Mr. Speaker, I am very pleased to rise today in the House to talk about something that is particularly dear to my heart, and that is reducing inequalities. When it comes right down to it, that is what Bill C-2, an act to amend the Income Tax Act, is all about.
Obviously, I do not consider Bill C-2 to be the final destination. There will always be work to do when it comes to reducing inequalities, but this bill is a step in the right direction, a step that the government took at the earliest opportunity. This bill is a step in the right direction because it makes our income tax system more progressive by creating a new 33% tax bracket for incomes over $200,000, while lowering taxes for over nine million Canadians who earn less than $90,000.
As a forward-thinking individual, I cannot help but be pleased to see our tax system becoming more progressive through the creation of a new tax bracket under this bill. However, I am also pleased because this bill repeals what can only be described as a regressive measure implemented by the previous Conservative government that increased the maximum TFSA contribution from $5,500 to $10,000.
I do not expect members to take my word for it that this tax measure was regressive. You could listen to economist Rhys Kesselman, from Simon Fraser University, who helped lay the foundation for the introduction of the TFSA in 2009. This is what he had to say about the previous government's proposal to increase the TFSA limit to $2,000.
Before dropping the second shoe, the government should reconsider its pledge to initiate a tax change that would impose a fiscal straightjacket on future administrations that undercuts tax progressivity and increases income inequality.
There are two interesting concepts in this short quote from Mr. Kesselman, who, I remind members, is credited with helping to bring in the TFSA. An increase in contributions would have imposed a fiscal straitjacket on future administrations, while undercutting tax progressivity and increasing inequality.
I will come back to the concept of a fiscal straitjacket, but first I want to look at how increasing the TFSA undermined our tax progressivity and drastically increased income inequality.
I have heard my Conservative colleagues on the other side say over and over, quite rightly, that 60% of TFSAs are held by individuals with incomes below $60,000. However, this statistic overlooks the fact that, often, the people who invest in a TFSA have a spouse with a substantially higher income. My Conservative colleagues should know that TFSA rules allow a spouse to contribute to both their own and their lower-income spouse's TFSA, up to a total of $11,000 under the former regime, before the Conservatives' increase.
In Kesselman's view, if you want to have a clearer picture, it is important to look at households, not at individuals. If you look at households, including single-person households, that contribute to TFSAs and have an income of less than $60,000, they represent 52% of TFSA holders, but they hold only 31% of all the money invested in TFSAs. In contrast, 4.4% of households that contribute to TFSAs and earn $200,000 or more hold 15% of all TFSA balances.
It should also be noted that the returns generated by families with the highest incomes are higher than those of other taxpayers, and on that particular issue, I would again like to quote Mr. Kesselman, who, I would remind the House, is the intellectual father of TFSAs in Canada:
Upper-income families enjoy TFSA tax savings to an even more unbalanced degree than those statistics might suggest: they typically generate higher investment returns on their TFSA assets than lower earners, and they avoid the higher personal tax rates that would otherwise apply on the income from assets shifted into their tax-free accounts.
Lastly, it is interesting to also note that, proportionally, not all Canadians contribute to their TFSAs equally. While only 29.2% of Canadians who earn under $50,000 contribute to their TFSA, 99% of Canadians who earn over $150,000 contribute.
It was not surprising, therefore, that the former parliamentary budget officer, Kevin Page, had something to say about the Conservatives' plan to increase the TFSA contribution limit. He wondered if it would really generate any savings for the middle class and low-income households. He pointed out that one would have to be pretty comfortable to be able to set aside $11,000 in a TFSA at the end of the year and that the priority should be investing in infrastructure, since the larger issue was growing the economy.
I could not agree more with Mr. Page, and clearly, Canadians agreed with him too. They chose growth and a more just and accountable society.
It should come as no surprise that when our American neighbours added TFSAs to their tax regime, they limited contributions to $5,500 and made TFSAs off limits to single individuals whose income exceeds $116,000 and households whose income exceeds $183,000.
Getting back to the concept of the fiscal straitjacket that Mr. Kesselman described, according to the parliamentary budget officer in a study published in February 2015, raising the TFSA limit would cost the federal government $14.7 billion a year in lost revenue by 2060. The provinces would lose $7.6 billion a year.
Interest rates are low, we need to stimulate the economy, and there is a pressing need to invest in our communities and our infrastructure, yet surreally, the Conservatives bemoan our government building up a deficit that will put future generations in debt while simultaneously tearing their hair out arguing in favour of maintaining an irresponsibly high TFSA contribution limit that will benefit only the wealthiest 10%, which would be an abdication of fiscal responsibility on the part of the government. It is utterly surreal.
I can understand why they are so attached to this policy. It was a hat trick for them. It was the triple crown. Not only did this irresponsible policy allow them to deprive the government of significant revenues, which then allowed them to justify its disengagement, but it also gave an undue and outrageous advantage to the wealthy, whose interests the Conservatives have always cared deeply about, as we know. That may be understandable, but it is not defensible.
Bill C-2 makes our tax system more progressive by a adding a tax bracket and giving back to nine million Canadians. It also undoes one of the previous government's most regressive and irresponsible policies. Overall, Bill C-2 is a step toward reducing inequality in Canada. At the beginning of my speech, I said that this issue is especially important to me. It may even be the reason I entered politics. It is important to me because I am seeing a worrisome trend in Canada. Since World War II, there has been a steady increase in worker productivity, but compensation has not kept pace. The gap between productivity and compensation keeps getting wider.
Since the 1980s, the disposable income of the top 1% of income earners has increased by 77%, while that of the 0.01% at the top of the pyramid has grown by 160%. During that same period, the other 90% have seen their incomes increase by only 19%.
In Canada, roughly 70% of all net worth belongs to 20% of the top income earners. Historically, economic growth is more robust when the trend leans toward income equality. From the 1950s until the 1970s, in developed countries, lower income inequality went hand in hand with high economic growth. The IMF was able to quantify the gains to be made by narrowing income gaps. I would like to share a quote:
If the income share of the top 20 percent increases by 1 percentage point, GDP growth is actually 0.08 percentage point lower in the following five years, suggesting that the benefits do not trickle down. Instead, a similar increase in the income share of the bottom 20 percent (the poor) is associated with 0.38 percentage point higher growth.
For all these reasons, I will enthusiastically support Bill C-2, because I believe that prosperity in Canada must be inclusive and that sustainable growth is inevitably dependent on equitable growth.
