Mr. Speaker, last night when the finance minister introduced his seventh budget there was much anticipation about what the budget could do for the standard of living of Canadians, for the prosperity of all Canadians. Canadians will be very disappointed with the budget once the dust has settled.
There have been seven budgets, we could say seven deadly sins from the finance minister. Again the missed opportunities of this budget will hold Canadians back when they should be rushing forward to seize the opportunities of the 21st century.
The government is big on labels. The 1998 budget was the education budget and the year after that, 12,000 graduates in Canada declared bankruptcy. The 1999 budget was the health care budget and over the past year, hospital waiting lists have continued to grow in Canada. Canadians remain uncertain about the future of health care. They do not believe their health care system will be there when they need it. That was the result of a health care budget.
This year we have seen the tax cut budget. Before this budget, we had the highest personal income tax rates in the G-7 and the second highest corporate tax rates in the OECD. Well, guess what? After this budget we will have the highest personal tax rates in the G-7 and the second highest corporate taxes in the OECD. There is no change because as we take these baby steps forward, other countries are taking gigantic leaps forward.
The government is working with a $150 billion surplus. It says it is going to devote $58 billion over five years to tax reduction. It is including the elimination of bracket creep and the reindexing of tax brackets in that.
The fact is this is not a tax cut. This is a cancellation of future tax increases. To promote it as a tax cut is disingenuous at best.
We are pleased with the reindexing of tax brackets. We have been calling for it for three years. It was a deficit reduction measure and once the deficit was gone we wanted to see the tax brackets reindexed. We are pleased that finally the government has taken a page out of our book on this.
With this budget the government continues to look inward when it should be looking outward. The government is ignoring the global realities that are occurring around Canada while bragging about progress within Canada.
Progress within Canada frankly is in many ways irrelevant if we are simply comparing ourselves to our past performance. It has nothing to do with the reality of how we are going to build a stronger economy and increase the standard of living of all Canadians and the levels of opportunities for all Canadians.
In this hypercompetitive global environment, we do not write the rules, but we ignore the rules at our own peril. Other countries have embraced these global realities earlier. In response to these global changes, our trading partners have pursued policies of lower taxes, less regulation and lower debt. The levels of growth have been striking.
Ireland's real GDP per capita growth has been 92% from 1988 to 1999. Corporate tax reductions helped in Ireland because it drew capital, entrepreneurs and investors to Ireland to create a greater level of economic growth. GDP per capita has increased in the U.S. during the same period of time by 18%, and in the U.K. and in Germany by 14%. Yet in Canada our GDP per capita growth has only been 5% during the same period.
We are stagnating while other countries are progressing. While citizens in other countries are getting richer, in Canada we are getting poorer. In the 1990s we have seen an 8% drop in our personal disposable income or take home pay in Canada. During the same period, Americans have enjoyed a 10% increase.
With this budget the government has opted for baby steps with regard to tax relief and tax reform. The progress that Canadians expect to make as a result of this budget simply will not materialize because as we take these microsteps forward, other countries are rushing forward with much more visionary approaches and much more gigantic steps and leaps.
Canadians may gain some comfort from seeing the directional shift of the government on taxes. However with the mobility of capital and the mobility of people that exist today, we cannot afford to be one nanosecond behind our trading competitors.
It used to be that high taxes redistributed income. In the current technologically driven global environment, high taxes redistribute people. That is what we are seeing.
Perhaps one of the most damning barometers of how we are doing is the unprecedented level of brain drain in this country. Young people, in particular our best and brightest people, are leaving Canada to seek greater levels of opportunity elsewhere.
Over a 10 year period we have seen the number of Canadians seeking opportunities in the U.S. grow from 17,000 people per year to almost 100,000 people per year. Some of our best and brightest, the types of people we need to build a stronger more productive society, are choosing to go elsewhere to seek greater levels of opportunity.
Capital gains taxes are a major contributor to the brain drain because increasingly, Canadians particularly in the high tech sector are compensated with stock options. After this budget is fully implemented, effective capital gains rates will still be 13% higher than the effective capital gains tax rates of the U.S.
It would cost about $70 million to $80 million, not billion, per year for the government to equalize our capital gains tax regime with that of the U.S., but it is not doing it.
The reason why it is not doing it is that the government is dealing with perceptions. It is not dealing with realities. In reality, effectively oppressive capital gains tax regimes will continue to drive innovators out of Canada. When we lose those innovators, when we lose that investment, we lose the jobs, the growth and the entrepreneurial energy that Canada needs to move forward.
In our tax task force report tabled in January we were calling for a reduction of capital gains taxes in Canada to the U.S. effective levels by reducing our inclusion rate to 50%, not 66%. That step would have put us on a level playing field with the U.S. in the very important areas of capital gains and taxation. Unfortunately the government in its incrementalism has missed the boat again and as a result Canadian entrepreneurs will be held back.
The government also had an opportunity to adjust tax brackets to a more realistic level reflecting global realities. Unfortunately again it failed to do so. Moving the top marginal tax bracket from $60,000 to $70,000 is a pathetic, tiny step in the right direction.
The government could have used the opportunity it had to reform and reduce taxes to redefine Canada's middle class. Instead the government believes that Canadians making $70,000 should be taxed as if they are rich. One does not hit the top marginal tax rate in the U.S. until he or she is making an income of $400,000 Canadian. Yet in Canada we are taxing those making $70,000 Canadian as if they are rich.
This means that a high tech worker in Vancouver making $70,000 per year will be taxed at the top marginal tax rate of around 52%, federal and provincial combined. A high tech worker in Seattle, an hour and a half away, making the same level of income will be taxed at a 26% marginal rate. Do we wonder why these people are leaving?
The starting wage for most MBA graduates from Canadian schools is over $70,000 in technology driven companies or the financial industry. We are sending those people out of Canada. We are telling them that we do not want their innovation, their brains, their sweat, work and efforts to build a better country. However, the U.S. wants young Canadians because they are well educated, bright, hardworking, the best in the world and will build a better country. Unfortunately that greater country will not be Canada because of the government's backward thinking policies. That greater country will be the U.S.
Don Goodison of the Canadian Certified General Accountants Association, said after the budget last night that it was not good enough. If he were contemplating moving south of the border this budget would not keep him here. The current Prime Minister has suggested that young Canadians should leave the country if they are unhappy with Canada's taxes. I am afraid that he may get his wish. Sadly, when we lose the best and brightest young people, we lose the capital and talent necessary to create a greater level of prosperity for all Canadians.
On the digital highway of the global economy Canada has fallen two years behind the U.S. in e-commerce. Silicon Valley is full of expatriate Canadian innovators who are there not because they want to be but because they needed to access the entrepreneurial environment and capital necessary to grow.
Canada's comparatively high tax regime has driven over $135 billion worth of investment from Canada over the last 10 years. Access to capital is critical in the high tech sector, particularly in the incubational stages. While there are Canadian high tech innovators here the government is making it very difficult for them to stay.
We are proud of our new technology success stories like Nortel or JDS Uniphase. We are proud of the new economy startups like Versus Technology, Bid.com, Leitch Technology, EcomPark, Imagic TV from Saint John that is riding the wave of the future of convergence of technology, and Hemosol, a cutting edge biotech industry player that is emerging in Canada. We are proud of all these ventures.
We believe that the CDNX can be Canada's NASDAQ or NASDAQ north, financing Canada's future and creating greater levels of economic growth. For that to happen, the government has to recognize the power of technology and the power of the opportunities facing Canadians. It should stop getting in the way and start helping the Canadian technology industry seize the future.
We need to do more than simply to retain Canada's best and brightest. We need to develop a high tech industrial strategy that attracts innovators from other countries to Canada. With the death of distance as a determinant in the cost of telecommunications, with the quality of life advantages in Canada, particularly Atlantic Canada, and with the highly developed post-secondary education infrastructure in Canada—and coming from Atlantic Canada I am very proud of our post-secondary education infrastructure—these are advantages we can utilize to succeed in the global environment, not just to compete.
I believe that Canada can be a world leader, not a world trailer. We can lead the world of innovation if we actually start producing policies designed for Canadians well into the 21st century, instead of merely focusing on policies that may give the Liberals a bump in next week's polls.
The government should be striving to develop a tax system as it applies to the technology sector that is not almost as good as the U.S. system but in fact in some ways is better than the U.S. system. As I mentioned, we are two years behind the U.S. in the very important area of e-commerce. We are now entering a period of growth in the biotech industry. In fact it is a biotech revolution. We still have an opportunity. I see our health critic here. He is very interested in the future of biotech as it applies to the Canadian health care system and health reform.
This can be an opportunity for Canada. If we change our policies now, we do not need to be a laggard. We do not need to be held back. We do not need to watch the U.S. and other countries move ahead. We can actually ride the wave of the biotech revolution, create jobs and opportunities, and reform our health care system at the same time.
On the debt issue, the finance minister was ignoring warnings from economists that Canada needs to set out a more aggressive debt reduction strategy to reduce the debt in real terms. The former Liberal finance minister, Donald MacDonald, has asked the government to reduce the debt that he helped to create in the 1970s.
This $570 billion albatross costs Canadians $40 billion per year in debt servicing charges. By not addressing the debt issue more seriously, the Minister of Finance is forcing future generations of Canadians to face the issue he continues to duck. Debt reduction may not be the most politically exciting way to invest a fiscal dividend in the short term, but reducing Canada's debt in the long term is the best way to ensure that we can continue to afford the social programs and low taxes that we value as Canadians.
At current levels of debt reduction it would take 150 to 200 years to eliminate the accumulated debt. The finance minister is crowing that within five years Canada's debt to GDP ratio will be down to 50%. The situation in France and the U.K., for instance, has allowed those countries to have debt to GDP ratios of 40% now, and we are saying we strive to have a debt to GDP ratio of 50% in five years.
In terms of health care, probably the greatest single disappointment in this budget is its failure to address the real needs of Canadian health care. At one time the federal government shared the cost of health care equally with the provinces. Fifty cents of every dollar spent on health care was spent by the federal government. In recent years, particularly under this government and its draconian slashing of the CHST transfers, that share has been reduced to 13 cents on the dollar. Only 13 cents of every dollar spent on health care in Canada come from the federal government. The $2.5 billion over the next four years is frankly a drop in the bucket.
Health care expenses in Canada are growing in some estimates of upward of $2 billion a year due to inflation, population growth and the aging population. The increases the government is promoting do not even keep track with the increase in the expense in health care.
This investment hurts provinces like mine in Nova Scotia. It hurts all provinces, but Nova Scotia Premier John Hamm said that without full restoration of the health transfers cut in the fight against the deficit Nova Scotia health care standards would slip. They have already slipped under this government. We have seen the health care system in Nova Scotia and across Canada deteriorate significantly.
Even Brian Tobin, Premier of Newfoundland, wannabe Liberal leader on the other side of the House some time and perhaps a future competitor for the holy grail of Liberal leadership, is saying that the government missed the boat by not reinvesting in health care.
Mike Harris, Premier of Ontario, said that we could not deliver the quality of health care we are delivering today with declining dollars from the federal government.
The Canadian Health Care Association said that the budget's announcement of an additional $2.5 billion over four years did not recognize the severity of the current health care crisis in Canada.
This budget has virtually ignored the agricultural crisis in Canada. When it talks about the agricultural crisis the government believes that if it is not grown in the west it is not agriculture anyway. It is ignoring the plight of farmers in the west, but at least it is talking about the agricultural crisis in the west. It does not even talk about the agricultural crisis in eastern Canada and we have some real problems in Atlantic Canada in terms of an agricultural crisis.
On defence, since 1993 the government has cut 23% from defence spending. The budget's anemic attempt to reinject a bit of much needed cash into defence falls far short of what is actually needed. In an increasingly complicated global environment we are asking our soldiers to do more and more. Instead of giving them more to do that, we are actually paying them less and less. Quality of life issues are paramount.
On equipment, we are sending helicopters up in the air with baler twine and duct tape holding them together. The government, which is only reinvesting $1.9 billion over the next several years in defence, was willing to spend half a billion to cancel a helicopter contract for political reasons. The government is more focused on short term politics than on the long term needs of Canadians. Canada spends less on defence as a percentage of our GDP than any of our NATO partners except Luxemburg. After this budget Canada will still be spending less on defence on a per capita basis than any other country except Luxemburg. It is an embarrassment.
On infrastructure, the government's reinvestment in infrastructure is an insult to the provinces. It means that highways like highway 101 in Nova Scotia will not be twinned. Death traps in some of our provinces will not be addressed. The $100 million this year for the infrastructure program is nothing, given the cost of what needs to be done across Canada with the municipalities and with the provincial governments.
One of my disappointments with this budget was that the Minister of Finance in the estimates is giving the HRDC minister an increase in her blank cheque of $1.3 billion in this budget. Instead of cutting her allowance we are giving her more money. The Minister of Finance must have been wearing his boondoggle blinders when he wrote this budget. For the past two months Canadians have been focused on waste in the HRDC department and in other departments. The minister has ignored this fact.
We could have lower taxes. We could have better spending on health care. We could have better spending on defence, highways and agriculture if the government had the courage to ensure that Canadian taxpayer money would be invested carefully instead of wasted rampantly.
We need more vision if we are to lead the way into the 21st century. I believe Canada can do it, but only if the government seizes the day and starts to recognize the opportunities and challenges facing Canadians.
