Debates of March 30, 2004 (day 11)

Thank you, Ms. Lee. The motion is in order. We are going to circulate that motion. Thank you. The motion is in order. To the motion. Ms. Lee.

Thank you, Mr. Chairman. I am presenting this motion because I do believe that we cannot be at 12 percent where we are losing money for having the corporate tax at that rate. I do believe that 13 percent will allow us to break even and possibly a little more. I do understand that our government is in fiscal restraint but, as I have stated, I don’t believe that we have an opportunity to go through our final situation to the detail where we could prioritize. I do believe that 13 percent will give us extra money, but 14 percent would take us to a two percent increase. That is higher than I would like to see, so I am proposing this motion. I am not going to ask for a recorded vote on this. I understand that we can have a recorded vote on the third reading. Thank you.

Thank you, Ms. Lee. Mr. Braden.

Thank you, Mr. Chairman. I can’t speak in favour of this. I am satisfied that the information presented to us justifies that 14 percent is a realistic tax level, and that the increase of two percent is not excessive. I guess what convinces me of this is that if we go from 12 to 13 percent we are just sort of tweaking and tinkering here, we are not giving ourselves the margin that I would be satisfied with to know that we are not going to continue to be in a negative revenue situation. I think 14 percent is realistic because it gives us a buffer. That being said, that is my comment. Thank you.

Thank you, Mr. Braden. Any other comments? Mr. Hawkins.

Thank you, Mr. Chairman. I will be supporting this motion. I think it is a good step, and I think it is a recognition that we still have to work a little harder to sharpen our pencils. As it has been said, I don’t really think that this burden is necessarily fair to be taken solely on the 15th Assembly’s shoulders, but unfortunately we have to make corrective actions. The Minister has quite clearly said that if we don’t take some steps we are going to be penalized by Canada. I think it is a good saw if we are taking corrective steps, and I think we need to go back to the drawing board and make a few more creative solutions. The last point I want to hammer out, and I may have to repeat this later, but the point is if this side of the Assembly makes any comments in regard to the budget, we have to recognize that it is a position of weakness because our comments are only treated as creative suggestions, and any comments we make, they don’t even vote on them for goodness sakes. It is kind of pathetic, because we may vote unanimously on a suggestion and then we just watch it go through. So it seems almost embarrassing that we provide creative suggestions, the majority of this House provides good feedback on what we want to see in this budget yet we get no reaction, it is at their discretion. So at the end of the day it seems quite sad. I will finish by saying I will support this at this time. Thank you, Mr. Chairman.

Thank you for your comments, Mr. Hawkins. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, the work that has been done to date in here is the best work we have available in working with the federal government on the numbers provided, in trying to secure the base that we have of revenue, and ensuring that we can deliver the programs and services we have available to residents today. This is not about getting rich, this is not about enhancing what is there, it is about securing the revenues that we have to date so that we can deliver the programs that we have, and it is about sustainability.

Being a money bill, this is very important to us that in fact we proceed with this. The revenues, as I stated earlier, in the draft main estimates that we are about to vote on later, include a 14 percent amount. So we have already got it built into the system and we are still just barely delivering what we have in programs and services, and there have already been calls from Members to spend more on different areas that are important. What Members say in this House isn’t just going to be thrown out as we walk out of this House. We are going to be using comments that Members are giving to go forward. I take the comments Members say in this forum seriously, as well as in committee, in helping me look at the issues before us when it comes to the fiscal side and how we should build these things into our budgets. As Mr. Braden said, at 13 percent we are just making the line. If we are going to deliver the level of programs and services we have at least for 2004-05, we are going to have to do more than just meet that level.

Again, as Members are saying, we have to look internally, that is the case. When we get back to planning for the business cycle, and business plans we are looking, as I stated in the budget address, to take $20 million out of the system. So we are going to be going in that direction of taking out instead of just trying to add to it. Thank you.

Thank you, Mr. Minister. Mr. Menicoche.

Thank you very much, Mr. Chair. I am not going to support this motion only because I believe that by doing the increase the way it is suggested, that at least it maintains our ability to hang on to some of the programs and services that we do have. That is why I am in favour of it. Thank you.

Thank you, Mr. Menicoche. Ms. Lee.

Thank you, Mr. Chairman. I want to reserve my comments for last, as the mover of the motion. Thank you.

Thank you, Ms. Lee. Mrs. Groenewegen.

Thank you, Mr. Chairman. If we're going to raise the corporate tax, there is no sense doing it if it's revenue neutral for us. You might as well not bother with it. If you're going to go to the trouble of raising the tax, you might as well make it worthwhile. It's not exorbitant and it's not outrageous. Like I said before, it's going back to what we had that was an historical level a few years ago. Thank you.

Thank you, Mrs. Groenewegen. Mr. Handley.

Thank you, Mr. Chairman. I just wanted to point out for Members, especially the new Members, that this is a money bill and that Cabinet will be voting on this issue. But we have done the work on it, we feel that 14 percent is justified and it is reasonable, and that all of Cabinet will be voting against this bill. Thank you.

---Laughter

---Applause

Thank you for clarifying that, Mr. Handley. To the motion. Ms. Lee.

Thank you, Mr. Chairman. Just a short comment to close the debate. I appreciate the Members' comments. I just wanted to add that this goes back to…Having been here for five years, I guess not everybody shares my view, but I have gained a healthy dose of skepticism and cynicism in the way the information is provided to us. Mr. Chairman, I don't mean any disrespect to any of the staff or accountants. Accountants balance numbers. They make sure that what goes on the left side goes on the right side. Ministers are the ones who set the priorities, and I think under the consensus government maybe we should have Finance Ministers running and laying out their agenda at re-election time, because otherwise we get one Finance Minister on one extreme spend, spend, spend, decrease taxes…

---Laughter

…and then we get another Finance Minister using exactly the same fiscal relationship we have with Ottawa, exactly the same social problems, probably using exactly the same facts that the department staff provides and comes out with a completely different interpretation. I've been sitting here listening to the same thing, but drawing different conclusions.

We have gone through two weeks of a budget debate, and I'm telling you they gave us a box and we are giving them a box back with a rubber stamp on it. We have not been able to make one iota of change as regular Members. If we really have a consensus government, then we on this side of the House should have more say in making into a dough and not a square box where we either take it or leave it. None of the suggestions we have made in terms of saving programs or anything, none of it was addressed.

Mr. Chairman, obviously this is my motion and I will be supporting that. Thank you.

Thank you, Ms. Lee. Just to clarify, Ms. Lee's comments do not conclude the discussion on this item, so to the motion.

Question.

All those in favour? All those opposed? The motion is defeated.

---Defeated

Clause 2.

Agreed.

Clause 3.

Agreed.

To the bill as a whole.

Agreed.

Does the committee agree that Bill 2 is ready for third reading?

Agreed.

Bill 2 is now ready for third reading.

---Applause

I would like to take an opportunity thank Mr. Roland and his staff, Ms. Veinott, Ms. Melhorn, and Mr. Gagnon, for their appearance here this afternoon. Thank you for your time.

Thank you, committee. We would now like the Honourable Floyd Roland, Minister of Finance, to begin with his opening remarks on Bill 3, An Act to Amend the Income Tax Act, No. 2.

Thank you, Mr. Chairman, for the opportunity to present Bill 2, An Act to Amend the Income Tax Act, No. 2

Bill 3 would increase personal income tax rates for higher income earners, effective July 1, 2004.

Because this income tax measure will be effective in 2004, we need to advise the federal Minister of National Revenue of our new rates before April 15th of this year so that they can be administered by the Canada Revenue Agency. In order for these changes to be implemented, this bill needs to be passed in this sitting of the Assembly.

Bill 3 would increase personal income tax rates for taxpayers with taxable income over $66,492. The rate for the third bracket, covering taxable incomes between $66,492 and $108,101, will increase by one-half a percentage point, from 11.7 percent to 12.2 percent. The rate for the highest income group, those with taxable incomes over $108,101 will increase from 13.05 percent to 14.05 percent.

This change will raise about $1 million a year from the 4,600 highest income taxpayers in the Northwest Territories.

I would like to note that there is a difference between an individual’s taxable income and his or her total income. Taxable income is calculated by deducting a number of items, such as pension contributions, RRSP contributions, and the northern residents' deduction from total income. Someone with a taxable income of $66,492 would have, on average, $80,111 in total income before deductions. Someone with taxable income of $108,101 might have total income of around $124,254.

Someone with a taxable income of $68,000 will see his or her tax increase by about $7.54 a year, while someone with a taxable income of $110,000 will have an annual increase of $227.

Because this tax measure will be effective starting July 1st for source deductions, the amendment sets transitional rates for the 2004 year halfway between the old rates and the new rates. The CRA requires notification by April 15, 2004, so that payroll deduction tables can be adjusted.

Mr. Chairman, I would be pleased to answer any questions the committee has on this measure. Thank you.

Thank you, Mr. Roland. I now call on the deputy chairman of AOC, Mr. Hawkins, to make comments from the committee with regard to this bill.

Thank you, Mr. Chairman. The Standing Committee on Accountability and Oversight conducted public reviews of Bill 3, An Act to Amend the Income Tax Act, No. 2, on March 25 and 26, 2004. The committee would like to thank all the witnesses for their submissions, which were made on very short notice. The committee also thanks the Minister and his staff for presenting the bill.

As I indicated in my comments on Bill 2, the committee was very concerned about the short amount of time allowed for the public to review and respond to these tax increases.

Bill 3 proposed to raise the personal income tax rates on the two highest brackets effective July 1, 2004. The committee heard concerns about Bill 3 from both Mr. Mike Vaydik of the NWT and Nunavut Chamber of Mines, and Mr. David Tucker of the NWT Construction Association, who told committee the increase could affect their ability to recruit and retain skilled trades workers who are a highly mobile section of the labour force and in high demand across Canada.

Mr. Connelly of the Yellowknife Chamber of Commerce indicated to committee he did not have a concern with Bill 3.

The committee heard support for Bill 3 from Ms. Suzette Montrieul of Alternatives North. Similar to its position on Bill 2, Alternatives North does not believe the proposed tax increase is unreasonable and considers maintaining the GNWT's social programs to be more important than maintaining low tax rates.

The majority of committee Members find this tax increase regrettable but necessary in order to maintain the GNWT's social programs.

This concludes the committee's opening comments on Bill 3. Individual Members may have additional questions or comments as we proceed. Following the committee's review a motion was carried to report Bill 3, An Act to Amend the Income Tax Act, No. 2, to the Assembly as ready for Committee of the Whole. Thank you, Mr. Chairman.

Thank you, Mr. Hawkins. I would now like to ask the Minister if he would like to bring in witnesses and introduce them.

Thank you, Mr. Chairman. I would like to have witnesses.

Does the committee agree?

Agreed.

Thank you. I would ask the Sergeant-at-Arms to please escort the witnesses in.

Thank you. Mr. Minister, for the record, please would you introduce your witnesses.

Thank you, Mr. Chairman. To my far right is Mr. Gerry Gagnon, manager of tax policy; to my immediate right is Ms. Margaret Melhorn, deputy minister; and to my immediate left is Rebecca Veinott from Justice. Thank you.

Welcome. We will now move to general comments. Mr. Hawkins.

Thank you, Mr. Chairman. Mr. Chairman, in this particular case I'm going to state that I will be supporting this adjustment. Although very unusual probably for me to be enthusiastic about a tax increase, $7.54, under the $68,000 taxable income bracket, basically could represent a box of Tim Horton's doughnuts. So I don't think that's going to have a significant impact on that tax bracket.

The other side of the taxable income of $110,000 plus, the increase being $227 per year, we are really only talking about $15 a month so I don't think that will have a significant impact on that bracket either. Therefore, I will be supporting this. Although I stress it's highly unusual for me to be enthusiastic about a tax increase, I feel that this will have a very minimal impact on those in the sense that they will never even notice. Thank you, Mr. Chairman.

Thank you, Mr. Hawkins. Other general comments. Ms. Lee.

Thank you, Mr. Chairman. It appears that I'm going to have to play the lonely role of a contrarian here. I am not going to support this tax bill either, on the basis of many things that I've said. I do believe that we have had a break from the federal government for $50 million. I do believe it is unreasonable to go from a deficit position of $47 million and the federal government gives us $50 million that we were not expecting, and we go into a surplus of $3 million but still pursue an increase in taxation.

Mr. Chairman, I should state -- I think everybody here understands but I just want to make it clear -- that we have, as Members, to state our position and argue on an issue-by-issue basis and present our justification for the way we take our positions. I don't think it means any disrespect to the work of the Finance Minister. I know that the Minister of Finance, since becoming the Minister of Finance, has not I don't think given thought to anything but his budget. I'm sure he speaks this formula financing and rebasing and tax effort adjustment and all those jargons in his sleep. So I know that he is constantly crunching the numbers. But I am just very resistant to this taking the box again that I was fed in the last Assembly, where not only did we increase the spending, as the Minister's of Finance budget address suggested, our spending grew by $220 million in the years between 1999 and 2000 since division, where our revenue only went by $140 million. We spent way more than we got. At the same time, we reduced the personal tax credit, we reduced corporate tax, all in the name of justification that the Finance Minister of the day told us.

So I think Members could understand that I have a healthy dose of cynicism and skepticism when I'm presented with a completely 360 degree backwards on another set of assumptions. I'll be watching the Minister's work over the next while and once I've had a chance to go through the business planning process, not as a new Member but as a returning Member to this Assembly, maybe I’ll feel that I could actually have an input into the way that we make our priorities by the way we set our budgets. After all, when we pass a budget that is setting our priorities. So far I feel like I've had zero input into how we spend our money, what assumptions we expect, how we accept and how we interpret those assumptions. I guess I live my life where I don't mind making mistakes, but I don't like making mistakes twice and I'm not going to sit here and accept everything that is told to me.

Another reason, Mr. Chairman, is that I think anyone who walks down to Tim Horton's, not only to buy a box of Tim Horton's doughnuts with, well, I guess extra money we will have to spend once this is passed, anyone who walks down there will hear from the people that the biggest problem we have in the North is the cost of living. Everything about living here is high. Even the government acknowledges that it's too high to buy here that they're going to go south to buy where it's cheapest. Not only that, Members that come here have gotten themselves a housing allowance increase because they can see with eyes open how expensive it is to live in Yellowknife, and it applies to all the communities in the North.

This taxation would affect the top two tax brackets, but it would affect about 3,500 taxpayers. We have only been here for four months, we have not had a chance to look at what we can do better. I'm telling you we had lots and lots of spending stuff last time that I haven't seen, and I'm not speaking for cuts in programs, I'm talking about what we can do to better use our dollars before we go out and reach into the pockets of the people out there. It's not their problem that we have spent out of control and spent like drunken sailors, which is a quote that I gave to this Assembly.

Perhaps in a year's time I may be willing to support something like this, but I think this is way too new in this Assembly and I am going to exercise my right to flex my healthy dose of skepticism and cynicism and I'm going to not give support to the Minister's of Finance initiative just because. I know he's good and willing and he operates under good faith and he's certainly working hard to put some fiscal discipline into our work, but I do believe the picture is incomplete and I do believe that if somebody came to me and said they're going to pay off my mortgage and I owed the amount of $47 million and somebody gave me a $50 million cheque, I think somebody could get a break here and not respond to that by a tax increase. In the House I fought and fought and fought hard to save some of our programs and none of that happened. So I'm thinking why should I be doing everything that the government wants if the government is not prepared to listen to any of the suggestions we make on this side of the House. So on that principle and all the reasons that I have given already, for that reason I am not prepared to support this bill. Thank you.

Thank you, Ms. Lee. I have Mr. Menicoche.

Thank you, Mr. Chairman. One of the things that I have been telling the people back home and I'm going to be consistent about, is that it would be unrealistic to come to government and try to get more. We cannot get more programs, more services, but we can hang on to what we have. Unfortunately this tax is one of the ways we do it, and I would like to look in the long term as well. I do want to achieve a balanced budget and this is one of the ways we're going to have to do it.

This afternoon I had the pleasure of being at a presentation where one of our organizations that we support was in a severe deficit position, but they rolled up their sleeves and they did lots of hard work just to climb out of it, and that's where we are today. That's what I would like to concentrate on, is here we are today and what can we do to better ourselves for our people and the future? This is one of the ways of doing it right now. So I'm supportive of this increase in Bill 3. This is one of the best ways I think today we can achieve those results of a balanced budget, which I am striving for as well. Thank you.

Thank you, Mr. Menicoche. Mr. Roland, did you care to make some comments?

Thank you, Mr. Chairman. Mr. Chairman, the philosophy of the 15th Assembly is different from previous assemblies, and that's something I think we need to recognize. As a new government we sat down as new Members, some returning, some more experienced, some with new ideas, and decided that we would set a fiscal course early on. Now we've taken that direction, myself as Finance Minister and my Cabinet colleagues, and looked at the alternatives we have before us in trying to meet that target. It's not an easy process. We know that taxes are something that is not an option that's looked upon lightly. In fact we're going to have to ensure that as we go forward that we're spending the money wisely, the money that the taxpayers of the Northwest Territories pay as well as the rest of the Canadian citizens as they play a big part, as over 70 percent of our revenue comes from Canada. So we're going to have to ensure we're doing the best we can.

Early in the life of this Assembly our Cabinet has committed to ensuring we're going to begin to look at that and how we spend money as a government. Look internally, see how we're delivering programs to those in small communities as well as those in the large communities. That balance is going to be a tough balance to come across.

I respect Members who, on principle, do not support the tax initiative. As Ms. Lee mentioned, on principle it's her right to speak and I respect that. We all have that opportunity here, and I've done that on many occasions in the past myself. But one of the things we have to remember is we ended up in a situation, for a number of reasons, that we were now looking at a potential deficit of $46 million for 2004-05. Now myself as a homeowner, if somebody came to me and using the scenario that was used by the Member, if somebody came to me and paid off my mortgage, I wouldn't be tempted to get myself back into a huge debt. I would be very thankful that somebody paid my mortgage, but then I would use my resources to ensure that I didn't end up in a position like that again unless I knew I could pay my own way out of it.

So there are difficult choices that we'll have to make going forward from here. I think again with the options before us, the timeline that we have, we can't afford to put off initiatives and see what the future may hold. By doing that, we only create a bigger hole and deeper hole to try to dig ourselves out of. So we're being proactive here in trying to come up with the approach that we agreed to as new Members of the 15th Assembly. We've taken the initiative, we've gone forward, we are looking long term down the road in trying to secure a stable fiscal environment for the 15th Assembly, but, more importantly, beyond. I think we have to take the actions today to ensure that our children aren't paying for equipment and infrastructure that we make use of today and that they'll run out of in the future. But I agree; we're going to have to look internally and look at how we're spending those dollars and ensure that we're doing the best job for the residents. Thank you.

Thank you, Mr. Roland. Mr. Menicoche.

Thank you, Madam Chair. I have concluded my comments. Thank you very much.

Thank you, Mr. Menicoche. Mr. Allen.