Finance committee  I have more than four reasons, but I won't go through all of them. I'll pick out four, as you requested. I think our number one problem on the tax side is the high marginal effective tax rates. They kick in for people up to about $50,000 in income. I know we instinctively think of marginal tax rates as being bad for high-income people, but they're much higher when you take away the social benefits at low incomes, usually higher than 60%.

Finance committee  If I could start again, there is what we in the fiscal business call a natural wedge that is formed. That's because the interest on the public debt is tending to be flat to trending down. In fact, even if interest rates don't go down further, you will see flatter declining interest on the public debt because bonds were being issued at 10% ten years ago and they're being reissued at 4% as they come up for renewal.

Finance committee  Can I answer that?

Finance committee  I have a very strong conviction on depreciation for tax purposes. I think it should just match up with the economic life. The tax depreciation should be exactly in match with the economic life of the asset. If the tax depreciation is accelerated, it's a subsidy and we should just recognize it as a subsidy.

Finance committee  I might be able to answer that question. We have the advantage of using the private sector forecasts which have already been published, most of them in September. I believe that the average for the entire private sector is about 2.5% in GDP growth for 2007. The TD Bank forecasts are somewhat lower, at 2.25%, but that does not make too much of a difference.

Finance committee  The average consumer inflation rate is about 2%. That is the forecast average. Everyone concedes that the price of oil is more or less stable but similar to the current level, which leaves us with the rate that is forecast by the Bank of Canada. The growth rate is slightly higher for 2008, about 2.75%, and maybe 3%.

Finance committee  It's a different way.... Is the glass half full or half empty? The current system is a disincentive to do that. This removes some of the disincentive. I wouldn't really look at it as providing an incentive. There are different aspects to it. Do you look at the family unit as being individuals, or do you look at it as a couple?

Finance committee  I think it absolutely has to be a blend of the two. On the tax side, you have to get down the marginal effect of rates on tax, on capital, and also on individuals. They're extraordinarily high in Canada. But having low taxes isn't going to take you very far, unless you have that government infrastructure in education, and hard assets in the country.

Finance committee  Certainly it would be on the education and skills training. But you also have to recognize that the federal government has done a lot in those areas in the last years. I'm not really suggesting that at this point you need to do more. Since 1997, there has been quite a substantial reinvestment in post-secondary education.

Finance committee  Well, if you realize a gain on it, you obviously get some interest relief on $5 billion. At a 4% effective interest rate, you can get a small trickle of ongoing savings. But absolutely, you can't really pair it up with anything other than a one-time expenditure. In my 23 years in government, I never encountered a one-time expenditure.

Finance committee  No. You'd then have to get the asset proceeds coming over a space of time, but even if you managed to do that physically on an accrual basis of accounting, that wouldn't fly. You have to record the transaction when it occurs.

Finance committee  Yes, sure. Rather than giving you the numbers cold, maybe, as a benchmark, I'll use the May 2006 budget. I think that would be the appropriate context for the update later this afternoon. Just to step back a bit, obviously you need an economic forecast. Actually, for a long time our economic forecast at the TD Bank hasn't changed very much.

Finance committee  Sure. Relative to the budget numbers, our forecast would be that the surplus will be up $1 billion to $2 billion in the current fiscal year, and about $1 billion in 2007-08. If indeed it goes further, it will trend back to the longer-term horizon after that. In a nutshell, that is basically what has changed.

Finance committee  Thank you very much. I'm not certain what particular areas of the economic and fiscal outlook most interests members of the committee, so with your permission, I will pass on the five-minute introductory remarks--perhaps that would make better use of my time--and target it to the areas you're most interested in.