FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 17, 1999

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I would like to call the meeting to order and welcome everyone here this evening.

We have the pleasure to have with us representatives from the Retirement Income Coalition, the Canadian Real Estate Association, the Hotel Association of Canada, the Canada Foundation for Innovation, and the National Council of Women of Canada. Many of you, of course, are not new to this committee. I recognize many familiar faces.

You probably know how this committee operates. We will give you around five to seven minutes to make your introductory remarks, and thereafter we will engage in a question and answer session.

We'll begin with the Retirement Income Coalition, Mr. Charlie Pielsticker, chair; and Ian Markham, actuary, KPMG. Welcome.

Mr. C.A. (Charlie) Pielsticker (Chair, Retirement Income Coalition): Mr. Chairman, thank you very much. It's good to see you this evening.

The Retirement Income Coalition was formed in January 1997, with the purpose of bringing together a diverse group of people representing a very broad base of Canadians. The Retirement Income Coalition today has 14 members, who represent between 4.5 million and 5 million Canadians. The reason for the diversity of the group is to work together on retirement issues and find out where we can find agreement.

In the beginning the focus was on the seniors benefit, which is what we spoke on when we appeared last time. At that time we found that all the members of the Retirement Income Coalition agreed that the existing state of affairs was preferable to making a change.

The Retirement Income Coalition also looked at the 1983 paper on retirement income issues by Marc Lalonde and said there were three basic issues: to guarantee a basic income for those without resources of their own; to ensure opportunities for Canadians to provide for their retirement years; and to enable Canadians to avoid serious disruptions in their standards of living upon retirement.

We then looked at what has happened since that time, and we noticed that on an international competitiveness level, people in the U.S. and the U.K. were able to save substantially greater amounts for their retirement years than those in Canada. At that time we undertook a survey and found that in the United States people can save up to $45,000 a year to provide for their retirement, and people in the U.K. can provide between $39,000 and $90,000 a year. That is compared with our position in Canada, which is currently frozen at $13,500 a year. That is what we presented here last year, in terms of another background in going forward.

Since that time we have looked at the foreign property limit. We have strongly recommended, as have many others, that the foreign property limit be increased to 30% from the current 20%. We still want to carry forward with that position.

We had meetings over the summer with many of the member organizations of the Retirement Income Coalition to discuss with members of Parliament their feelings on this issue, whether there should be an increase in the contribution limits, and whether there should be an increase in the foreign property limits.

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I can say that first of all the members' knowledge of this issue was very high. Well over 85% were very knowledgeable on the issue. As a matter of fact, there was only one member, and I can't remember who right now, who was not interested in having the foreign property limits or the contribution limits increased.

Next, in looking at where we could go forward with this issue, was to look at cost. Over a period of time and in many different areas, the cost issue will always come up. We have seen the figures many times that the cost of the retirement income system in Canada is $15 billion a year. We have done our own analysis and have come up with a figure that would be much closer to $5 billion—in other words, about one-third of the $15 billion that is currently being used in many papers.

There is also the position, as was mentioned by the finance minister in a recent meeting in London, Ontario, that every $1,000 increase in the contribution limits would actually cost about $200 million. Our analysis suggests it would be much closer to $90 million for that same increase.

How many people does this really impact? Mr. Chairman, do you have to...?

The Chairman: I'm just checking to see if it's a 15-minute bell.

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): It's a 15-minute bell.

The Chairman: Just continue and disregard the bell. I'll interrupt the meeting when we're supposed to leave to vote. Then we'll be back.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Fifteen minutes.

The Chairman: Keep going. You'll have enough time for your presentation.

Mr. Charlie Pielsticker: I'll be through in a moment.

We looked at what impact the contribution limits have on Canadians today. This government is trying to promote as much technology development as possible in Canada, in the new industries that are so important for our future growth. In a recent review, in looking at a very large multinational Canadian high-technology company, we found that people who were managers, supervisors, and engineers and who were in their early thirties were all bumping up against the current contribution limits.

With this particular company, approximately 50% of their total workforce is now in this category. They can look across the border and see that rather than putting away $13,500 a year, they could contribute up to $45,000 a year in various other plans. Of course, they're not only looking at that; they're looking at other tax levels. But that is not what we're here to talk about.

I think that's a very real position. It's not the president or the vice-president; these are people who are managers, engineers, and technology specialists. Now, as far as Canada's future is concerned, they have to consider whether $13,500 a year or $45,000 a year is adequate to put aside for tax-assisted retirement savings.

The Retirement Income Coalition is certainly looking to increase the contribution limits from the current level to $27,000 per year, to begin immediately and extend over a five-year period; to increase the defined benefit pension limit from its current level of $1,722 a year up to $3,000; and to increase the foreign property limit from 20% to 30% over the next five years.

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We would also indicate that the cost of doing this would be substantially different from a lot of the other costs we have seen put out by the government. In other words, the cost of the pension system today would be $5 billion, not $15 billion; and the cost of annual increases would be closer to $90 million, not $200 million.

Thank you, Mr. Chair.

The Chairman: Thank you very much.

We still have time for approximately two more presentations, one by the Canadian Real Estate Association, and the other one by the Hotel Association of Canada. We'll begin with the Canadian Real Estate Association, Mr. Pierre Beauchamp and Gregory Klump. Welcome.

Mr. Pierre Beauchamp (Chief Executive Officer, Canadian Real Estate Association): Thank you very much, Mr. Chairman.

On behalf of our members, I thank you for the opportunity to present their views. We have 65,000 members in Canada. They are realtors involved as sales people or as real estate brokers in residential practice. We also have a council specializing in industrial, commercial, and investment property.

The real estate industry in Canada is a major contributor to the economy. Last year there were over 352,000 transactions through the multiple listing service, representing some $55 billion in economic activity. The residential side alone accounted for some $48 billion.

In your letter, Mr. Chairman, you suggested that we comment on several themes. We're here primarily to deal with the question of tax relief today. We have provided members with our current report on housing markets. We expect the national economic fundamentals to remain supportive of housing activity in the near future. Steady interest rates will keep consumer confidence strong, support consumer spending, and hopefully bolster job and economic growth.

The fundamentals are strong today because the government took the necessary measures in previous years to cut spending and eliminate the deficit. Today we're concerned about keeping those fundamentals strong, well into the millennium.

The Canadian Real Estate Association has always said the federal government's single most important contribution to housing is to get the fundamentals of the economy right. Our members have told us this year that the way to ensure fundamentals continue to be right is to work effectively for broad-based tax relief.

It won't happen automatically and it won't happen at all if the government reverts to a tax-and-spend mindset. In recent weeks, we've been hearing a lot about new programs. We urge you to resist spending, except for proven national priorities, such as health care.

The committee was on the right track last year when you recommended that every proposed federal spending, tax and regulatory initiative be subjected to an assessment to determine its impact on productivity and our standard of living. We urge you to not lose sight of that very sensible recommendation. It's one we strongly support.

Our proposal on tax relief supports several other recommendations this committee had in your report last year. You said the current lack of full indexing of income tax brackets has the perverse effect of letting inflation raise the tax burden across all income levels. We fully agree.

You then recommended a return to full indexing when the fiscal situation permitted. We say that time has now come. We say price stability was never intended to penalize taxpayers with more and more income tax with each passing year.

You also noted the 5% surtax on high-income earners was a deficit-fighting measure that has distorted the tax system, and you recommended that it be phased out. Once again we agree, except the members of our association strongly believe the surtax can and should be eliminated in one stroke.

We propose that the next budget cut rates by 2% on all income tax brackets. This measure would give the highest proportionate benefit to those earning less than $60,000. At the same time, this is the kind of broad-based measure that would show that the government is starting to attack the tax burden seriously.

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As an additional measure directed primarily at lower-income earners, we're recommending that the government address the growing hodgepodge of recoverable tax credits such as the child tax credit, the GST credit, and the seniors credit. We recommend a comprehensive review of all means-tested personal income tax breaks, with a view to smoothing and spreading out clawback ranges.

Mr. Chairman, last year you also recommended that the government accelerate the paying down of the debt and not rely solely on growth of the economy. Once again we're on the same wavelength. We think the government should commit to reducing the debt burden in absolute terms, and the best way to do this is by setting two-year, rolling debt targets. Meeting these annual targets would build the government's credibility, sending a clear message that it's actually reducing the 27 cents on every tax dollar that's now eaten up in servicing charges.

I'll close by making what has become, in our case, an annual appeal to raise RRSP contribution limits. I should mention here that we are members of the retirement income coalition and fully support the presentation you have just heard.

A majority of Canadians rely on RRSPs for retirement. Our brief to you points out that contribution limits would have to double to be competitive with the United States—a point that was made by Mr. Pielsticker a little bit earlier—and the United Kingdom as well in terms of tax-sheltered retirement savings. Increasing those limits is an investment, it is not an expense. It is an investment, again as demonstrated earlier—and we support the RIC paper—because the additional savings and the accrued interest will be taxed at a time when Canada's smaller working population is supporting a much larger retired population.

We also urge you to resist any proposals to convert the current deductibility of RRSP contributions into a tax credit. In a previous submission we showed that changing to tax credits would create a great taxation inequity for those Canadians not fortunate enough to belong to a company or a public service pension plan.

Our submission draws your attention to the continuing economic and social benefits of the home-buyers' plan, and it updates you on our efforts to provide consumers with much better disclosure of mortgage prepayment rights and penalties.

We'll be glad to take any questions on those issues when the time comes, Mr. Chairman. Thank you.

The Chairman: Yes, thank you very much. It's always nice to hear that you disagree with very few things that we've done so far.

As you probably know, we have to go for a vote. We'll be back probably within the next twenty minutes.

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The Chairman: I'd like to call the meeting back to order.

Thank you for waiting. We had to go in to vote, which is something we enjoy doing, by the way.

We have heard from the Canadian Real Estate Association. Now, of course, we move on to the Hotel Association of Canada, with its president, Mr. Tony Pollard.

Welcome.

Mr. Anthony P. Pollard (President, Hotel Association of Canada): Thank you very much, Mr. Chairman, for the opportunity to be back here once again. It's a pleasure to see you. It's a pleasure to see you somewhere other than on an aircraft, as well.

First of all, I want to say how much we value these consultations. They're very useful for everybody. I guess I'd like to begin by saying that we're the good news industry. It seems that whenever we come here, you always congratulate us. We are the good news industry for one very simple reason: we create jobs and we bring in revenue, particularly foreign revenue. People like us for that, and the government likes us, so it's nice to be among friends.

As you know, our mandate has seen us coming here for many years to represent all the hotels across the country. There are 7,800 properties in Canada. Just to give you a little bit of background, we generated $9 billion for the Canadian economy last year. Of that, $2 billion ended up going back to the federal government, so there's a bit of a relationship there, if you will, between the two of us. And we employ 235,000 people right across the country, in literally every part of Canada.

We appreciate the government's continued recognition of the hotel, travel, and tourism sector. In particular, we like its support for the Canadian Tourism Commission. We applaud the government for its deficit reduction and balanced budget; however, we do need immediate relief from taxation. You asked us what our views are, Mr. Chairman, and clearly taxation is the number one issue. We congratulated the Minister of Finance on his reduction of the EI premiums by 15%. However, more needs to be done.

Just before I get into that, let me just briefly give you a couple of other numbers. First of all, we're optimistic about the future. We think the future looks very good. Our research and your research shows that interest rates should remain fairly low. We see inflation rates staying manageable, at about 1.8%. God knows, I can remember back in the early eighties—Mr. Chairman, you were in diapers then—it was up around 20% or so. So this is good news for us.

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The Chairman: It wasn't me.

Mr. Anthony Pollard: We like what the GDP is doing. We calculate that it will be at about 2.5 points next year. That's good news for all of us. We see growth in travel. I think we all know that. We also see what the Canadian dollar is doing. It's keeping Canadians at home, so they get to travel around our great country. And it also brings Americans up here in droves, so we're happy with that.

Let me tell you that when I appeared before this committee in 1994, the Canadian travel deficit was $6.9 billion, and Canada was the eleventh most popular destination in the world. Today our travel deficit in 1999 hovers around $2 billion, and we are the eighth most popular destination in the world. Obviously, we are very pleased with that.

Let met tell you, Tourism Canada, the government agency, invested $15 million a year in travel and tourism promotion back in 1994. Now, through the Canadian Tourism Commission, which is basically a $145 million agency that the feds funded to the tune of $65 million a year, we are the number eight destination in the world.

If you look at it, the travel deficit then was $6.9 billion. The travel deficit today is at $2 billion. The federal government investment is $65 million, for a $4 billion return on investment. It doesn't matter what party you're in, I think any of us in this room would like that return on investment. I think the Government of Canada should be proud of it.

Just going back to a couple of very quick points, if I may, tax reduction, payroll taxes, and employment insurance premiums are our principal preoccupation. A couple of years ago, when the government was off by about $15 billion in terms of how much additional revenue would have been forecast, we saw that $15 billion would be sufficient to cut taxes by roughly 3% right across the board. We want to see corporate and individual taxes cut.

We also believe very firmly that this is going to stop one of the major problems that we have in our country, and that is the brain drain to the United States. We see it in our industry. We're having a heck of a time employing decent people. The good ones are leaving, and we need to do something to put us on more of an equal footing with our friends south of the border.

I have a couple of other very brief points, and I know I'm going to sound like a broken record here. We'd like to see some investment in the highway infrastructure program. We see where the government basically took in approximately $4.5 billion that they raised in fuel taxes last year, and then spent only $150 million on this. That's about 3% of the return. Yes, I realize how revolving funds work, but we need to invest something in that for all of us.

Another point is something I raise every year, and that is to bring the business meal tax deduction back up to 100%, like all other expenses. Make it fair for all people who are in business.

Remember, the best poverty fighter is a healthy job market. The government is to be complimented for making a lot of progress in turning around our country's fortunes, Mr. Chairman, but now is the time to make further and selective and judicious changes.

Thank you, Mr. Chairman. It's a pleasure to be here again.

The Chairman: Thank you very much, Mr. Pollard.

We now hear from the Canada Foundation for Innovation, Dr. David Strangway and Carmen Charette. Welcome.

Dr. David W. Strangway (President and Chief Executive Officer, Canada Foundation for Innovation): Mr. Chairman, the Canada Foundation for Innovation is a very interesting creation that was created in 1997. In 1997, the Canada Foundation for Innovation was set up as a freestanding organization and was given an allocation of $800 million at that time. In the budget cycle of February of this year, in 1999, a further $200 million was added to that.

This investment in capital infrastructure—that is, the research and development infrastructure in the country—is playing a very significant and fundamental role with respect to the issues you've raised, such as the brain drain, and with respect to the knowledge-based economy of this country.

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The needs were very profound. When we called the first set of proposals, we received requests for over $1 billion worth of our share alone. We will fund up to 40% of the projects, and the institutions have to find the remaining 60%.

We were astounded by two things. The first was the level of requests, which represents the long-term need and the long-term neglect of providing capital infrastructure for research in the country. And we were astounded that those institutions, by working with their provincial governments and the private sector, felt they would have no particular difficulty in finding the 60% that would be matching.

At the present time, we have awarded about $450 million as a result of our first two years of activity, and this has been a remarkable set of events. We have awarded it in a number of areas, and the first one is what we call new opportunities. We have awarded $40 million to young or new scholars recently hired into the system. To date, we have supported 535 people at institutions from coast to coast to give them the tools they need to be productive in doing the things that they can contribute back into the Canadian scene.

From these young people we hear over and over again words like “I didn't know that Canada was really interested in the knowledge-based economy. I didn't know you were really interested in assuring that Canada was competitive in the research world. I didn't know it would be possible for me to stay in Canada and get these kinds of resources to start my career at an early stage and be fully competitive on an international basis.” Those are the messages we're hearing back from these young people.

The second program is for the smaller institutions. We have had marvellous projects proposed from across the country, not only from the large institutions, but also from the smaller institutions. We have found very many interesting proposals. We have been able to deal with a significant number of them in assisting them in getting the tools that they need to make sure their researchers have the capacity to do the things that can be done, whether it's in one part of the country or another, whether it's on the west coast or the east coast, or wherever it might be.

For the first time, we have introduced a program that is providing some of the capital for facilities for research in the colleges. Again, we have been enthusiastically received in the support of the college activities. This is the first time most of them have been given recognition of the fact there is very interesting and fundamentally good research being carried out in the colleges. Again, we have had proposals and have supported projects from coast to coast.

In the institutional fund, we have funded a large number of projects as well. As I say, at this point we have funded about $450 million worth, and that is to about 546 projects at 73 institutions across the country.

The second phase of this program is now out. There is a call for proposals. We expect the proposals due in in the next month or two.

The third phase will take place next year. By next summer we will have awarded a total of $950 million out of the original $1 billion that has been provided in the two pieces. But what's interesting is that because the government provided that funding on a slipped year basis so that we were able to invest the funds until we got it out the door, it will grow to about $1.3 billion before we finally fully invest.

We have one more competition coming up. By 2001 our program will be completed, unless there is a decision that there should be a renewal of this particular approach. That is something that needs to be thought about, and we think it is an important feature of helping to build the capacity for Canada to be a participant in the knowledge-based economy.

These are the tools that our people need. These are tools are young scholars need. These are the tools that our best researchers in the nation need. If they're going to be able to live up to their potential, and if they're going to deliver to Canada what they're able to deliver for us, they have to have access to this kind of tool.

As I say, we will have awarded $950 million by next summer, which means getting pretty close to $2.5 billion in investment in the research and development infrastructure. It's still an infrastructure program, just as highways or bridges or roads or anything else might be, and it's just as fundamental for Canada being competitive. It is today's new highway.

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We are organizing a major national conference on innovation that's taking place on December 1 and 2, 1999, and we hope that many of you will be able to attend and participate in it. We're bringing people in from across the country. We have people coming from universities, hospitals, colleges, the private sector, and governments. We think it's going to be a very interesting opportunity to learn something about what has happened and the enthusiasm that goes along with this new level of support.

When we read the Minister of Finance's financial update, we were pleased to note that he focused explicitly on a number of items, one of which was the Canada Foundation for Innovation, its implementation and the impact it is having. Secondly, he focused on the Canadian institutes for health research and the activities there that had been strengthened as a result of decisions a couple of years ago. That is also very encouraging. You may also be fully aware of the creation of these new research chairs that are to be funded across the country over the next few years.

Again, I would have to say that the sense that this nation, and your government, is committed to ensuring that Canada really has the capacity to be a full international-quality participant in the knowledge-based economy is coming through very loud and clear. All of these are elements—as I say, the Minister of Finance made explicit reference to them in his financial update.

I'm here to say keep up the good work, and don't forget that a year or so from now we're going to be in a situation where you're going to have to contemplate whether you wish to renew the mandate the Canada Foundation for Innovation has, because we need to give our people the tools.

Thank you.

The Chairman: Thank you very much.

We'll now hear from the National Council of Women of Canada, the president, Ms. Elizabeth Hutchinson, and Shirley McBride, economics convener. Welcome.

Ms. Elizabeth Hutchinson (President, National Council of Women of Canada): Good evening, Mr. Chairman. I'm pleased to be here. I will be joined in the presentation by Shirley McBride, our economics convener.

The National Council of Women of Canada—NCWC—deeply appreciates this opportunity to present our concerns and priorities for economic issues affecting women to the House of Commons Standing Committee on Finance.

[Translation]

Founded in 1893, NCWC is a non-profit organization of women's groups representing a large number of citizens of diverse occupation, language, origin and culture, reflecting a cross- section of public opinion.

[English]

Our policies are formulated by means of local council initiatives. Policy additions and changes are proposed, circulated, and voted upon by the general membership.

Council members may only speak on existing policy when contacting the government, the media, and the public. Thus, this brief is the united voice of the federated membership of the National Council of Women of Canada.

In the preparation of this brief NCWC has addressed the five primary themes outlined by your standing committee. The process of budget-making, tax relief and reform, social infrastructure, new economy, and productivity.

In the process of budget-making, we find that the present consultative process is commendable since it permits individuals and groups to have direct input into the development of the budget and should be continued. However, it does not appear to be entirely well understood by Canadians.

Furthermore, we are concerned that longer-term targets for debt reduction could make the budgetary process less flexible and thus less able to reflect changing needs in society or address unforeseen economic or natural crises. In the process of budget-making, we would recommend that the present consultative budget-making process be continued, that information about how budgets are developed and the consultation process should be more widely publicized, and that longer-term targets for debt reduction not be considered.

Ms. Shirley McBride (Economics Convener, National Council of Women of Canada): For tax relief and reform we have several concerns. First, we strongly oppose a general reduction of income taxes at a time when social, health, and education programs continue to be threatened with cutbacks at every level.

A change from partial to full indexation of tax brackets to inflation is essential to stop the current gradual erosion of income, particularly at lower income levels.

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The present child care tax deduction is unfair to lower-income earners and discriminates against families in which one member is a full-time caregiver. Unpaid caregivers of adult family members, who are primarily women, make a significant contribution to society by providing care for individuals who would otherwise be cared for at government expense. Such caregivers sacrifice career opportunities and frequently subsist on inadequate income, both during the caregiving years and in later life.

We strongly urge that taxation continue to be based on individual rather than family income. Taxation of family income would have negative consequences for many women, as they're usually paid at a lower rate and are more likely to work part-time. In spite of the current concerted media blitz to convince government that high taxes are driving business out of Canada, the National Council of Women believes that payroll taxes such as employment insurance and the Canada Pension Plan should not be reduced.

Failure to recognize the value of unpaid work in the economy is reflected in substantial inequities, particularly for women, who often take part-time employment, refuse promotions, request unpaid leaves of absence, or resign from careers to become full-time, unpaid caregivers for family members. The downloading of care to family members that follows cuts to funding for social and health care services continues to be invisible to government.

For tax relief and reform, we recommend that income taxes not be reduced; that income tax brackets be indexed to inflation; that the present child care tax deduction for working parents be changed to a refundable income tax credit and made available to parents who care for their own children at home full-time and to unpaid full-time caregivers of adult family members; that eligibility for Canada Pension Plan credits be made available to unpaid full-time caregivers of adult family members; that the present system of basing taxation on individual income be continued; that payroll taxes not be reduced; that all government benefits be indexed to inflation, including pensions and so on; and that national accounting statistics recognize the value of unpaid work to the economy.

Under social infrastructure, we also have some concerns. The National Council of Women commends government for continuing to support the principles of the Canada Health Act, enabling the poorest Canadian to have access to the same quality of basic health care as the wealthiest.

Prorated benefits are a concern for us, as a majority of part-time workers continue to be women, who frequently spend their later years in poverty, lacking a pension and other job-related benefits. Lower-income older workers under the age of 65 are increasingly being laid off due to downsizing or restructuring, with little or no wage settlement or other financial resources, and generally with bleak prospects in the job market because of their age.

We recommend for social infrastructure that the principles of the Canada Health Act continue to be maintained; that the present single-payer approach to health care continue to be supported; that legislation continue to be enacted that would require employers to pay prorated benefits—medical, dental, pension, vacation, etc.—to part-time employees; that assistance be considered for older unemployed persons with meagre financial resources during the period of time before old age security benefits can be accessed at age 65.

Ms. Elizabeth Hutchinson: Under the heading of the new economy, we agree that a thriving economy, reflected in increased employment opportunities, benefits all levels of society. Support for investment in new technology to stimulate the economy and increase the standard of living in Canada should be continued. On this heading, we would recommend that the effect on the quality of life in Canada or changes created by new technologies and the increased integration of domestic and world markets be monitored by the government, and that government invest in infrastructure associated with new technology to stimulate economic growth.

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We have a number of concerns under the heading of productivity. We are particularly concerned about the increased reliance on markets. There is a strong role for government in the protection of public good in such areas as health protection, food safety, and environmental concerns.

Under this heading we would recommend that Statistics Canada be asked to develop a research agenda that would lead to improved measurement of productivity; that any definition of productivity should include criteria related to distribution of income; that funding support to the provinces for both post-secondary education and training and social assistance programs include accountability criteria; that a social safety net of government services and income maintenance continue to be secured for those in need; and that limits to the free market system be recognized in such areas as health protection, food inspection, and environmental protection.

That concludes our brief, but we will be really glad to answer any questions you may have on any of our topics.

The Chairman: Thank you very much. We'll get right to that.

We'll begin our ten-minute round with Mr. Epp.

Mr. Ken Epp (Elk Island, Ref.): Thank you.

Thank you to all for your presentations. I'm sorry, when you're here, I don't make eye contact with you, but I'm scrambling as I try to write down all of these important things you're saying. I did think of bringing in my laptop computer, because I can type about 100 words per minute, but then people think I'm playing games, so I wouldn't want to do that.

First of all, to the Retirement Income Coalition, I appreciate your presentation. You said you'd like to have RRSP contributions increased, that they're way too low, and yet only a relatively low percentage of people actually contribute anywhere near the max of what's available. I don't know the exact number, and Paul Szabo, who knows these things off by heart, isn't here right now.

Why would you want those limits increased?

Mr. Charlie Pielsticker: First of all, it does affect about 600,000 Canadians currently. In this type of economy, with the new companies coming out, if we are to retain those types of people...and the percentage of workers in that area will increase significantly.

I was speaking with Mr. Szabo just a moment ago, and he referred to the fact that only 3% of Canadians are impacted by that. He referred to a book here, a government publication. We happened to be over for a meeting with Keith Horner at the Department of Finance earlier this afternoon.

I'll turn it over to Ian Markham.

Mr. Ian Markham (Representative, Retirement Income Coalition): This book, which comprises tax statistics on individuals for the 1997 tax year, has just come out. Although it may be true that 3% of Canadians are affected by this limit, when you look at the percentage of Canadians who have tax returns, it's in fact 7%. If you look at the proportion of total income tax raised by Canadians, the individuals affected by the limits pay fully one-third of all the income taxes. So we're dealing with some individuals who are funding a significant portion of the government revenues.

I turn it back to the point Charlie Pielsticker raised, which is looking at the impact on those who could get far higher limits in the U.S. and in the U.K. The magnitude is huge. We have looked at many aspects of the tax system, not just the retirement system, in examining what would be a reasonable limit, and felt that a doubling of the limit, from $13,500 to $27,000, was actually a modest amount of increase over a period of years, again thinking of five years, in order to maintain the limits at a more competitive level.

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Mr. Ken Epp: Okay, thank you.

Our friends from the Real Estate Association pointed out something I have never thought of—that is, when the government defers collecting income tax on RRSPs, it's like a savings account for the government to give them some income down the road a bit, when presumably the number of people in the retirement years will be a higher proportion of our population than it is now, as demographics change.

So thanks for that little bit of free education. It's amazing that one can, at this time of the night, still learn something.

Mr. Ian Markham: In connection with the point you just made about the deferring of income taxes into the future, you have to remember that for baby boomers—and we know all about the aging of the population—it's not too far away before they begin their retirement. Already some are starting early retirement. We have to maintain a very healthy tax base going into the next millennium, particularly once the majority of them have retired, because they're going to have very heavy health costs. These costs have to be borne by someone, and we want to make sure there is the opportunity to have high taxes available for the country ten, twenty, and thirty years from now. One way of doing this is to have people put aside money now, as an incentive, so that they'll have tax money coming later on, many years in the future.

Mr. Ken Epp: That does bring me, in fact, directly to my next question. As a member of Parliament, one of the most frequent complaints I hear from seniors is that they have saved just enough to keep them in poverty but too much to make them eligible for all of the government programs. Their marginal tax rate on their own income is very high when that's taken into account. Some estimates are as high as 60% to 65% on their own income.

I often have people phone me or come to see me in my office and say, you know, here I am; I need $3,000 to fix my roof, I have to take out $4,500 in order to get the $3,000 to pay my bill, and I'm afraid I'm going to run out of money because I'm expected to live a long time. Now, that is, of course, a blessing, in a way, but it is a dilemma.

Do you have any comments on that type of thing with respect to annuitants?

Mr. Ian Markham: There is a distinct lack of understanding by Canadians, and particularly lower-income Canadians, as to what marginal tax rate they're going to be paying in retirement. They see what may appear as a relatively low marginal tax rate on income taxes—and you talk about a tax rate of 60% to 70%—but when you take into account the guaranteed income supplement, provincial supplements, and all of the other aspects of income they may be able to get from various different sources from the government.... In fact, the GIS and the Ontario gains program alone can have a 100% tax rate.

I was reading a report very recently that said with some of those individuals who also have dividend income, it in fact works out to higher than a 100% tax rate, and yet they just don't know what is potentially coming for them way down into the future. So you have individuals at a lower income saving for RRSPs, oblivious to the fact that they are getting a low tax deduction on the money and will down the road be paying a very high income tax on those moneys.

I think the point, then, in response to your comment, is that governments need to help Canadians understand the tax system and what's coming for them and take a more rational approach to how marginal tax rates interact with all of these other government programs.

Mr. Ken Epp: So you would just have them understand it. You wouldn't be terribly concerned about the need to relieve the burden somewhat.

Mr. Ian Markham: No, I should have gone further—

Mr. Ken Epp: Yes.

Mr. Ian Markham: —and said there has to be a rationalization of the income tax structure so that individuals are not penalized for putting moneys aside for their retirement.

Mr. Ken Epp: To me, that's a very important issue, because our whole system, whether it's EI.... For instance, unemployed workers looking at maybe taking a part-time job will not do it because they lose more than they gain by taking a part-time job. Throughout our whole system, with retirees and others, we have too many disincentives built into our system that I think really prevent people from doing the things they should be doing.

• 1925

I want to correct the Hotel Association. I just have to do this. I think you indicated a 15% reduction in EI premiums. When I heard you say that, I checked your notes, and you actually wrote it that way as well. It's nowhere near 15%; it's 15¢.

Mr. Anthony Pollard: I realized that later, yes, when I was looking at the numbers.

Mr. Ken Epp: The actual reduction in the premium is much closer to about 5%.

Mr. Anthony Pollard: I compliment you on finding that error. Thanks very much, sir.

Mr. Ken Epp: Now, we have conflicting testimony here. The people from the National Council of Women say “Please keep those payroll taxes high; EI and CPP should not be reduced”, and yet EI, by legislation, is a designated fund. It's supposed to help people who are employed but between jobs. That's what it's designated for.

But here the government is, in my view, illegally taking this money and rolling it into general revenue, which they're not even entitled to do. Of course, their being in a majority situation means we can't tell them to stop it or else we'll kick them out. They keep getting away with it, and you're saying okay, keep doing it.

On the other hand, we have both the Hotel Association and the Real Estate Association saying, you know, let's deal with this issue of the overpayment in EI. It's really much too rich. It's like your local fire insurance company charging you five times the premium they should and just pocketing the money. Eventually you would say no, that's not fair.

I'd like you both to respond.

Mr. Anthony Pollard: I think you're in fact in agreement with what we're saying at this end.

In fact, when you were doing the vote, we were having a lovely conversation with my esteemed colleagues on the left until I happened to comment on something. Then I felt it was like the Jerry Springer Show here—

Mr. Ken Epp: And we missed it!

Voices: Oh, oh.

Mr. Anthony Pollard: —where we have different people.... It was a lot of fun. We had the RCMP in here earlier, but fortunately, when Mr. Loubier left, I guess the RCMP left with him, so we don't need to worry about the Springer show here any more.

The fact of the matter is, in the hotel industry upwards of 45% of all our gross revenue is going to taxation, to be very serious about this. This is a problem, and we have to be able to reduce it.

What are the major items we have to pay on? Take human resources, where we employ 235,000 people. If we were able to reduce that a little bit we could make ourselves much more competitive. That's why we welcomed Paul Martin's decision to reduce EI, and we would like to see that come down even further. There's no doubt in our mind that's the road we would like to go on.

I think you're somewhat in agreement with me, if I'm....

The Chairman: You've gone a little long.

Mr. Ken Epp: But there's nobody else here.

The Chairman: Ms. McBride.

Ms. Shirley McBride: I think our concern was that there was a lot of controversy about cutting EI benefits over the past number of years. The cuts that have already been made can be maintained, but I think the cuts need to be done very carefully. If there's surplus money in the EI fund, then maybe some of the benefits that were cut could be reinstated. That seems to be an ongoing issue.

We also have concerns about taxation in general not being reduced. Our current Canadian tax and transfer system has enabled Canada to not have the vast disparity of income that exists in the United States. It is the Canadian way to not totally level the field but to make sure everyone is taken care of.

That was the point we were trying to make there. If you're going to cut taxes, then be very careful that benefits aren't being cut as well.

The Chairman: That point was quite clear, actually.

Ms. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

I appreciate the thoughtful presentations today. We heard a group previous to your panel of witnesses, and they brought up some different points of view. Even today we're hearing different points of view—and I'm sorry I missed the Jerry Springer episode of this committee meeting.

• 1930

Mr. Pollard, I saw you react when Ms. Hutchinson and Ms. McBride were talking about prorating benefits for part-time employees. I wonder if you could just comment on that suggestion. You seemed to have an opinion; it was certainly in your body language, if not spoken.

Mr. Anthony Pollard: I noticed that as well Mr. Nystrom...we kind of caught each other's eyes there.

About four or five years ago I spent some time over in Geneva at the International Labour Organisation—and I am coming back to this, Ms. Redman—when the ILO decided, in their wonderful wisdom—and I'm not going to establish eye contact with my friend on the right-hand side right now or he may look at me strangely—that the benefits would be the same for people working part-time as they would be for people working full-time.

We said that what we want to do is to have people recognized for the quality of the work they're doing, and that the individual, if working five hours a week, would not be receiving the same benefits as a full-time worker. So when I hear something such as their salaries or their benefits being indexed or whatever.... We live in a global economy today, and how can we function when we're up against competition from south of the border, from Europe, from Asia? It just is something that is very difficult to accept and understand.

The Chairman: Ms. McBride.

Ms. Shirley McBride: The prorating is that for people working probably half-time they would have half-time vacation benefits. They would have part of their benefits, like half-time pension benefits. At present, a number of employers—fast-food and retail chains—reduce operating costs by hiring part-time people in order to not have to pay the benefits. Eaton's was one, if I may use them as an example, that did this traditionally. If people spend most of their time working part-time, they end their career with no benefits. Many of these are women. That's why it's an issue for us. They end up in poverty.

The Chairman: Ms. Hutchinson.

Ms. Elizabeth Hutchinson: I would just like to add something in answer to what our friend at the other end of the table said about people not taking part-time jobs or retiring early because they felt they wanted to make sure they had their benefits and so on. For many women there is no choice about that, because they're the people who have to take care of the family. If they don't have children at home, they very likely have elderly parents, sick spouses, and people like that.

In the present climate—in Quebec we call it the virage ambulatoire—you have people sent home from hospital needing to be looked after. So women, in particular, have to give up their jobs early or go to part-time work or something like that. Then they don't get the benefits that they would have. They end up their days in dire poverty. I know some men do this as well, but mostly it's women who are doing this job.

The Chairman: Ms. Redman.

Ms. Karen Redman: Thank you for that, both of you.

Mr. Pollard, I also wanted to talk about the earlier witnesses representing mostly labour unions and steelworkers. They were talking very vigorously about bringing down the EI premiums.

One of the things that I have heard about and read about is a sort of experience rating for EI, and sectoral ratings. I represent Kitchener Centre. We have a wonderful tourism attraction in Oktoberfest, and our city benefits greatly, as do the charities. I'm very aware of what tourism can do for a community, of the benefits. I'm wondering if you would just comment on that factor and the fact that when we look at EI experience and employment across the country, very often people talk about tourism as being very seasonal.

Tourism is perhaps one of those employment areas that look to EI as being part of the base salary. They get so many weeks a year after the tourist season is over; it's cyclical. If they can't rely on EI, they're not above poverty levels; they can't pay their rent. I'm wondering if you'd comment on that.

Mr. Anthony Pollard: First of all, we're very fortunate in the travel and tourism business. The seasons have been extended. I think all of you or many of you are now having to find hotel rooms, for example, here in Ottawa, rooms where it used to be that you'd be paying a fair amount for them up until about the middle of October, when your rates would fall off. If you go out now and you try to get a hotel room in this town or in many of them across Canada, including K-W, it is becoming more and more difficult.

What I'm saying is that as opposed to a high season of let's say seven months, and a low season or what we call “shoulder seasons” of a month or two at each end, business is in fact getting better and better. As a result, there is greater and greater demand for employees and there are fewer and fewer people working part-time, if you will, and depending upon EI or what we used to call the old UI between periods of work. That's good news for us and it's good news for the government. We see that trend continuing.

• 1935

One of the things I'd like to dispel is the notion that an individual working in a hotel is doing a hamburger-flipping job and it's part-time. Certainly there are a lot of part-time jobs. Our industry is typically one-third full-time, one-third what we call full-time part-time, which is somebody working about twenty hours a week, say, and what you call part-time, which is somebody working four or five hours a week.

Contrary to popular belief, many people do like to work part-time, and that includes people who are a little older, people who are a little younger, and people who are maybe going to school or whatever. In our industry, in most cases, in fact, they are people who are exceedingly well taken care of, with full benefits and the full package and so forth that goes along with it. I just wanted to clarify a couple of those points.

Ms. Karen Redman: Thank you.

I'd like to ask another question, if I may, of Ms. McBride and Ms. Hutchinson.

You talked about not treating the family as a taxation unit. I had the privilege of sitting on the subcommittee of this committee that looked at tax fairness in one- and two-earner families that had children. You suggest that we go to a child tax refund instead of a child tax benefit. I'm wondering how you would see that mechanism working. Who would we pay that to? I don't have your written brief. I'm just going on my memory of what you said.

Ms. Elizabeth Hutchinson: I said that I'd recommend that the present child care tax deduction be changed to a refundable tax credit and be made available also to parents who care for their own children at home.

Ms. Karen Redman: That was for...?

Ms. Shirley McBride: That was for working parents.

Ms. Elizabeth Hutchinson: Yes. That was for working parents, but also for parents who choose to have one parent at home. We are not in the business of saying that everybody needs to go out to work. If people choose to have both parents go out to work or to have one parent at home, we don't feel they should be penalized either way.

Ms. Karen Redman: I would agree with you, but my question is, if we go along with the theory that we're not treating the family as a tax unit but as individuals, to whom would we pay that refundable tax credit?

Ms. Shirley McBride: If it's a family and if they're both working parents, it would be the one that normally has the child care deduction. If there's just one parent working and the other one is staying home, the refundable tax credit is going to benefit the family because there's only one income being taxed.

The other issue about individual rather than joint taxation is that when you combine both incomes it likely places the family in a higher tax bracket and both spouses pay more income tax. In most families where there are two people working, the wife is the lower-income spouse—although times are changing—and that puts her in a higher tax bracket than she would be in if she were on her own.

Ms. Karen Redman: But you're suggesting that for a family that chooses to have one parent, whether it's the mother or father, at home, that benefit would be accrued as a family as opposed to the individual tax...?

Ms. Shirley McBride: Well, they don't have individual taxes. If there's only one person working, there's only one tax form being filed.

Ms. Karen Redman: Then aren't you still failing to value the unpaid work of the at-home spouse, whether they're looking after an ill person or a child?

Ms. Shirley McBride: You'd be talking about giving them a pension of some sort at that point, if you're going to give something like a child benefit. Is that where you're going with this? Now that would be ideal. We didn't put it in our brief, but if you want to—

Ms. Karen Redman: No. I just wondered if that's where you were heading with your brief, because it seems to me that you're saying not to treat the family as a tax unit, to tax individually. I'm just trying to follow the logic of your submission.

Ms. Shirley McBride: They were in two different sections.

Ms. Karen Redman: Okay.

Ms. Shirley McBride: The first was with income tax and the taxation. Periodically there's a movement.... We have a resolution on this on our books from way back, about twenty years ago. It was an issue back then. Someone was proposing combining family incomes and taxing them at the maximum amount of the total. We opposed it for a variety of reasons.

• 1940

That's a different issue. In the one with the refundable tax credits for the people who choose to stay home to look after children, that family is already being taxed as a family, and there is only one income. So it's not an issue. If she were working, there would be two incomes, but she's not.

Ms. Karen Redman: But we're not necessarily flowing money to the hands of the caregiver, then—it's to the family unit.

Ms. Shirley McBride: No. It would be to...whatever money is coming in, the way it is now.

There's been a lot of concern about that among people who choose to stay home and look after their children, because if those parents are working, the child care becomes tax deductible, but when a parent chooses to stay at home there is no similar benefit for that family. That was the issue.

Ms. Karen Redman: Okay.

The Chairman: Would you like another question?

Ms. Karen Redman: If I may, I would just like to ask Mr. Strangway a question.

I want to touch on the brain drain a little bit. It seems to me, when I've looked at it and read about it, that it isn't just worrying about the best and brightest, which I think the funding for the Foundation for Innovation partly speaks to, but it's also sectoral. I'm wondering if you would want to comment on that. It seems we have deficits in specific areas, as opposed to worrying that we're losing all of our bright lights.

Dr. David Strangway: I don't think there's any question that there is some focus with respect to different sectors, but the foundation has been working with the institutions. There are something like 60 or 70 universities across the country, then the teaching hospitals and the colleges, and we respond to where they are putting their priorities.

So rather than going back to these institutions and saying it has to be in this discipline, field, or area, what we're getting is the collectivity of where these institutions see the action. In effect, that's where you're going to have the maximum brain drain—where the action is taking place. We haven't gotten into imposing it by sectors, but when we get the responses from the institutions, it's very clear that the institutions know where they're having the difficulties. That's where they're hiring and that's where they're then choosing to make their proposals to us with respect to the individuals.

So I think we are addressing it, but we're addressing it without creating it and making it a central policy issue. We're really saying to the institutions, show us where you need the most help to make these things happen.

Ms. Karen Redman: Thank you.

The Chairman: Thank you very much, Ms. Redman.

Mrs. Bennett.

Mrs. Carolyn Bennett (St. Paul's, Lib.): Thank you.

Firstly, I would just like to say to the National Council of Women of Canada that I am always impressed by the thorough policy process of your organization, which I think sets you aside from lots of others we hear from. Whether it was in the child custody and access committee, or in many of the other places you have presented, it always is thoughtful and well researched, I think.

I have a couple of questions. I too am worried about the part-time workers. I think the casualization of the workforce is something that is particularly worrying in the health care sector, where nurses are having to work in three different hospitals, almost in a restructuring that allows the management to decide not to pay benefits. So I would love to see something that would be a deterrent for that in order to make it better in certain sectors, not only for the workers, but also for the people being looked after.

My concern is that a lot of the part-time workers are non-unionized, and unless they were actually getting minimum wage, we'd be concerned that it would end up coming out of their wages and their wages would actually just come down. How would we protect against that? Had you thought about that at all? It would help minimum-wage people, for sure, because it would be added. But I'm a bit worried about everybody else.

Ms. Shirley McBride: Well, the minimum wage is mandated by law, and I think the benefits would outweigh, probably, in the long term what differences they had in salaries. Salaries are set by the market. It's competitive. So I don't think you'd see a massive cut in salaries with people who needed part-time workers. If one person were paying $2 over minimum, the other people would have a hard time keeping their employees. I would hope the market could absorb that.

• 1945

Mrs. Carolyn Bennett: I just need a little explanation on the child care stuff. To you, a refundable tax credit means that it could be paid to either person, I understand. A non-refundable tax credit has to go to a taxpayer, right?

Ms. Shirley McBride: Yes. It could be in the form of a tax refund at the end of the day.

Mrs. Carolyn Bennett: Right.

Ms. Shirley McBride: People who pay for child care commercially are entitled to a tax refund at the end of the year. What we're looking for there is something similar for the people who stay home and look after people. But there has to be income involved.

Mrs. Carolyn Bennett: And even though you've also said adult family members, I think what I'm hearing is that's then not refundable.

Ms. Shirley McBride: Well, maybe we have an unfortunate choice of words there in putting in the tax credit. We were thinking more of a refund.

Mrs. Carolyn Bennett: Like a tax deduction.

Ms. Shirley McBride: Yes.

Mrs. Carolyn Bennett: Okay.

Ms. Shirley McBride: You get it back at the end of the year.

Mrs. Carolyn Bennett: Well, I assume you would assume that would also apply for parents of children with disabilities, or for any other reason that somebody has decided to work at home as a full-time caregiver, as well as the adult ones. Is that right?

Ms. Elizabeth Hutchinson: Yes.

Ms. Shirley McBride: That's a big issue with our membership.

Ms. Elizabeth Hutchinson: That's a big issue with our members because people, particularly in the middle-age range, have children at home and they have older parents. But also I would certainly see it applying to people with children, teenagers, or young adults, whoever, in their families who were suffering from disabilities and had to be looked after at home.

Mrs. Carolyn Bennett: Thank you.

I just wanted to say to Dr. Strangway that the success of the innovation fund is also due to the fact that it's been so beautifully managed. People have nothing but compliments in terms of how it's been assigned and given out, and we thank you, because sometimes you set up funds that are nothing but problems. We are thrilled about how good it looks on the government in terms of this particular fund. Thank you.

Dr. David Strangway: We have the same dialogue. You usually come to complain. I'd like to thank my colleague, who has done an awful lot of the management.

The Chairman: Now, Doctor, how do you think she's doing as a member of Parliament? Do you want to answer that?

Mr. Nystrom.

The Hon. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you very much, Mr. Chair.

I want to first of all thank all the people for their comments and observations this evening. I apologize for the bells interrupting everybody, and I'm sorry I missed the Jerry Springer show. It would have been exciting to see. We should have left the cameras rolling.

I'd like to ask a few questions, and I'll start with the Real Estate Association. You list here a number of tax cuts you want—income tax, de-indexing, the 5% surtax, and so on. The one tax you do not refer to is the most unpopular tax in the country, according to polling, and that's the GST. When you ask the ordinary people out there in the polls what tax cut they'd prefer, it is the GST. Recently a poll was done by Environics that had 54% of the people saying that's where we should start.

Why do you advise something that is not in the mainstream of current thought in the country?

Mr. Pierre Beauchamp: I think the polls may reveal what you just declared. On the other hand, I think the alternative of dealing with a separate tax system and what would be involved for Canadians to change over to a different system hasn't been seen as that appealing to Canadians at this particular stage, or at least that's the information we have. However, in our opinion, from what we're hearing from our members, the priorities have been debt reduction and tax cuts. It's in that context that we have made the recommendations we have.

• 1950

Mr. Gregory Klump (Senior Economist, Canadian Real Estate Association): If I may add to that, the principal focus of our submission is personal income tax, for the very simple reason that Paul Martin has identified it as a first priority. We're also advocating that business taxes be cut. And two years ago, just to speak to the point on EI, we said that the government's own actuaries said they can cap it at $20 billion and still have enough to go through an entire economic cycle, so you take care of those who are entitled to benefits.

Principally, the focus of this submission has been on personal income tax, because Paul Martin has identified that as the very first priority and we wanted to speak to it.

Mr. Lorne Nystrom: You also say in your brief that you want to limit new spending; you say “limiting spending increases to health and education”. Again in point five you're calling for a rise in the RRSP contributions by $2,000 per year until they reach double their current limits. That's a new spending increase. Isn't there a contradiction here in your advice? You're saying no spending increase except in education and health, and yet you want a spending increase in terms of the RRSPs.

Mr. Pierre Beauchamp: We have made the point as well, though, in our brief—and I think our friends with the Retirement Income Coalition have done the same—that 15 years down the road, after you've increased the RRSP contribution limits, those Canadians who benefit from that advantage would be paying taxes. It's simply delaying taxes to a time when the government would need it most, at a time when baby boomers are actually going through the retirement process. It's a delaying of tax payment, not a doing away with. There's a huge difference.

Mr. Lorne Nystrom: You're sort of quoting John Crosbie, then—“short-term pain for long-term gain”. There's an exception to just education and health in the short term: you want more spending in terms of RRSPs for wealthier people.

Mr. Pierre Beauchamp: I don't know that I would agree with wealthier people. That has been a notion we have argued with for quite some time now, and I think—

Mr. Lorne Nystrom: It's still a tax expenditure, though, in the short term.

Mr. Pierre Beauchamp: It may be, but I think if you consider the advantage down the road at a time when government will need the money, it's probably very wise financial planning for the future.

Mr. Gregory Klump: Moreover, increasing RRSP contribution limits by $2,000 per year according to the most recent budget would cost the government in the order of $400 million per year, which is pretty small potatoes in comparison to the expenditure on health care. I think both are affordable.

Mr. Lorne Nystrom: Yes. I was just noticing that you said limit spending to education and health and then you call for an increased expenditure in this area.

Going to the Retirement Income Association, I wonder if you can tell us what the average income of people is who make the maximum contribution of $13,500 to date in RRSP. It's about 3% of the people. What is their average income? Part of my riding is the city core, the inner city in Regina, and we don't have many people there who make enough money to even make an RRSP contribution to begin with. I'd be very interested in what the average income is of someone who makes the maximum contribution today.

Mr. Charlie Pielsticker: First of all, I think you'd find, coming back to the 1999 book, that it isn't 3% of Canadians; it would be about 7.5% according to this.

Mr. Lorne Nystrom: Who make the maximum contribution today?

Mr. Charlie Pielsticker: Who are affected by the limits, number one, and those people are contributing about 31% of all the tax revenue.

Mr. Lorne Nystrom: What would the average income of those people be, roughly? What you're doing here is advocating that we increase the limits for those people. I assume those are the wealthiest people in the country who make the maximum contributions. Someone who is in the inner city of Regina, who goes to a soup kitchen and lives on minimum wage, or works part-time—as the two women have said here—or are living on welfare, in single-parent families, where there is lots of crime and lots of violence, those people aren't even making a contribution. And some who are may be making $1,000 a year or $500 a year.

How would you go into my riding in the inner city of Regina and explain why you want to have a big tax break for the wealthiest people in this country when there's a growing income gap and increasing poverty? The things the women were talking about here today in terms of those people, that's the reality we're facing. So what is the average income of those people who are today making the maximum contribution? Then why would you want to double it for them and not be concerned about low-income people?

• 1955

Mr. Ian Markham: To answer your question about the income, you're looking at individuals who earn $86,000 and up. So among those, what would be the average? I would guess that $100,000 may be the average of the people affected by the increase. That's a rough guess.

Mr. Lorne Nystrom: Yes, I think that's probably a pretty good guess. You have to look at it as a member of Parliament would: if we were to accept that, how do we explain it to my constituents, for example? If you come out to Scott Collegiate in my riding, a high school that is 95% aboriginal in the inner city, and say you want to advocate an increased tax break to people making at least $100,000 or more, how do you expect us to accept that as sound advice in terms of public policy?

I'm not trying to be tough, I'm just trying to see why you would suggest we should be advocating this at a time when there's growing income disparity, when we have prairie farmers who are going bankrupt—you heard the news stories—when we have people being cut off EI because of changes in the employment insurance policy, and when we have homeless people on the Hill today. Yet you're advocating a tax break for the wealthiest people in the country.

Mr. Charlie Pielsticker: I'd turn around and I'd say the people we're talking about currently pay.... It's about 600,000 people. We're dealing with people many of whom are 30 to 35 years old and they're in today's economy. We can either look to being competitive on an international basis, which is the nature of this government, the nature of Canada today.... And if we are looking to have the high-growth industries of the future, we have to retain the type of people who are going to be earning those types of incomes.

Mr. Epp had brought up a question earlier about the disparity of income and so on. I wanted to just come back to the book here again and say that in 1997 there was $38 billion of money paid out in retirement income benefits and $42 billion of expenditures. So by the Department of Finance's own calculations, by 2006 the money being received in and being taxed by the government will actually be greater than the amount of deductions.

Mr. Lorne Nystrom: I wonder if Ms. McBride or Ms. Hutchinson would comment on the wisdom of the advice we're receiving from your next-door neighbour. Do you think we should spend a lot more money now on the wealthiest people in terms of another tax break for them? There's only so much money to go around.

Ms. Elizabeth Hutchinson: That's a really difficult question.

Mr. Lorne Nystrom: But that's the advice we're getting.

Ms. Elizabeth Hutchinson: I know, I hear that. I have to say I've been in Canada 21 years, and I have never made a contribution to an RRSP. I'm actually the wife of a retired priest, and we never, when we were junior clergy, had that sort of money. So I find it actually difficult to get my head around these sorts of figures.

The women I deal with in inner city Montreal or the women we hear from, the older women who are retired on very small pensions, if any, are the sort of people we are really concerned about. We feel that one really needs to have the means to support them and to help them to support themselves in their older years.

Ms. Shirley McBride: I would like, if I may—it's a little off topic—to change an answer I gave to Dr. Bennett a few minutes ago about the refundable income tax credit. In reviewing the recommendations, we did mean a refundable income tax credit instead of the present child care tax deduction, because we were thinking about the lower-income people who have almost no income tax to pay and for whom very often, particularly when you're talking about full-time caregivers of adult family members, there is no income coming in. A refundable tax credit would mean if it went down to zero then they would get money back. It was a refundable tax credit.

So that is a partial response to what you are saying, because we're concerned there's so much poverty and there are so many needs that I really wonder about cutting government money by benefiting the very wealthy part of society.

Mr. Lorne Nystrom: Maybe somebody else can add something.

• 2000

In my riding, in addition to the inner city, where I have thousands of aboriginal people, I have 12 Indian reserves. According to StatsCan, it's the second-poorest riding in the province. That's before the farm crisis and people going bankrupt.

No more government spending, you say. We have farmers who are requesting in my province alone an extra billion dollars from the federal government because of the cutback in the subsidies and the abolition of the Crow rate. There are massive American subsidies at 38 cents on the dollar, 55 cents on the dollar from Europe, and 9 cents on the dollar from our own country. Yet no more government expenditures except for wealthier people with RRSPs and education and health—nothing more on EI, I'm gathering is what most of you are saying, except for the two women. Maybe Mr. Pollard is saying something different there.

I'd just like to ask you, Mr. Pollard, to react to that. I mean, this is the reality we are facing. Even you with your charm probably couldn't go into the inner city in Regina and have a public meeting and persuade these people that giving a bigger tax break to Conrad Black is a good thing.

Mr. Anthony Pollard: If you look in your riding and you look at what some of the industries are that are performing reasonably well there, and look at some of the hotels in Regina, they're probably some of the biggest employers in the city. In fact the best way to go out and be able to heighten prosperity is to ensure the people have jobs. And how do you go out and create jobs? Well, you ensure that the people who are creating the jobs, who are employing these people, in fact are put in the best possible situation to do so.

Mr. Lorne Nystrom: But is that the best way to do it?

Mr. Anthony Pollard: I believe it is.

The Chairman: Mr. Markham.

Mr. Ian Markham: I'll come back to answer the second part of your question.

The Retirement Income Coalition is focusing on retirement income, as opposed to the general tax system. We're not advocating or taking anything away from the individuals you're talking about.

Mr. Lorne Nystrom: There's not much more to take away from them.

Mr. Ian Markham: I realize that.

If you're looking at what the retirement system, the RRSP system, the pension plan system—which is what we're talking about—is attempting to do, it is attempting to create some reasonable replacement of income that the individuals had before retirement. And if you look at the Canada Pension Plan, or you look at old age security, or you look at guaranteed income supplement and other provincial programs, you'll see that individuals earning up to say $20,000 are already getting an adequate level of income replacement from those programs compared to their income prior to retirement, adequate in the sense of something most people would regard as reasonable. These other programs—pension plans and RRSPs—are more designed for people for whom the government programs don't give an adequate income replacement. They are not for the individuals who are earning extremely low amounts; they are for the next tier up.

Mr. Charlie Pielsticker: I would think the situation of many of the people you're referring to would improve significantly in retirement compared to where they are today, and that's because of the government supplement programs that do kick in at that time. Actually they're much better off as they do retire later on.

Mr. Lorne Nystrom: In reference to the Retirement Income Coalition, what do you advocate for the lower-income people in terms of a more decent retirement?

Mr. Charlie Pielsticker: What was the last part of your question? I'm sorry.

Mr. Lorne Nystrom: As the Retirement Income Coalition, what do you advocate for lower-income people in terms of enhancing their retirement compared to the status quo—

Mr. Charlie Pielsticker: I don't have the—

Mr. Lorne Nystrom: Because there is a widening gap in terms of income in this country, and that concerns a lot of us as policy-makers. What do we do to create more equality rather than more inequality? One of the things in your paper you're quoting is from Monique Bégin and Marc Lalonde a number of years ago.

Mr. Charlie Pielsticker: Right.

Mr. Lorne Nystrom: One of the principles is to guarantee—this is in your paper—a basic income for those without the resources of their own. So how do we do that—how do we enhance that over what we have today? The women next to you say there has been some deterioration in living standards and cutbacks in EI and problems with Canada Pension Plan unless we have premiums that are going to pay out enough in the future. So how do you do the other side of the coin?

Mr. Charlie Pielsticker: I believe according to last year's submission—and I don't have it here in front of me—people earning up to $50,000 a year, through various government programs, will have the equivalent of a 70% retirement provided through government programs. So when you're looking at up to $50,000 a year, perhaps those people do not need RRSPs, perhaps they do not need other forms of supplement in there. If I'm looking at the vast majority of Canadians—and this is what we put forward last year—the current programs that are in place do cover the majority of Canadians at the lower-income levels.

• 2005

The Chairman: Thank you, Mr. Nystrom.

On behalf of the committee, I'd like to thank the panellists. It's been yet another interesting day for the finance committee as we see that various individuals of course have different points of view on how to improve the standard of living for Canadians.

Having paid close attention to the questioning by Mr. Nystrom, who correctly points out many of the social challenges we face—and we all feel that the issue of child poverty, homelessness, the challenges we face with Canada's natives, are very real problems, real challenges that real people face every single day—having said that, we have to find a way to make sure the social programs we have are in fact sustainable. So we have to find a road to generate the type of economic growth and wealth that can sustain those programs.

The reason I bring this up is that there's really no need to believe the two agendas are exclusive. They're not necessarily mutually exclusive. I think there is a convergence, and that you want to improve the standard of living, and that is no different in the inner city core of Regina or Toronto or Newfoundland. What is the plan of action to improve the standard of living for Canadians? That is what drives the agenda.

If it means lowering taxes is going to spur on economic growth, then that's the road we must take. If it means smart choices in the area of social policies, then that's what we have to do. But this committee will always keep in mind that the ultimate goal is in fact to provide Canadians with a better standard of living.

You have certainly added value to the debate as to what the priorities should be, and for that we're very grateful. Thank you.

The meeting is adjourned to the call of the chair.