Budget 2000 - Budget Speech - 2
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The Environment

Mr. Speaker, for Canadians of all ages, protecting the environment is not an option – it is something that we simply must do. It is a fundamental value – beyond debate, beyond discussion. For this reason, this budget provides additional resources to further clean up the Great Lakes, ensure environmental enforcement, protect species at risk, aid international efforts to reduce organic pollutants in the North, and provides development assistance to deal with greenhouse gas emissions in developing countries.

Furthermore, we are announcing today that in order to preserve natural habitats and species, we are cutting – by half – the capital gains tax arising from the donation of ecologically sensitive lands.

Mr. Speaker, in 1998 we, along with the other orders of government, non-governmental organizations and the private sector, launched the process required to develop a national climate change strategy. These consultations are concluding and the strategy should be unveiled by the end of the year.

However, within the context of a budget seeking to prepare our economy for the 21st century, there are a number of things we can and we must do now.

The unequivocal fact is that climate change – indeed, the entire environmental spectrum – will provide challenges, but for an innovative economy it presents many more opportunities.

Indeed, those nations which demonstrate how to truly integrate environmental and economic concerns will forge new tools and develop new technologies that others will have to adopt.

Tremendous rewards await those nations that get there first, for those which do it best.

Given the importance of natural resources to our country and because of the severity of our climate, leadership in this area of the new economy is not a matter of choice for Canada.

Quite simply, we must apply the same innovative thinking, the same spirit of enterprise, the same technological ingenuity, to protecting and enhancing our environment, as we have to becoming world leaders in the fields of telecommunications, transportation and so many others.

Technology is key.

Make no mistake, if we are to successfully tackle climate change, if we are to cut costs and boost productivity, if we are to transform ourselves into the world leader in the field of clean energy, then we have to employ every bit of the skill and knowledge we possess.

Accordingly, this budget takes a number of targeted actions.

First, we are announcing today the creation of the Sustainable Development Technology Fund. This fund will foster innovation by helping companies develop new technologies and bring them to market in areas such as clean burning coal and new fuel cell developments.

Second, we are announcing that we will create the Canadian Foundation for Climate and Atmospheric Sciences – a network of institutes which will link researchers from across the country in order, for instance, to further our understanding of the impact of climate change and air pollution on human health.

Third, this government is beginning to change its procurement policy to move, as much as possible, to more environmentally friendly energy, stimulating market demand for green power.

Fourth, the Federation of Canadian Municipalities and La Coalition pour le renouvellement des infrastructures du Québec have worked on excellent proposals in the area of green infrastructure. These allow us to extend the hand of partnership to those on the front lines of the fight for a cleaner environment.

One of these proposals is a Green Municipal Enabling Fund to help communities assess where their environmental needs are greatest.

A second is a revolving fund, leveraging private sector investment in areas such as waste management and water conservation at the municipal level.

This budget, Mr. Speaker, gives effect to both proposals.

Finally, as we move to more fully integrate economic and environmental policy, we must come to grips with the fact that the current means of measuring progress are inadequate.

Therefore, we are announcing today that the National Round Table on the Environment and the Economy and Environment Canada, in collaboration with Statistics Canada, will be provided funding over the next three years to develop a set of indicators to measure environmental performance in conjunction with economic performance.

In the years ahead, these environmental indicators could well have a greater impact on public policy than any other single measure we might introduce.

Mr. Speaker, when all of these measures are taken together, this budget will invest $700 million in environmental technologies and practices. We are making this investment because protection of the environment is a fundamental value of our country. But let us understand as well, it is also good economic policy. It is a key element of our plan to build a more innovative economy.

Make no mistake, far from being a cost we cannot afford, environmental protection is an opportunity we cannot forego.

Mr. Speaker, there is another aspect of our plan that is of critical importance. To succeed in the new economy, we must ensure that it takes root in every part of our country.

This perspective was at the heart of Catching Tomorrow’s Wave, a report prepared by our Atlantic caucus. We have heard them loud and clear.

Indeed, a similar point has been made by other members of our caucus – in a very different context.

They point out that while we must ensure that all provinces participate in the benefits of the new economy, even within provinces, there are major differences between urban and rural communities.

The concerns of rural Canadians are those shared by all Canadians – quality health care, the best education for their children, a good job. The difference is that, in the case of rural Canada, a hospital closing, a school cutback or the loss of a major employer threatens the very life of the community.

Therefore, we must expand economic development in smaller communities right across the country, north and south, east and west. We must recognize that in the years ahead, all orders of government have to come together, as never before, to broaden opportunities right across the country.

As one example, that is why we said last week that, in addition to monies previously announced to meet farm needs across Canada, we would commit a further $240 million for farm families on the prairies. When combined with an additional $160 million from the concerned provinces, this provides an immediate relief package of $400 million.

Mr. Speaker, we can also enhance opportunities across Canada by strengthening the basic physical infrastructure which underpins so much of the economic activity of both rural and urban Canada.

Whether it is urban transit, a grain road on the prairies or the highways of our country, the capacity to move people and goods safely and efficiently is key to an innovative and productive economy.

Affordable housing and green infrastructure are also essential elements of a modern society. They are critical to meeting the 21st century needs of our municipalities.

To these ends, the Government has announced that we will work with other orders of government and, where applicable, the private sector to reach agreement on a plan to improve provincial and municipal infrastructure in cities and rural communities across Canada.

We hope to have an agreement by the end of the year. For its part, the federal government is prepared to commit $450 million over the next two years and $550 million in each of the following four years.

Children

Mr. Speaker, having spoken about what it will take to succeed in the world of tomorrow, let me turn now to the authors of that future – our children.

Let there be no doubt: assisting families is not only the smart thing to do, it is the right thing to do.

An important key to our children’s success is the strength of the communities in which they live.

That is why federal and provincial governments agreed to develop a National Children’s Agenda – to expand the capacity of governments, voluntary organizations and our communities to provide the services and support upon which so many of our families and their children rely.

This agenda is critical. And it simply must be advanced.

As the next step, the Prime Minister invited all governments to reach agreement, by December of this year, on an action plan for early childhood development.

Our objective is simple. Whether it be further services or income supports, all orders of government must be prepared to do more for our children.

In this same respect, in the Speech from the Throne, the Government committed itself to improving support for children by extending maternity and parental benefits under the employment insurance program from the current six months to one year. This budget honours that commitment.

Mr. Speaker, these initiatives focus on the needs of children. They deal with the services and programs their families require.

But let there be no doubt, one of the best things we can do is to leave parents with more money at the end of each month to invest in their children’s well-being.

Tax Relief

It was with this very much in mind that the Government sought to design its tax reduction plan.

The principles underlying that package are as follows:

First, while tax reduction must ultimately benefit all Canadians it must primarily benefit those who need it the most – middle- and low-income earners, especially families with children.

Second, broad-based tax reductions should focus initially on personal income taxes.

Third, the business tax system must be internationally competitive.

And finally, broad-based tax reductions should not be financed with borrowed money.

In the 1997, 1998 and 1999 budgets we lowered the average personal tax burden of Canadians by 10 per cent.

Today, with surpluses projected for the coming years, the time has come to do more. Today we are setting out a five-year tax plan so that individuals, families, small businesses and others will know for certain that their taxes will fall this year, next year and in the years to come.

The plan we are presenting today provides real and significant tax relief. It is anchored in two fundamental structural changes.

First, Canadians know that taxes cannot start to come down in earnest until they stop going up with inflation.

Inflation should not force lower-income Canadians onto the tax rolls and others into higher tax brackets.

Nor should inflation erode the real value of the Canada Child Tax Benefit and the goods and services tax (GST) credit.

Nor should it erode the real value of the age credit for Canadian seniors, nor the income level at which the Old Age Security begins to be reduced.

Therefore, we will make the most important change to the Canadian tax system in more than a decade.

We will restore full indexation to the personal income tax system – and we will do so immediately.

Indeed, we will do so retroactively – to January 1, 2000.

Second, it has been over 12 years since the actual tax rates of Canadians have come down.

In practical terms, this has hit middle-income earners the hardest, because the federal tax rate jumps by 9 points – from 17 to 26 per cent – as soon as someone’s income reaches $30,000.

Therefore, over the next five years, we will lower the middle tax rate from 26 to 23 per cent.

Most importantly, we are announcing today that two-thirds of that reduction – down to 24 per cent – will go into effect on July 1 of this year.

Mr. Speaker, re-indexing the tax system and lowering tax rates will provide a significant benefit for all Canadians but as well, we will go further.

Over the next five years, we will increase the amounts Canadians can receive tax-free to at least $8,000 and we will raise the income levels at which middle and upper tax rates begin to apply to at least $35,000 and $70,000 respectively.

These amounts will provide significant relief but they are only the start. In future budgets, when we can do more, we will.

Mr. Speaker these structural changes mean substantial tax relief for all Canadians.

But for families, we are doing more.

I hardly need to remind this House that the cost of raising children is a significant expense. Ask any parent about the price of new shoes, or snowsuits. Ask any parent whose child plays sports or takes music lessons. Ask any parent trying to save for their child’s education.

The purpose of the Canada Child Tax Benefit – the CCTB – is to help with these costs.

In July 2000, the maximum payment for a family’s first child will rise to $1,975, a level at which it was to remain in 2001 and subsequent years.

Instead of leaving the benefit at that level, we are announcing today that the CCTB will be further increased in July 2001 to $2,265, and to $2,400 over the next five years. Amounts for each additional child will keep pace with these increases.

Nine out of ten Canadian children will benefit from these improvements.

Mr. Speaker, at the present time, the Canada Child Tax Benefit is of greatest value to lower-income Canadians. The measures we are introducing today will add to that benefit while extending it more fully for middle-income families.

For example, a single mother earning $25,000, with one child, will see her benefits increase by 22 per cent by 2004.

A typical family with two children, earning $60,000, will receive $200 in additional benefits in 2001. By the fifth year, their benefit will more than double – from $733 to $1,541.

Mr. Speaker, the challenges of raising a family are compounded when a child has a disability. In some of these cases, full-time home care by a parent is a necessity. We will assist these families by increasing the disability tax credit by up to $500 per year.

In addition, for families with disabled children, we will increase the maximum annual child care expense deduction from $7,000 to $10,000.

We will also introduce a number of other tax measures to further assist persons with disabilities and we will make permanent the Opportunities Fund – a pilot project to assist persons with disabilities prepare for, obtain and keep employment.

Mr. Speaker, our government inherited three major legacies in the area of income tax which had been introduced to help reduce the deficit.

In 1999, we eliminated the 3-per-cent surtax.

This budget restores indexation of the personal income tax system.

Today, we are also committing to eliminate the last of these legacies.

Effective this July, we will eliminate the surtax for middle-income Canadians on earnings up to $85,000. Over the next five years, we will eliminate it altogether.

Mr. Speaker, since 1994, employment insurance (EI) rates have been reduced each and every year – from $3.07 to $2.40. These rates will keep coming down to the point where they cover just the costs of the EI program itself. For planning purposes, we have assumed that they will fall to $2.00 in 2004.

Mr. Speaker, adequate incomes in retirement are a critical requirement for any society. Diversification of registered retirement savings plans and registered pension plans, in turn, is an important part of ensuring that income.

Accordingly, we will increase the foreign content allowed in retirement plans to 30 per cent, beginning with a 5-percentage-point rise in the year 2000, followed by another 5-point rise in 2001.

Mr. Speaker, to sustain the growth which underpins our economy, we need a corporate tax system that is internationally competitive.

At the moment, a number of Canadian industries do enjoy competitive tax rates of about 21 per cent.

But there are others – where much of the new job creation is occurring, such as high-tech services – which shoulder tax rates that are much higher, yet they are up against companies around the world that pay lower taxes in their home countries.

If we are to unleash the creative energies of our economy, if we are to encourage innovation and expand job creation, then these tax rates must be brought down to allow our companies to compete vigorously.

Therefore, Mr. Speaker, we are announcing that over the next five years, we will lower the tax rate for these higher-taxed industries from 28 to 21 per cent – putting all sectors of the Canadian economy on an internationally competitive footing.

As a first step, the rate will drop to 27 per cent as of January 1, 2001.

Mr. Speaker we have talked about the importance of innovation in developing a modern economy. And just as we are making investments to that end, we must also introduce tax measures that encourage entrepreneurship and risk taking.

This budget proposes action on three fronts.

First, we will reduce the taxation of capital gains by lowering their inclusion rate from three-quarters to two-thirds, effective immediately.

Second, we will allow up to $100,000 in stock options granted annually to be exercised with the tax being paid only when the shares are actually sold.

Third, a key factor contributing to the difficulty of raising capital by new start-ups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains.

Therefore, Mr. Speaker, we will allow a $500,000 tax-free rollover for qualifying investments, thereby increasing the amount these investors can put into new ventures.

Finally, Mr. Speaker, this budget proposes a measure which specifically benefits small but growing businesses – a major engine of both innovation and job growth in our economy.

Small businesses have told us that the most important steps we could take to assist them would be to lower personal income taxes, provide for rollovers, remove the 5-per-cent surtax and reduce the tax on capital gains.

This budget does all of these. It also, however, includes one further measure.

At the present time, the corporate tax rate rises dramatically – from 12 to 28 per cent – once non-manufacturing small businesses reach $200,000 in income.

We are announcing today that the reduction in the corporate rate to 21 per cent, which is being phased in for large businesses, will fully apply to all small business on income between $200,000 and $300,000, effective January 1, 2001.

Mr. Speaker, the five-year tax plan – both personal and corporate – which we have outlined today is far-reaching, both in terms of the structural direction it outlines and in terms of the size of the tax relief it permits.

Mr. Speaker, this budget provides a minimum of $58 billion in cumulative tax relief to Canadians over the next five years, it cuts personal income taxes by an average of 15 per cent and for many, much more than that.

For low- and middle-income Canadians, for instance, taxes will fall by some 18 per cent on average, and for families with children, by an average of 21 per cent.

Let me give you some specific examples of how this budget will benefit Canadians.

Indexation will help lower-income Canadians most. Indeed, they will receive almost 40 per cent of the tax reduction it affords.

They will receive more than $500 million by the fifth year in additional GST credits. They will automatically receive increases in child tax benefits.

Other examples:

Two seniors, with family income of $30,000, will see their net federal taxes fall by 45 per cent by 2004.

A one-earner family of four earning $40,000 will see its net federal taxes reduced by 17 per cent next year and by 48 per cent by 2004. That is a savings of more than $1,600.

A one-earner family of four with income up to $32,000 will receive more in benefits than they will pay in federal taxes. As a result, they will pay no net federal tax next year and by 2004, this family will be able to earn up to $35,000 and still pay no net federal tax.

A single parent earning $30,000, with one child, will see his or her net federal benefits increase from $32 to $1,018 by 2004.

A two-earner family with two children, with an income of $40,000, will see their net taxes cut almost in half next year, and they will pay no net federal tax by 2004. This represents a savings of $1,244.

Finally, a two-earner family with two children and with $60,000 in income will see their taxes cut by almost 9 per cent next year and by 27 per cent by 2004. That is a saving of more than $1,500.

One further point – at the beginning of this presentation, I said that while we would set out five-year objectives we would make our decisions based on a rolling two-year time horizon.

This is particularly important when hearing these examples because it means that substantial as they are, the tax cuts outlined in this budget reflect the least, not the most, we will do. In subsequent budgets, as resources permit, we will do more.

That is how we eliminated the deficit. That is how we will reduce taxes.

Conclusion

Mr. Speaker, this is a budget with many elements, but a single theme: creating better lives for Canadians in a rapidly changing world.

It is a budget that makes innovation the driving force of our economy.

It puts more money into post-secondary education and health care.

It acts to preserve our environment and to capture the opportunities it affords.

It speaks to our values by recognizing the importance of children.

Mr. Speaker, this budget restores indexation to the Canadian tax system.

It cuts federal tax rates for the first time in more than 12 years.

It supports job growth by making Canadian business more internationally competitive.

It is a budget that says you can cut taxes and invest in tomorrow at the same time.

It is a budget that sets its sights firmly on the future and charts the course to take us there.

It is a budget that says, while we can’t imagine the world our children will live to see, our responsibility to their future is clear.

We must lay the foundation on which they will stand; we must preserve the values on which they will build.

May it be said of us that we, in our time, laid that foundation and preserved those values.

And May we embrace the future with confidence – the confidence of a people who know that for all of our achievements as a nation, for all of the greatness of our history, the best of Canada is yet to come.

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