Mr. Speaker, I apologize in advance that my voice is not as robust as usual; I am suffering from laryngitis. There is simply too much to shout at the government about. It is difficult to maintain one's voice.
I am pleased to rise today to address the bill dealing with equalization. At the outset and contrary to some of the comments by members opposite, the Reform Party supports the principle. We object to the equalization which is entrenched in the charter.
Contrary to what some members opposite might have us believe, I and others in my party share the belief that Canadians from coast to coast should have access to generally comparable standards of public services at reasonably comparable levels of taxation. We have some significant differences with the current structure of equalization which is perpetuated in the bill.
We have some very serious objections to the process by which Bill C-65 came before us. Equalization is an automatic entitlement program, a statutory program, which causes us to spend $8 billion a year annually out of the public treasury with no specific annual grant by parliament.
Rather, it is an amount that is automatically included in each year's federal budget and automatically spent out of the federal treasury under the authority of the statute we are discussing and amending today. It is an automatic statutory entitlement program. I have a very large problem in principle with programs of this nature because they do an end run around normal safeguards, checks and balances of accountability in parliament.
It is important we not create programs of this nature that simply proceed on auto pilot year after year spending literally billions and billions of tax dollars without a close methodical serious review of their cost, their design and their implications.
We do not have such a methodical review in the debate on Bill C-65 before us today. Quite to the contrary, the government gave the House only three days sitting notice that the bill would be debated today, a bill which will essentially authorize roughly $35 billion in expenditures over the next five years.
This is one of the largest expenditures of the federal government which parliament authorizes. Yet we have quite a remarkable circumstance of being given three days to prepare for debate on an extremely complex and complicated bill that deals with a formula which, as colleagues have said, nobody really understands expect for a handful of specialist accountants in the government.
The government is attempting to collapse debate by not putting up any other speakers. It is so serious about this $8.5 billion public expenditure that I think it has had one prepared speaker on the bill and another who just stood and gave us 20 minutes of hot air. That is how serious it is about a parliamentary review of an $8.5 billion expenditure. It is shameful.
That is why we ought not to rush through the automatic rubber stamping of this huge public expenditure every five years as we are today. Rather we ought to calm down and make a serious, slow, parliamentary public review of the design of the entire equalization system.
We ought to be allowed to have the bill go before a parliamentary committee for extensive hearings, to bring forward academic experts, to speak to the entire concept and design of equalization, and to hear from Canadians on how they feel this matches with their ideas of social and fiscal equity. We will not do that. We will just ram it through yet once more, treating parliament and the people who represent Canadians as a kind of rubber stamp in the system.
A lot of experts would have a lot to add to the debate. In October the C. D. Howe Institute produced an excellent, thoughtful study on the entire balance of fiscal federalism with emphasis on equalization. It was authored by an esteemed professor from the University of Alberta, Dr. Paul Boothe and sponsored by Koch Oil. Other studies have been done by people like eminent fiscal expert Professor Thomas Courchesne at Queen's University. We ought to be receiving the benefit of the expertise of these people and not just rushing through it.
One of the many problems with this formula is that it is extraordinarily complex. A very simple principle involved in responsible government is that spending and taxing decisions should be transparent. They should be easy to see and understand at least by a reasonably well informed layman. I do not think there is a reasonably well informed layman in the country who is not an expert in the Byzantine rules surrounding equalization that really understands the process.
Even the auditor general pointed out that among the many problems with the equalization formula is the inclusion of property taxes in the assessment of the average tax rate in various provinces. It is incredibly difficult to get to the bottom of that. The auditor general in his 1997 report flagged as a very serious problem the inclusion of property tax in the formula for 33 tax sources. The finance department responded by saying that it would address the issue of property taxes in the renewal process, that is in this bill. There is nothing in Bill C-65 dealing with this one very complicated element of equalization.
Another problem is that the government tells us that this is all governed by a clean, clear mathematical formula but that is not the case. For political reasons we have ended up establishing a roof and a floor of equalization transfers.
Let us look at Newfoundland which is going through a period of considerable growth and suppose that it continued or in fact doubled or tripled over the next couple of years. Newfoundland would find its unemployment rate tumbling down. Let us hope that happens. Revenues would be flush in the provincial treasury but Newfoundland would still receive substantial transfer payments under equalization based on the notion that from a given year to a given year the reduction in equalization can only be x amount.
Even if the formula states that one province should no longer be considered a have not province and should be regarded as a have province, that province would continue to receive the benefit of a transfer from hardworking taxpayers in other parts of the country.
Similarly, if my province of Alberta, which seems to be a perpetual have province, were to suddenly suffer the fate of an enormous reduction in commodity prices, energy prices and agricultural commodity prices and suddenly were to fall into a regional recession, we would not suddenly receive a large equalization transfer payment.
Let us look at British Columbia. Today it finds itself in the worst recession ever since 1981, a very serious and deep recession. B.C. taxpayers are having to work harder and longer than they otherwise would in order to send extra revenues into the federal treasury. Those revenues are then spun around in this enormous costly machine we call Ottawa and sent out to parts of the country which are actually growing and which have considerable growth rates.
Family incomes are on the rise in some parts of the country. They are on the decline in British Columbia yet those hardworking families, because of the bizarre mess of the equalization formula, end up having to pay net into the system so that others can receive the benefit. I think that is just plain wrong.
What we need is a system that is transparent and accountable and one that ordinary people can understand. We also need a system that is fair. I have talked about the unfairness inherent in the system today.
One of the points that Dr. Paul Boothe has raised in his many studies on this issue is that if the objective in equalization is equity, if it is to establish a modicum of social equity through fiscal transfers, then the equalization plan as currently designed is surely not the way to do it. It takes money from every taxpayer in British Columbia, Alberta and Ontario, every single person who pays GST, federal income tax or pays in any way into the federal treasury. Even if they are below the poverty line, as hundreds of thousands of them are, they all end up making a net contribution to the fiscal transfer through equalization to even the highest income taxpayers in the so-called seven have not provinces.
Incidentally, I have a hard time believing in one of the wealthiest countries in the world, in a country that enjoys a level of prosperity and a standard of living almost unparalleled to any other country at any other time in human history, that seven of our ten provinces are purportedly have not provinces. I think that is part of the problem with the formula.
Having said that, a single mom in my riding who has a minimum wage job and is earning $14,000 a year and is trying to raise a couple of children on that meagre, paltry sum is still paying federal income tax because of the enormous equity in our tax system. She is paying federal income tax, the goods and services tax and other taxes which come to us in this parliament. What we are going to do under Bill C-65 is take some of the money from that single mother in Calgary Southeast, spin it around in this bureaucracy in Ottawa and then send it out to subsidize the delivery of social programs, including health care, which accrues in part to the benefit of billionaires who might live in another province.
One could say that my low income constituents, because they happen by accident of geography to live in what is deemed by this formula to be a have province are forced to pay, according to Dr. Boothe, 9% more in taxes than they otherwise would in order to benefit the Desmarais family, the Bronfmans of Montreal or the Irvings in New Brunswick, or the Purdues, or the Crosbies in St. John's, Newfoundland. That is not equity; that is inequity. This is not how to design a system of social equity.
If we want to help people who really need help, if we really want to equalize opportunity and living standards across the country, we need to come up with a system of equalization that is sensitive to income, not to the arbitrariness of region or geography or the accident of where people happen to live, but with respect to the very real circumstances of their standard of living.
That is why we propose that there should be a much clearer per capita transfer from the federal government to the provinces for the various social programs and, I believe, an equalization system on top of that which should be designed on the basis of individual transfers. What does that mean? That means we should look to the tax system which can respond to the different levels of income that people have as the way to transfer wealth in this country.
Really that is what this is all about. If we get all the bureaucratic gobbledegook, legalese and accounting gimmicks out of the way and what we are talking about in this bill is how we transfer wealth from those who have a lot of it to those who have not much of it. I submit we do not do that by penalizing the lower income taxpayers in Alberta, B.C. and Ontario to the financial and fiscal advantage of higher income taxpayers in the rest of the country.
My colleague from Medicine Hat mentioned that an Alberta family that earns $30,000 to $40,000 pays 9% more in taxes to the federal government than it otherwise would, whereas its counterpart family in P.E.I. generates 20% more income. These are families with the same standard of living. They have the same jobs. They are working just as hard. The family in P.E.I. is not living in poverty and is no less able to provide the necessities of life than that family in Calgary, Medicine Hat, Toronto or Scarborough, but it gets the 20% advantage.
This reminds me of a study that was conducted some years ago by the Canada West Foundation under the auspices of Professor Robert Mansell, an economist at the University of Calgary. It was the first real effort to quantify the net impact of what we call fiscal federalism, all of these transfers back and forth between Ottawa and the provinces.
This was in about 1992, several years ago. Professor Mancel found in 1992 that the total cumulative cost of fiscal federalism to the province of Alberta, my province, was nearly $150 billion since 1960. That is to say that because of equalization, because of other transfers and things like the national energy program, the federal government had managed to extract $150 billion more out of Alberta than Albertans received in benefits or transfers from the federal government. There was a huge net transfer out of British Columbia and Ontario, not nearly as large. I think it was in the neighbourhood of $20 billion for British Columbia and $30 billion to $40 billion for Ontario.
We are talking about massive transfers of wealth largely based on geography. I just do not think that is equitable or fair in a society which is trying to assist those who need the help the most.
Another problem with the current equalization system is the classic welfare trap, as it has become known by sociologists. As a way of explaining it, the welfare trap is if we subsidize something we are likely to get more of it.
The current equalization plan essentially subsidizes provinces which do not have high rates of economic growth. It subsidizes provinces which keep their tax rates low. Provinces such as New Brunswick give special tax deals to corporations to locate there, as my colleague from South Surrey—White Rock—Langley pointed out, yet they still receive the benefit of equalization.
It creates this perverse situation where if a province raises its taxes or generates more economic growth, it will be deemed to be a have province. Based on the Byzantine equalization formula its transfer from the federal government under equalization will decrease. We are penalizing success. We are in a sense creating a perverse incentive for regional economies not to succeed.
I am not suggesting that any premier or his cabinet would set out to generate low rates of economic growth in order to avoid a cut in its equalization payments. I am not suggesting that for a moment. Surely the provincial finance minister realizes in the back of his mind when he is planning his annual budget that if he raises certain tax rates and if on the other hand they generate significant growth, that the province's equalization payment from the federal government is going to be cut. That is inevitably going to be a factor. We have entrenched this kind of welfare trap into federal-provincial fiscal arrangements.
For all of those and many other reasons, I am vigorously opposed to this bill. I do not think it is in the best interests of social equity in Canada nor is it equalizing opportunity or creating greater harmony between the provinces and individuals within this wealthy and diverse country. I hope my colleagues will look more closely at this issue.