Alex Shepherd

[Income Tax Conventions Implementation Act, 1997, October 20th, 1997]

By the way, if they are so concerned about these people, part of this protocol basically says that anybody who during that two year period, because of the 85% inclusion amount, would have seen their taxes increase will not be reassessed. How much fairer can you be? People who would have paid taxes based on the increase in the income inclusion amount during that period of time will not be reassessed.

The retroactivity is solely directed to the benefit of the low income seniors who need the money that the U.S. treasury is sitting with in its bank account. When this protocol is passed by both governments the IRS will cut a chunk to Revenue Canada and Revenue Canada will turn around and distribute that money back to those lower income seniors.

In conclusion, it is those low income seniors, the Mrs. Lois and Mr. Stevens of this world who are waiting for this legislature to get this bill through so they can get their money back. These people are desperate. They are not making $85,000 like the member over here. They are making $15,000 and they need their money. That is why this legislation should go through the House as quickly as possible and not be derailed by this party.

[Income Tax Conventions Implementation Act, 1997, October 20th, 1997]

Mr. Speaker, I am pleased to enter into debate on the issue of Bill C-10 and, more important, to support passage of the bill.

It is appropriate to review what has happened and why it has become a problem. The Canada-U.S. tax treaty was amended and came into effect on January 1, 1996. Unintentionally social security benefits and disability benefits of some Canadians who worked in the United States for part of their working lives were taxed by the U.S. government at roughly 25.5%. We basically did the same for American residents who were receiving Canadian benefits.

The problem is that Canada has a very fair and reasonable system of taxation which allows non-residents to file tax returns in our country and to seek a refund of the taxes if they were not in fact taxable. Unfortunately the United States does not have a similar system of refund.

As a consequence a good number of seniors—as was mentioned today it is upwards of 85,000—discovered that suddenly taxes were being deducted from them that they had no real way of getting back.

In my riding and across the country I have dealt with many seniors who are concerned about the issue. I spoke to a woman in my riding, Ellen Mowat, whose total income was about $14,000. Of that amount, $10,000 was social security benefits. The result was that it increased her taxes to $2,500, and the woman was only receiving a total of $14,000 in income.

Statistics Canada says that low income cutoffs for people are about $25,000. Clearly Mrs. Mowat would be considered to be in poverty. Yet at the same time she had this problem of over $2,500 a year being deducted from her income.

I had letters from Mrs. Leona Jeremy of Middleton, Nova Scotia. It was the same situation. She had $14,000 of income and was paying over $1,000 a year in taxes. It goes on and on. Les Stevens, a resident in my riding, had a total income of $12,000 a year and was paying $1,000 in tax through this retrogressive tax the United States imposed. He had no way of getting it back.

It is interesting to note, in spite of some of the comments of the Reform Party today, that none of those people will pay any more taxes under these changes. In spite of some of the things the Reform Party has been saying today about tax increases, the bottom line is that these people will not be paying any more taxes. In fact they are entitled to a refund of their taxes.

I will address some of the other issues presented today. One is the income inclusion amount in Canadian taxes. It is true the income inclusion amount has been increased from 50% to 85%. When I say “income inclusion amount” I am talking about people in Canada receiving social security benefits from the United States being required to report 85% of that income for tax purposes.

The Reform Party went on and on about the 85%. The reality is that it was already at 50%, so there has been an increase in the income inclusion amount of over 35%.

We should think about what it means. People in some jurisdictions will be heavily influenced, such as Windsor and other border cities. There could be someone receiving Canada pension benefits and paying 100 cents on the dollar on their taxes because of the income inclusion factor being 100%. Another person receiving a U.S. pension could still report only 85% of it. How could anything be more fair? Many would suggest it should be higher.

Once again the Reform Party is taking little shreds of evidence and turning it into a fiasco. Of the 85,000 seniors who will be affected very few will pay more taxes.

The law came into effect on January 1, 1996. What has happened in the interim? Taxes have actually been held back. Mrs. Mowat is missing $1,000. It goes on and on. For over two years these people on meagre incomes have had thousands of dollars held back by the U.S. government. Our Minister of Finance has taken on their cause and negotiated with his American counterpart to relieve the problem.

It is interesting the U.S. Senate committee has already accepted the proposal without amendment and is pushing it through the U.S. Congress. Here we have the Reform Party saying that it will delay it and wants to amend it.

Who are Reform members talking about protecting? Are they talking about Mrs. Mowat? Are they talking about low income seniors across the country who are out this money? No. They are talking about the very highest income earners. That is with whom the Reform Party is siding.

The Reform Party is stating today that it is prepared to delay the legislation? Why? So a few people who do not want to pay do not have to recognize 85% of that income on their tax returns and only have to recognize 50%, even though every other senior in the country receiving a Canadian pension has to recognize 100%. Reform members are talking about these people. They want to protect them. That is atrocious.

Reform members spoke about people who could not afford to get in their cars to go and get groceries. The U.S. government has $5,000 of Mrs. Mowat's money and she is only making something like $15,000 a year. What does the Reform Party say to Mrs. Mowat? It will somehow delay the legislation. Tell me how that is being responsible.

The Reform Party talks about the progressivity of the system. We have a progressive system. I have worked with the Canadian Association of Retired Persons. The Reform Party is saying that it will get on the case and really study it. It will drag its feet through parliament.

Where were Reformers when this was going on in the 35th parliament? I did not hear them asking how they could help these poor people. It was members on this side of the House and members of the Bloc who asked how we could resolve the problem.

On various occasions the Minister of Finance went down there to negotiate with his American counterparts. He told them that the problem had to be resolved because it was hurting Canadian seniors.

The Reform Party is a great wall of silence. When does the Reform Party become interested in this issue? When we talk about increasing the income inclusion amount from 50% to 85% of the 85,000 seniors affected by this. I heard the member for Calgary Southeast say the number of people affected was 10,000. He did not say 85,000. He said it was, at most, 10,000 who may see their taxes increase. It is those 10,000 who the Reform Party is concerned about. It is not the 75,000 sitting out there who may well become deceased while they wait for this process that the Reform Party is now talking about dragging through the House of Commons.

Most people can see what the real issue is today. The government is asking for this bill to be fast tracked because we want to get that money back in the hands of seniors.

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, mismanagement? The first time we have not had to go to the capital markets to finance the operation of the government in 27 years is not mismanagement. It is good management.

It was interesting to listen to the member. One of his colleagues and said those people who are getting Canada pension are getting 200 percent return on their money. Then the member says it is a mere pittance, we should give them more.

I did not know that was the policy of the Reform Party, to increase Canada pension plan benefits. I did not see that on any of its platform documents. I have not seen that anywhere.

I really have to commend it for recognizing that many seniors are living well under the poverty line and that we should be taking some notice of how to deal with that.

I congratulate the member for realizing the importance of possibly increasing some of our social spending in those areas.

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, if I understand the member's question, he is concerned about the accountability of that plan. I note, in reading the legislation, that there is a whole process, a board of directors as a corporation which falls under our general corporation provisions and the duties of directors to that corporation. I noticed that there is definitely a requirement of external auditors so that the external people will basically review the operations of that and report directly not only to government but to the people generally.

It is not a closed shop. We do not have a bunch of people holding on to this money in a back room somewhere. The bottom line is the people who are going to be the beneficiaries of that plan will be able to see how their money is invested and will be part of the process not only directly through the public forum but also through their members and the fact that this is answerable directly or indirectly through the political process through the appointment of the board and so on.

It is not something the government wants to get involved in on a daily basis, but there is going to be constant visibility of the mandate of this board. I think basically that is what people are asking for.

In the old system we did not know. We were not very sure where that money was going. We had the idea that it was going back to the provinces and so forth, but nobody ever saw a financial statement actually showing clearly where the float of the Canada pension plan money was at any one time. I think this is very much progress and an improvement.

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, we have a privately funded plan that already exists in our country. I think this is where the member is looking at absolute jurisdictions like Chile. I have read some of those reports. However, we have a three tiered system in Canada. We have the basic social benefit, the Canada pension plan system and the tax assisted RRSP system.

Our RRSP system is one of the most generous in the world. We have total limits of up to $13,500 of premium contributions as a tax assisted support for private pensions. In the United States that same deduction is only $2,000. The reality is we already have a privately funded system in the sense of a voluntary system through the registered retirement savings plan.

What we are talking about are those other two tiers, the ones that the Reform Party keeps wanting to forget about, the people on lower incomes who are not able to take advantage of those RRSP levels. We are talking about the basic integrity of our pension plan system. The people of Canada told me and my colleagues they want to keep it, and so we are.

[Canada Pension Plan Investment Board Act, October 6th, 1997]

Mr. Speaker, it is with great intent that some of my colleagues are discussing Bill C-2 respecting changes to the Canada pension plan board.

I listened with great interest to the member for Calgary—Nose Hill talk about the importance of a consultative framework. I know from my fellow colleagues on this side of the House that we have already done this. Years ago we went out and conducted town hall meetings in our ridings, asking the people of Canada what they wanted to do with the Canada pension plan.

I conducted three of these meetings in my riding. The conclusions of the people of Durham are very much part of this legislation. In particular, they told us that they wanted to maintain the Canada pension plan. Also they told us that they wanted to see a different investment format.

They were concerned about the government directly investing it and giving money back to the provinces. They wanted to see an independent board. The bottom line is that we have been listening to the people. That is exactly what the people of my riding, and I am sure many ridings, have told our government. They want this money set aside and managed in a businesslike fashion. That is essentially what this act attempts to do.

Some members have mentioned there is going to be an increase in the size of the fund. Some talked about $100 billion and some of my colleagues who like to double everything are up to $200 billion. That is a substantial fund for this country.

It is interesting to note that some members opposite talked about payroll taxes. When some of them spoke I had to reach for my Oxford dictionary because they referred to the CPP as a tax. Perhaps I could buy the members a dictionary because they do not seem to have one. I opened up my Oxford dictionary and it clearly says that a tax is a contribution to the state.

Deductions for the Canada pension plan are either currently being paid to beneficiaries or invested in a fund. They do not come into the general revenues of the Government of Canada. By definition in the Oxford dictionary clearly they are not a tax.

When people talk about Canada pension plan contributions they somehow end the discussion at the payment of premiums. Once again it is the same discussion Reform Party members often get into when they talk about spending, that somehow it is gone, ended and never heard from again.

Members are talking about a $100 billion fund. We have to ask what does it mean. What does the fund go into? The government is empowered to carry on normal market interventions much as mutual funds do now, purchasing equities in Canadian owned companies and bonds. I suspect this is going to have a double effect economically. It is going to provide more capital for small and medium size business. As businesses expand they either borrow or raise equity. Businesses are expanding, building new buildings and plants and facilities. Invariably when they do that they create jobs.

Therefore it is a circular argument that by paying these premiums we are going to lose jobs. However, when we look at the other side of the argument of creating robust capital markets in Canada, we are creating jobs. This is simple economics which the Reform Party often likes to look at, the bad side. The reality is there are a lot of positives.

To take this one step further a lot of people are saying that they are concerned about the amount of money in the fund. If we compare it to a privately managed fund today, the Caisse dépot et placement du Quebec has a fund which is now at about $57.6 billion, the Ontario Teacher's College pension plan is at about $50.9 billion and the municipal employees fund is at about $25.9 billion. By definition those are some very significant funds.

When we talk about the Canada pension plan we have to talk about the demographics, the fact that our population is getting older. As the fund becomes more robust, active and intervening in the private sector it could well have an impact on the reducing interest rates because it will make more capital available, looking for capital and it will be more competitive in the capital markets and thus may reduce interest rates for small and medium size businesses.

Through this fund process the possibility is there for lower interest rates and also we have created the availability of more debt and equity capital for small businesses which will create jobs. The Reform Party is not interested in that because it is a very positive thing.

I also heard the member for Calgary Southwest talk about other negative aspects of the plan.

The important thing is Canadians want to know their funds are being invested. As has been mentioned a number of times in the House, Canadians have said where did that money go, where is it in the system. Now they will be able to see where their money went. There will be a quarterly report which will show where their money has been invested.

Reform Party members often talk about the super RRSPs. The hon. member for Calgary—Nose Hill said that only 1 percent of the payments from the Canada pension plan are related to disability. I suggest she read the financial statements. She will see that Canada pension plan payments to the disabled amount to about 19 percent. The Reform Party has no plan to ensure that factor.

I can tell hon. members opposite that there are many people in my riding who are living on disability payments. It is hard for me to believe they are concerned about the hardships these people face.

Second, members opposite have gone on and on about the intergenerational tax. The hon. member for Calgary—Nose Hill called it a rip-off.

The Leader of the Opposition was concerned about the clawbacks in the old age pension system. Then the hon. member for Calgary—Nose Hill spoke about the 200 percent return on investment that some of these people are receiving.

What is it going to be? Are they going to be concerned about intergenerational transfers? Are they going to be concerned about a 200 percent return on investment? Are they going to be concerned about clawbacks to seniors pensions?

The bottom line is they cannot have it all ways. They cannot argue out of both sides of their mouths all the time.

As the member suggested, there would be a $500 billion deviation if we actually tried to fully fund that plan today. I have not heard any opposition member tells us how they would do it.

We went to the people and we asked them how to do it. This is the plan they told us they wanted. This is the plan which is acceptable to them.

Some of our younger people are worried that the premiums are going up, but everything is not absolute in history. The reality is our younger generation has other benefits which have been given to it by government. It has support in the educational system and other benefits from our system.

Who knows in 20 years what the premium levels or what the benefit levels will be. It will depend on the demographic shifts in our country.

This government has had the intestinal fortitude to look at a situation that was breaking up. Many governments in the past have shifted this on to other administrations. It would be easy for us to do just that, shift it on to another administration. The problem would get worse and worse. However, we have faced reality and are dealing with the problem.

That is what this government has done. This is good legislation. I encourage all my fellow members to support it.

[Supply, September 30th, 1997]

Mr. Speaker, I will even concede to the hon. member that payroll taxes do have an impact on job creation. I wish we could reduce them to a nominal amount.

The reality of government funding and government financing is that is not possible. If you want us to stay in the Canada pension plan, like all the people in my riding have told me, then you have to implement reforms to make that happen.

When we talk about tax reduction, I do not doubt that UI rate reductions are going to be on the table. We have been reducing them, by the way.

[Supply, September 30th, 1997]

Mr. Speaker, I thank the member for his question. The reality is Canada's government has a commitment to its youth and the extent to which we take advantage of that, no matter what province they live in, is a positive thing.

There is a horizons program that takes young people in universities who have been educated in the area of export development and puts them into small and medium size businesses to make those businesses export ready. There are a number of programs that once again take some of those youth with an understanding of the information highway and put them into small and medium size businesses to empower those businesses.

The member is talking about duplication and overlap. I do not think, frankly, that there is enough money to go around. The problem with good initiatives, whether they be federal or provincial, is that there still is not enough money to take up the need. I am sure those students, those young people in Quebec, are happy to share in a federal program that has a federal initiative and vision about where the country is going in the area of science and technology.

[Supply, September 30th, 1997]

Mr. Speaker, I thank the member for his question. Obviously I do not have the statistics that the member has before him. However, I am sure that there is a plausible explanation. I am glad that he used the American example because it lets me remind people that this whole agenda of the Reform Party is not new. It was started by Ronald Reagan. Basic Reaganomics said that what it was going to do is reduce taxes, stimulate demand and get rid of the deficit.

The results are, and the member can and look just as easily as I can, as the member suggested to me, that the U.S. went to a deficit of $1 trillion in that same period of time, almost bankrupting that country. Why is that?

Under Reaganomics they did stimulate demand at that time. The stimulation went to foreign imports. The bottom line is that they went out and bought Japanese cars. There were no more jobs created and the U.S. deficit went through the ceiling and they are still paying for it.

Do not tell me that there is a simple solution, that if we put some dollars into people's pockets somehow that will solve all of our unemployment problems. It will not.

[Supply, September 30th, 1997]

Madam Speaker, congratulations to you on occupying that chair. It is a pretty face to see.

This is my first intervention in the 36th Parliament and I would like to thank the people of Durham who graciously have decided to send me back to the House.

We have been debating the Reform motion which refers to the returning to the last 27 years of our history. This is rather absurd because the reason we are here today debating the motion is the diligence the government has had toward its fiscal agenda to reduce the annual deficit. In my lifetime I do not remember another finance minister who not only set and met the targets but exceeded them. It is because of the orientation the government had toward its fiscal agenda.

It seems rather absurd to me that the second party is now thinking that somehow we are going to change all that again. The agenda is very clear in my mind. We are going to continue to keep our fiscal house in order.

There is some room to manoeuvre. This will be the first year in which we do not have any positive net borrowings in the capital market to support our annual expenditures. In future years we will be able to reduce not only the deficit but will also make a positive contribution toward reducing our outstanding debt.

I welcome the debate because it is very important to question what is a fair level of total debt. At approximately 75 percent of our gross domestic product the current level of debt is inoperative and must continue to come down. I believe most parties can agree with that.

Second, the throne speech clearly talked about tax cuts. Most of us will agree that Canadians are fairly heavily taxed and that they are probably entitled to some kind of rate reduction in the future. The operative word is future. More important, what is the nature of the tax cut? How is it physically done?

This whole debate talks about spending. The motion of the Reform Party talks about irresponsible spending as though we all know what it is. According to Reformers all spending, as far as I can understand from listening to them, by the government is somehow bad. It is very simple.

It is very interesting to be in the 36th Parliament because we have another group of parliamentarians at this end of the House who stand day after day and say that all spending by government is good. It is interesting to sit between these two arguments and try to find out what makes any sense.

Time and time again member after member of the Reform Party says that money in the hands of consumers is far better than money in the hands of government. I have heard their speakers suggest from time to time that we also live in a period of high consumer bankruptcy. It may actually occur to members that some people in society spend too much. The negative impact is the consumer bankruptcies that occur.

When we talk about tax cuts I am very interested in exactly what we are talking about. We are talking about rate reductions. The income tax system in Canada is called a progressive system. As income increases, tax rates also increase. This is something that has been accepted in Canada for a long time.

I have heard the Reform Party indicate from time to time that everybody should have a flat tax and everybody should pay the same. That is a reallocation of taxes from the wealthy to the middle class. That seems to be part of its agenda as well, although I have not heard much about it in this parliament.

When we start talking about how to direct a tax reduction in a progressive taxation system, we have to take into consideration that the people who will benefit most are the very wealthy, which is why the Reform Party supports that group of people.

There is another point missing from the debate. When we start talking about tax cuts and hitting higher income groups more efficiently, we do not consider the demographics of our population. Everyone knows that Canada's population is aging. Almost a third of our country consists of what we call baby boomers, of which they tell me I am on the leading edge.

If baby boomers today were given a choice and were told that they would be given an extra dollar from taxes, chances are they would save if for their retirement. That is not so bad. That is good because we know we are having trouble with some of our retirement programs as well.

The reality is that tax cuts will not necessarily lead to job growth. There is no stimulation in the economy by people who simply save and do not go out and spend.

In other words, there is a great elasticity. We may well give more money back to people, and well we should. I believe our rates are too high. However the argument does not follow that somehow the economy will be stimulated and jobs will be created.

We have a premier in Ontario who ran a whole election based on giving a 30 percent rate reduction across the board. Of course what happened is that most of it went to the same group I am talking about, the relatively wealthy, sometimes and often the baby boom population.

Jobs were created although during the period in which he made this announcement jobs were lost in Ontario. Jobs have subsequently been created in Ontario, but I suggest that almost all jobs creation was created by lower interest rates which are directly related to the government's commitment to reducing its deficit. In other words, all rate reductions in the world do not stimulate the economy and do not create any new employment.

We might consider that the same generation of people today, once again thinking about investments, are thinking about foreign investments. I have heard members of the Reform Party talk about not making Canadians invest in Canada and allowing them to invest all over the world. Essentially the agenda of the Reform Party is to promote capital flights: give them a tax reduction and let them take the money out of the country.

Many people will say that for every billion dollars of direct foreign investment in Canada 45,000 new jobs are created. Similarly it must follow that for every billion dollars removed from our economy 45,000 jobs may well disappear. The Reform Party's agenda may indirectly result in reductions in jobs and not the increase Reformers constantly tell us about.

It is a delight to be in this new parliament because we have two parties that are diametrically opposed. I listened to members of the NDP who constantly think the simple answer to all our social problems is to spend more money.

As a nation we have to spend money wisely and efficiently. In my riding I have a program called CAPC, a federally funded social program to assist young teenage parents with a nutritional program and prenatal care. I am proud to say that this coming week the program is being expanded in Port Perry in my riding. They have expanded it in many communities. It is amazing that it has been done with the same budget it has had for the last five years. More services are being delivered to assist these people.

We cannot create smart parents. I do not think everything we do will create better parents. We need people in the communities who try to assist these people. We can help in the delivery of the system to assist with child poverty.

I am very proud to be part of a government that recognizes the importance of some of these building tools and building blocks. I am also very proud to be part of a government that recognizes there is such a thing as child poverty, especially in working low income families. The government has changed the working income supplement to breathe more financial strength into parents who are trying to work and at the same time support their young families.

This is the balance we need. The word spending has been going around and around this room the past two or three days. What is missing from the debate is that there is a difference between consumption and investment.

I will give a definition. To consume is simply that we pay out the money and it is gone tomorrow. Some people might say that seniors are entitled to their old age pension cheques. When they get the money in their hands they usually spend it and the money is gone. There is no money coming back into the economic system. We owe these people the support. They have entered into a trust agreement with us.

The other side of the spending equation is investment. I heard the member for Kelowna talk about investments in the technology partnership program. That program is oriented toward some very positive things. When the money comes back in, all Canadians will benefit from it. The money did not actually disappear. The money is still out in the system and will come back not only in its original form but also added to it will be some of the benefits of the growth that has actually occurred in the economy.

When we look at government expenditures the problem is that we do not think about these two different factors: the difference between investments and consumption. I am very proud to be part of a government that talks in the throne speech about investment spending and investment in people.

If we can solve some of the child poverty problems that investment will come back to us. Those people will be less of a threat to our criminal justice system. More important, they will have the tools and the skills to live useful lives.

The government has been very concerned about investment in the area of science and technology. I heard some members opposite talk about the fact that many people with technological skills were being hired south of the border. The average master's graduate in science and technological earns $45,000 to $50,000 in Canada. In the United States they will earn $65,000 to $70,000. That is a great incentive. Members opposite blame our tax system. There is some relationship between our tax system and that of the United States.

Another aspect of the economy is that our supply of those graduates is very low. When the supply is low pure economics bids up the value of labour. There is a bidding war. Similarly when there is a shortage in the United States they bid up their costs and they are removed from our country.

We have companies in Ottawa such as Newbridge Networks which needs 4,000 workers. It will only hire half of them in Canada. Nortel needs 5,000 workers. At best it can only hire 700 here because that is all that is available. In my own riding Durham College has a science and technology program with an enrolment of 700 students. The bottom line is that they could all get those jobs twice over. In other words, there is an emerging science and technology community which we are not filling.

What can governments do to invest in their people so that they will have the opportunities and that Canada and our standard of living will be better for it?

I am proud of a government that recognizes this is how the economy is evolving. The throne speech talked about the new millennium fund of $1 billion to help low income people who want a post-secondary education, hopefully in the areas of science and technology.

This is a very positive statement about how we want to invest. I keep coming back to the word invest as opposed to spending. Members opposite probably think this is frivolous, that money should have been given to higher income groups through rate reductions rather than by helping people to get the opportunity to better their positions in our society.

As in the previous parliament we have the Canada Foundation for Innovation. I am working with some of my community colleges to ensure they can access these funds to build their programs. They have indicated to me that their biggest problem is not having enough money to run their programs. They need more top grade scientific equipment to teach their people, to give them the skills to become competitive in the 21st century. I am happy to be part of a process that recognizes we have to give these people the tools to compete in the new millennium.

At the same time as we have this problem going on, we are going through a process of studying our immigration laws that satiate some of the demand of high tech companies in Canada. In this labour market the total immigrant population in 1990 was 1,900. By 1996 the figure was 6,600. These people were brought in from other countries because we did not have the skills to fill these jobs. It is very important that we as a government take the initiative to give our people the skills.

In conclusion, I think what is really missing from this debate is when somebody stands up and says that spending is bad and tax cuts are good. That is a very simplistic argument. The reality is we need to do more investing in people and I am very proud to be part of a government that recognizes that. Yes, we are going to reduce the deficit and debt, but at the same time we are not going to forget the opportunities and challenges facing our people. We are going to give them the tools to meet the 21st century.