tommy Douglas in the 1960s and 1970s. The speeches do not seem very different to me.

The issue I hear coming across loud and strong is that we should spend more money. Canada is the second highest spender on health care in the western world. We have to recognize that we are spending exceedingly great amounts of money on health care.

I do not deny that the member's argument contains a lot of concern about the delivery of the system. However I wish the member would have taken more time to say how we could deliver health care more effectively to the citizens of Canada within the parameters of our current spending envelope rather than simply writing more cheques.

My constituents are telling me that they do not want governments to spend more money in spite of the consultative process they claim to have gone through. The people of Durham are saying that they do not want governments to spend more money. In fact they want governments to have accountability for the money they are spending. They want more service for the money being spent. The answer is not simply to spend more money.

The member went on to talk about labour productivity. I am very concerned about the issue because labour is hiding behind a deflated and imaginary value of the Canadian dollar. The day the Canadian dollar starts trading anywhere close to 85 cents there will be massive unemployment in the country. The the association between labour productivity and the unemployment insurance system is inescapable.

Does the member have any commitment at all to balanced budgets in the future?

[Petitions, December 2nd, 1998]

Mr. Speaker, it is my pleasure to present a petition signed by 117 of my constituents. They request that a national referendum be held at the time of the next election to ask voters whether or not they are in favour of government funding for medically unnecessary abortions.

[Year 2000, November 2nd, 1998]

Mr. Speaker, my question is for the Secretary of State for International Financial Institutions.

The Bank of Canada is saying it plans to print more money to deal with the possibility of excessive withdrawals from our banks brought on by the public's concern over the year 2000 bug.

Are our banks themselves fully prepared for the year 2000?

[Division No. 247, October 27th, 1998]

Mr. Speaker, it gives me great pleasure to enter this debate on Bill C-43, the Canada customs and revenue agency. This is all about getting government right. We cannot continue to live with significant inefficiencies within our administrative structure. This is a continuation of our government's desire to reinvent government and get government onto a course of efficiencies.

When I talk about efficiencies, members will be interested to know that in the last budgetary estimates Revenue Canada's administration cost to run the department was $2.2 billion. It collected a sum total of about $153 billion. That means a ratio of 1.43%, that is to say, it costs us about 1.5% for every $1 that is being collected by Revenue Canada which is good in itself.

Some people note that Revenue Canada is probably one of the most efficient arms of government today. In my earlier life I was involved with Revenue Canada on a more direct basis in representing my clients. Generally speaking the people at Revenue Canada carry out their jobs in a professional and diligent way with fairness and equity. Some people watching today might think that Revenue Canada is just a little bit too efficient in how much taxes it collects. However, the reality is that it undertakes its functions quite effectively.

In Canada today we have developed a multiplicity of taxes and tax regimes. It is small business week. Maybe we should be paying attention to some of the concerns of small and medium size businesses in this country. One of them is the pure complexity of complying with our taxation system.

Both the federal and provincial governments collect excise taxes, transportation taxes, tourist taxes and corporate taxes. Both the federal and provincial governments have their own little tax regimes collecting corporate taxes from small and medium size incorporated businesses. We also collect the employment insurance and the Canada pension plan. At the same time, the provinces are also involved in making separate collections for workers compensation.

The most insidious is the incidence of duplicity of sales taxes, the GST and provincial sales taxes. This duplication is very expensive for our citizens and small businesses. The problem with the provincial sales tax is that it also cascades into the actual exports in the selling prices of commodities. As Canada is an exporting country it causes great inefficiencies as well. It makes us less competitive as a nation.

It is for some of these reasons that the government has put forward the concept of this agency. We talk a lot in this House about the underground economy. Generally speaking we assume that people are simply cheating, but the reality is that a good number of people find it very difficult to comply with the level of complexity of the forms and requirements for different types of taxes.

Quite frankly, people cannot afford the compliance. I can remember a small business operator saying that he needed to spend one day a week just to comply with the taxation system. It is very important that we develop an agency that will be efficient and smoothly run to try to reduce this complexity and make the whole concept of tax collection more efficient. I have been surprised to find out that Revenue Canada for instance does not do e-commerce. We can pay our bills over the Internet, to Bell Canada and even to our local municipal tax authorities, but we cannot do it with Revenue Canada. I suggest that one of the reasons is it needs a certain inertia. It needs to spend more time developing electronic commerce to make this a more efficient agency. This is done for corporate structures but not on an individual basis. We have to catch up with the times. When I hear the Bloc, the NDP and others saying leave it the way it is, these people are just standing in the path of progress.

I would like to get back to an issue which is dear to my heart, the harmonization of sales taxes. We have tried politically to deal with this issue in the maritime provinces and some of those provinces have signed on to harmonized sales tax.

The member for Regina—Qu'Appelle was actually challenging us as to what province would ever sign on to this. I am surprised by that comment. The reality is we are leaders, that we are leading in this area of efficiency. We should be complimenting the government on its leadership role rather than saying if nobody else is ponying up to the cause, it must be a bad thing.

In spite of what the member for Regina—Qu'Appelle said, I can remember when medicare was first brought on and I think only one or two provinces initially signed on to that agenda. Of course all the provinces today are part of the medicare system. So it is not a reason to stand in the way of an agency that will be competitive within our economy.

The lack of harmonization of the sales taxes is probably one of the single largest inefficiencies in tax collection. Canada has to be the only country in the western world that actually has one federal sales tax and nine provincial sales taxes. It does not take much thought process to realize how inefficient that really is.

If the agency were in place pure rationality between provinces and the federal government would try to find some way to solve that problem. We as politicians quite frankly have not been able to do that. I think that is possibly a failure of this place compared to what an agency could possibly do. That does not mean those decisions are outside the political agenda. They are not.

In answer to a question the other day the minister of revenue suggested Nova Scotia had already signed on to a service contract. Three ministers along with our minister had signed on. So we can see how this is starting to evolve. Once this agency is in place we are going to find many more ways to make the whole concept of tax collection more efficient and more relevant to the 21st century.

Ontario, for instance, my province, insists on collecting its own provincial sales tax regardless of the fact that the provincial sales tax becomes a cost of production to our manufacturers. In my area General Motors has to actually pay provincial sales tax on input components. When it buys stationery or other things for its operation, it pays provincial sales tax. Eighty per cent of its production goes across the border into the United States. It goes across the border embedded with provincial sales tax as opposed to the GST, which has a methodology of removing that tax when it finally goes outside of our borders.

As a consequence Ontario's provincial sales tax is a very inefficient, outmoded tax that is not serving the people of Ontario well, because 40% of our exports are coming from the province of Ontario.

We have to find better ways of doing business and I believe this is part of that solution, to create this agency which will be more efficient, will allow a broader base concentration of critical mass, will allow for possibly more spending in the area of technological efficiency and will allow people to interface with the government more efficiently and more effectively.

In the act there are provisions where the provinces will be able to be consulted in the area of appointing directorships and so forth.

We can certainly see the window of opportunity to make a more efficient agency, allowing the provincial and federal authorities to work together to make this an efficient tax regime, an efficient, modern tax collection system.

I am supportive of this legislation and I hope the rest of the House will support it as well.

[Supply, October 26th, 1998]

Madam Speaker, you cannot suck and blow at the same time.

The reality is that within the province of Ontario we have the same kinds of things. There are certain areas in the province where there is high unemployment and there are net beneficiaries of the unemployment system. In other areas, for instance in my own riding, General Motors says that it puts in a buck and gets 60 cents back.

The point of the matter is that as a country we are bigger than the province of Ontario. The Progressive Conservative premier in the province of Ontario is clearly saying that we should amend the unemployment insurance system so we do not share that money with Atlantic Canada. So the coffee is cooking. Realize that for what he is saying. The Progressive Conservative leader in the province of Ontario is saying to hell with you guys. It is not something we believe in. We believe this is a bigger country than the province of Ontario but that is not the viewpoint of the premier of Ontario.

[Supply, October 26th, 1998]

Madam Speaker, the hon. member for Malpeque gave us a great cross-section of the small weeks problem and how we are trying to resolve it.

During an earlier interchange the member for Saint John said that some people in the House need a history lesson with regard to their attitudes toward Atlantic Canada. She was responding to a question of mine. I was basically asking why the premier of Ontario was questioning whether that province should continue utilizing the employment insurance system to the extent that it does. He has often pointed out that Ontario, cash flow wise, is a net loser through the employment insurance system. It is certainly not the feeling of the government or Liberal members, but it certainly was seemingly odd that the leader of the Progressive Conservative Party here was taking major exception to the premier of Ontario whose very view that is.

Most of us understand the importance of underpinning our economy wherever it is, whether it is in Oshawa, Durham, the maritimes, Sydney and so forth. These are very important aspects. I was interested, because I thought the history lesson should be directed at Mike Harris.

The motion before us today says “in order to make adjustment projects a permanent feature of the Employment Insurance Act”. These pilot projects which are under way are to address the issue of small weeks. Most of us can see it is some kind of idiosyncrasy of the legislation that was written. This happens in many things. I worked on another issue, the Canada-U.S. tax treaty. It is amazing how many times things are written down with good intentions and when they actually get out in the public domain, they seem to have some unintended results.

This appears to be one of those very areas where it is possible that we discourage people from seeking employment because they have less than full weeks of employment. The result is that it reduces the average. Therefore in small ways they are better off not working at all than working.

I am sure the intention of the EI reforms was to make it a major incentive to gain that extra hour of employment. That is what the average Canadian would like to do. Rather than sit at home, he or she would like to be employed even if it is only part time, which is a positive thing.

The government is trying to deal with this issue. However the order today simply talks about extending it, enshrining it. I am concerned about that because here in Ottawa we do not do enough program evaluation and accountability. These two projects, while they are coming to fruition and cycling out of the system, if you will, up until November 15, it is clear we have not had the time to sit down and actually evaluate what impacts those two solutions to the problem are having.

A theory among columnists and maybe even social engineers is that people are totally conscious about how government programs affect them economically and therefore they will always react in their best economic interests. There is some concern that in fact that does not actually happen and it is really the intention of the government to ensure that those people continue to have the incentive to work.

As well intentioned as the motion by the member for Madawaska—Restigouche may be, I believe it is premature. We have not had the time to evaluate that program. We have to go through that process before we consider any concept of extending it indefinitely.

Part of the EI reforms tried to encourage the productivity of the Canadian labour force. This is something that is hard for people to measure. Canada's productivity vis-à-vis many of our trading partners is significantly lower. Some blame the unemployment insurance system; some blame other processes and some of our cultural differences.

The reality is that Canada's productivity has been increasing since this act has been changed. It is on that issue which I think it is very important that we get it right and in such a way that we do the evaluation and our homework and we ensure that we continue to be on the right course.

Obviously the minister has realized there is a problem. It is an unintended one. Obviously we do not want people to sit at home rather than work. Clearly there are some objectives we are trying to seek.

Some people look at the value of our dollar. Sometimes the value of our dollar is underpinned somewhat with the labour productivity factor. If our labour productivity factor does not improve, the Canadian dollar will continue to go down. This is the way international currency equates productivity. If we are less productive, it means that the value of our dollar is less vis-à-vis other currencies where the labour factors are more productive.

It is to that issue I think these reforms are attempting to address themselves. It is why we have to make sure we get them right.

Within that legislation were a number of ingenious concepts. One was the new hires program which the minister mentioned this morning in his lead off debate. My riding of Durham has a tremendous impact from the automotive sector and others. That program has been a great incentive for young people to get work experience because the first year of the employment insurance premiums are negated. We talk about the great surplus and so forth but right there are some people who are not paying into the premium system and it is a major bonus. By the way, it is small business week and we should be talking about that too. It is a great incentive for our small business community but it is also a great incentive for those young people to get some work experience.

We also do the same thing in our summer youth employment program. That is something which is taken advantage of by the young people in my riding to get that little bit of work experience so that they can access the labour market. I am sure most people in Durham and the rest of Canada want to work. They want to find the up ramp to the workforce.

The small weeks provision attempts to address the issue. The realization is that, although we are not sure, it may cause a disincentive for people to seek some employment rather than none at all.

Some of the members, especially in the NDP, have raised the concern about the deviation between unemployment insurance reductions and tax cuts and why somehow these reductions should go back to the people who actually put the money into the system.

Invariably tax cuts are assumed somehow to be benefits for the wealthy. The reality is that our country has a problem, which has been raised by other members, called bracket creep. In fact, the people being hit by an inflationary spiral are in the lower and middle income brackets, the workers.

It should be a policy of this government to take some of that surplus and direct it to people who make $20,000 or $40,000 worth of income. I am talking about the working poor. Some of these people hit marginal rates of tax in excess of 50% or 60% by moving from $18,000 to $20,000 worth of income. What does that do? It creates a barrier. People cannot get out of poverty. They cannot get out of that cycle of low income.

Why would it not be a great thing to shift that surplus from corporations to some extent to assist those people by giving them back the indexing of the income tax system. It would help them increase their disposable income. That is a lot more beneficial than some of the programs we talk about simply giving it back to the corporations which paid 60% of the employment insurance premiums in the first place.

In conclusion, as well intended as it may be, I believe this motion is premature. The motion should be rejected because we need to do our homework before making any decisions.

[Supply, October 26th, 1998]

Madam Speaker, I listened intently to the member's very impassioned plea for the people in Atlantic Canada. I must say I was somewhat moved by it.

I wonder if she is aware of the fact that payroll taxes in Canada are one of the lowest in the industrialized world. The way she talked about them made it sound like they were about the highest. In fact, they are one of the lowest, which makes us a competitive place in which to do business.

My province of Ontario has a premier who has pointed to the EI system as being an unfair transfer from the province of Ontario essentially to Atlantic Canada. He is saying “We already pay money through a transfer payments mechanism, through equalization grants. We do not understand why we should have to pay more money through the EI system to support places like Atlantic Canada”.

Can the member comment on the compassion of the premier of Ontario?