Saturday, March 8, 2008

A tale of two bills

The recent past has seen the passage of two bills in the House of Commons, both dealing with tax credits and both creating a great deal of controversy. The subsequent response to the passage of the bills by the Harper Conservatives lays bare truths that could prevent them from ever obtaining the majority government they want so dearly.

The first bill, Bill C-10, has a covert piece of wording in it that would allow the Canadian government to withdraw tax credits from any film or television show they deem offensive. The revealing part about the passage of this bill is not only the lack of reaction by the Conservative government but also the background support for the amendment.

Charles McVety is an ultra-conservative, ultra-literalist Christian behind the Canada Family Action Coalition, a non-profit organization with a mission to "defend and promote Judeo-Christian principles in Canadian society". Among other things, the group endorses the notion that gays lobby to ultimately eliminate gender distinctions in our society, that sexual education in school INCREASES pregnancy and disease, that the Globe and Mail spreads hatred, and that child care is synonymous with the state raising children instead of parents. After Bill C-10 quietly passed through Parliament, McVety came forward and praised its passage, suggesting that he and his organization were crucial in solidifying support for the bill.

So this bill sailed through Parliament with the support of the Conservatives and the Canada Family Action Coalition and nary a peep came from Harper, nor from the opposition for that matter. But when McVety says that its passage only goes to show that Canadians are conservative and that is why we voted for a Conservative government, I, like Margaret Wente here, would challenge this assertion on both accounts. Canadians are by and large very centrist. And the Conservative government is only conservative in its social views, not its economic practices.

Dan McTeague, a Liberal MP, had the chance to put forth a private members bill recently. Normally, only 1-3% of these bills ever pass through Parliament, especially when coming from an opposition MP. But this bill makes sense, even to a conservative government. Harper has made it clear his goal is to limit the power of the federal government and return money into the hands of taxpayers. So when McTeague put forth a bill to amend the Income Tax Act to allow Registered Education Savings Plan (RESP) contributions to be tax deductible just like those in Registered Retirement Savings Plans, I was sure Harper'd be on it like a fat kid on a Smartie. But him and his party actually unanimously rejected it. Luckily it is a minority government, so the opposition parties voted in favor and the bill passed. End of story, right?

Wrong. Although this bill would see more tax dollars returned to taxpayers, it was described as reckless spending of taxpayer money by Jim Flaherty, Minister of Finance. Huh? Furthermore, the Conservatives stated that the opposition had it all wrong and that this would cost the government up to $2 billion per year because of its likely popularity, a tough pill to swallow with the recent budget only projecting a slim surplus. So they vowed to fight it tooth and nail to prevent it from passing.

What is wrong with this? First off, a majority of ELECTED parliamentarians voted in favor of this bill, 156-122 to be exact. But the Conservatives, the party pushing for an elected, effective, and equal Senate, are imploring the UNELECTED senators to quash a bill just because they don't like it. Second, why would the Senate listen? As stated by Senator Celine Hervieux-Payette, the Conservatives have called senators "lazy, unelected, unaccountable, partisan hacks". I know I wouldn't be doing any somersaults for them if I was in the Red Chamber.

How about the financial aspect? First of all, if you want to talk about bonehead financial moves, look at the GST cut. Sure it feels good at the cash register, but economically, cutting consumption taxes like GST is stupid. It not only reduces government revenue, but it encourages spending and discourages saving. The 2% GST cut instituted by the Conservatives to get votes from the very soccer mom crowd they are now at risk of alienating shorts the feds $11 billion a year. That makes $2 billion look like child's play!

But beyond that, I believe Dan McTeague is on to something when he defended the bill by looking at the big picture and stating that in the long run, more educated children will eventually make more money, thus paying more income tax. The logic is sound as you will see and puts any concerns about the upfront costs of this program to rest.

Personal income tax accounts for 50% of government revenue. Having a postsecondary education certificate of any kind increases average income by about 40%, thus increasing income taxes, and therefore government revenue. Roughly 40% of parents are currently saving for education for their children through RESPs. The last time a big change was introduced to the RESP system, the Canada Education Savings Grant was implemented, whereby the government would put in a contribution equal to 20% of the value of each your contributions into your child's RESP. This encouraged more parents to save, evidenced by the 146% increase in RESP contracts over the next 3 years. This new system would increase the popularity of RESPS even more, but even if we considered it conservatively, it would mean that in 3 years, another 1.5 million RESP contracts would be taken out for Canadian children. If these 1.5 million children went on to postsecondary education, as they must to receive the money from the plan, they would see their average incomes rise by 40% to roughly $65000 per year. These 1.5 million children would, as adults, pay $6200 more in annual income taxes, roughly 70% of that going to the feds. This would add $6.5 billion per year to government revenue, essentially eliminating any concern about the cost of this program.

If Harper would have done the smart thing, and not the politically expedient one, we would have a healthy surplus this year due to larger revenue from GST. And then this bill would not be an issue. Except that it would because the true reason this bill is an issue is because it didn't come from within Harper's tightly woven circle of friends in which all federal power is concentrated. You can bet that if the bill was launched from the blue side that Harper would be head cheerleader. He runs this government like a majority, which it is not, and is abusing the will of the duly elected representatives of the Canadian people by doing all in his power to stop the passage into law of this excellent bill. The votes of the Bloq Quebecois, New Democrats, and Liberals represent the will of 60% of the Canadian population. The will of Stephen Harper represents that of one man. Who is he to stand against us?

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