Mr. E. B. RYCKMAN (East Toronto):
I hope the Minister of Finance will not think I am lacking in that profound admiration and respect which I certainly have for him if I frankly criticize this budget. I think the budget is a disappointing one; I believe that the minister has told us in it that he has not quite done his best. He has said that it is a budget of compromise, for a government which consists of sections is possible only through compromise. If a man is compromised he has suffered somewhat; if a woman is compromised she has suffered more; and if a country is compromised its position is still worse.
This budget has not met the challenge which every worthy, and, may I say, self-respecting budget must meet, namely, that of striking the balance. It has been announced to the world that Canada cannot meet her bills, that Canada has an unbalanced budget. Canada is in the same category as Brazil, though not to the same extent, of course-a wealthy country with large resources which cannot meet its budget and with a currency that is depreciated. That is the state of affairs, and I believe it has already had its effect. It may not be that the relationship of the New York exchange market to our budget is perfectly distinct, but New York exchange has risen since this budget was announced. When a household is unable to balance its budget that household is on the wrong road; and it is the same with a country. The budget could have been balanced, it seems to me there is no question about that. However, that is something to which I shall refer later on. The failure to face the situation squarely means that this country will suffer from the bare fact that there is a discrepancy, which has to be taken into consideration although it is not a very large one; and we shall find that throughout this year Canada will be subject to a disability that will come from the reputation of an unbalanced budget.
The fact is that the budget has tried to satisfy too many factions. So to speak, there is a little blood let here, a small poultice applied there, a hot bath given and a cold douche administered; and we are expected to be satisfied with this. From the reports that have appeared in the newspapers, it is abundantly clear that the Canadian people do not feel that in the budget which has been brought down by the minister the requirements of the country, its necessities as they exist to-day, have been met. There are many matters to which I should like to refer, but in the time at my disposal I do not think I shall be able to deal with them all.
There is one small item I would take up first of all, and that is that the incidence of some taxes on certain businesses that might be described as summer trades has been changed, but the change does not come into effect until the first of August. I do not know whether the reason is that the Finance Minister is in league with the weather prophets or whether he knows for a certainty that we are not going to have summer until the first of August. It is to me quite manifest at any rate that since the Minister of Finance has said that the change was desirable and since these particular businesses are summer trades, the change in this respect should be put into effect now. I offer that suggestion respectfully for the consideration of the government. There is one feature of great merit in this budget and that is the assurance that we shall have stability in this country. Canada needs stability, for there cannot be any sustained effort in industry, no matter in what branch, unless the people engaged therein can feel assured that there will be some certainty in conditions. That assurance has been given by the Minister of Finance and I believe it will be lived up to. But we have it from the Minister of Agriculture (Mr. Motherwell), who comes upon the scene, that this stability does not and will not exist, that there is no finality, and that we may expect changes to continue until we have that condition which the Liberal party has declared in the past that it would endeavour to bring about. However, I prefer to take the express statement of the Minister of Finance. There has therefore been given to the manufacturers and their workmen this assurance of stability; but so far as I can see nothing of a similar character has been offered to the farmers.
First of all, let us consider this sales tax. I consider that the imposition of this tax and the method provided for its collection are, if I may use the word, cowardly, in this respect in that there are a couple of thousand manufacturers and importers in this country and hundreds of thousands of jobbers and merchants. What this tariff proposes to do is to call upon the manufacturers and the merchants to do the collecting of this revenue and to account for it to the government. What happens? The manufacturer levies the 6 per cent; the jobber then levies his profit on the manufacturer's price plus the 6 per cent. Jobber No. 2 then comes along and exacts his profit on all that has gone before; and, as we were told at the last session of parliament, there were in some cases seven intermediaries, jobber No. 3 and those who follow him secure their profits in a similar way, with
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the result that when the farmer or the housewife or the labourer gets these goods, with all these profits added to the price, the tax really is not only 6 per cent, but has increased by as many times as a profit has been added. The farmers therefore get no benefit from the tax, and it will be found that less revenue will be collected, while there will be more expense involved in the collection of the tax.
Let me say a word with reference to the income tax, which has been dealt with by the hon. member for Huron (Mr. King). But before I speak of that tax I want to refer to an incident that occurred in this House last year. The House will find a reference to it at page 3241 of Hansard of that year. The occasion was the discussion of the duty upon cigarettes which this year has been taken off. I rose in the House then and told the Minister of Finance that while I did not desire to be considered a champion of the cigarette trade, at the same time representations had been made to me from which it was obvious that there must of necessity be a loss of revenue if the tax which he proposed then was put on cigarettes. I declared at that time that so obvious was this to me that I desired to go on record in the matter. The minister replied that representations had been made to him also, that he had considered them, and that the matter was doubtful. But he was determined to impose the tax for the then current year, and if it was found, as represented, that there was a loss of revenue the tax would be taken off.
The Finance Minister was as good as his word; the tax was taken off, and there was an immense loss of revenue. The loss, as was stated during the course of this debate, was 15,000,000 in connection with the tobacco trade and $1,200,000 on the item of cigarettes alone. How this should have been allowed to occur I cannot understand. I do not think the Finance Minister gave the matter his personal attention; he probably relegated it to his adviser in the department. I think that that gentleman, or whoever was responsible for the decision which meant a loss of revenue to this country of $1,200,000 should lose his position. It was plain that that result would follow, and there should be no chance of such a thing occurring again.
With regard to the income tax, with its surtax and its supersurtax, I am of the distinct opinion that this country is losing money every day by its imposition. It is lessening production and I believe it is lessening revenue. It is deliberately cutting off the limb upon which sits any chance for the growth of industry in this country. I feel very strongly on this point, and I hope I may be able to convince the government that that is the view to be accepted. Let me develop the point a little; the argument is not mine originally, but every reasoning fibre of my being is responsive to it. One of the chief fallacies in taxation is that if you levy the tax at the top, the bottom will escape; in other words, that if you levy the tax on the lieh you will avoid imposing it on the poor. That is an absolute fallacy. In the next place the income tax is altogether unfair; it means the imposition of a levy on those who have worked and saved, for the benefit of those who will not work and will not save. That is the doctrine entertained by some of my friends to my left, and when you get to the extreme left you have the doctrine which would go to the extent of taking away all capital from the rich in order that the poor might benefit. The idea would be fine if it worked, but it does not work, it never has worked and in the nature of things it never will. In this connection I want to adopt the argument of Mr. Otto H. Kahn, a distinguished banker and publicist of New York, a German by extraction whose conduct during the war was admirable, and I have great pleasure in quoting his views. He says:
The usual advocate of the income tax says: "Supposing the rich man is made to pay two-thirds or more of this income in taxes. He still has plenty left." The user of this argument can see no farther than his nose. He forgets that the income tax drives capital out of constructive use in the first place.
In the second place, it reduces the incentive to venturing to the vanishing point, so that capitaJ will not undertake new work.
In the third place, money that ought to be used in the expansion of the country's business and the prosperity of the whole people is drained into the coffers of the government.
Again, it amounts to a campaign against thrift. Why save when the government will rob you of your savings? The income tax is half brother to the inflated currency of Germany and the confiscation policy of Russia. It promotes extravagance and discourages industry among' the rich.
The one point that is overlooked is, as Mr. Kahn points out, that the income tax and surtax defeat their own purposes. Greed, envy, and injustice always overreach themselves. The result of these excessive taxes is not only that capital turns to tax-exempt securities for investment, but it takes every legally permissible dodge to escape intolerable taxation, while a reasonable tax would willingly be paid.
That this is not theory but actual fact is proved by statistics, which show an enormous reduction in the revenue derived by the government from large incomes.
The government referred to is, of course, the government of the United States. They have reduced their income tax. The United Kingdom has reduced its income tax by one-third since the war began. Canada is the only nation I know of that has increased its income
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met in a special way. The Finance Minister has said-has said it several times in my hearing-"Oh, it is difficult to raise money for the war debt. It was incurred while the war was on and there was a patriotic and most commendable feeling in the public mind. Bonds could be sold and money was cheerfully contributed by the people because it was for the carrying on of the war. But that is all past and the money cannot be raised now." I contend, Mr. Speaker, that the very same spirit could be depended upon to raise revenue-perhaps not to as great an extent but still to a very considerable amount -in this country to-day if the governmenc would only adopt the right method. What method would I propose? Well, I would take the sales tax which is so objectionable to some and I would scrap it. I would then introduce what is known as the "turn-over" tax. That is well understood by all the members of this House but in short it is this: There should be a tax levied upon all processed goods, and upon all annual services in the case of doctors, dentists, and other professional men. Speaking of processed goods I would say the tax should be in turnover to the extent of $10,000 annually, using that figure only for the purposes of illustration; in the case of professional men it should be applied to incomes of $5,000 annually. The turn-over tax should be one per cent and whatever that tax yielded should be applied to war expenses, interest on the debt, pensions, and so on; but that not one cent of revenue from that tax should be paid for any other purpose than war expenditure. Mr. Speaker, I am satisfied the amount such a tax would yield would take care of the necessary war expenditure that we have and, together with a properly graduated income tax, would provide even for the railway deficits. This tax has been tried in Switzerland and has worked well; but we would be satisfied with knowing that this tax of one per cent, which I have mentioned for the sake of example, would not be objected to. Who would object to paying one per cent on $10,000 a year? Who would object to paying ten cents on any $10 article he purchased? No one at all, especially if it were known that the revenue from it would be devoted to meeting war expenditure exclusively. Mr. Speaker, it has been said that after the Battle of Waterloo in 1815 the lament of the next generation of young English boys was that they had not been of an age which would have permitted them to have taken part in the wars in which
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Great Britain triumphed so magnificently. I want to say that if opportunity were given our people to contribute of their means to war expenditure they would gladly subscribe if they knew the money would be solely devoted to meeting war expenditure. The spirit which was so splendidly exhibited during the war is still alive. The young men who will succeed us, if the tax is still in existence, will know that in bearing it they were upholding the sentiment that the Canadian nation upheld and fought for during the Great War. I say, Mr. Speaker, the Finance Minister does not know the immense amount of money that would be willingly given by the nation for this purpose. No one would default in payment of this tax, few would try to do so. But consisting in the main in small amounts the total revenue to be derived from this source would largely meet the burden that now rests upon the shoulders of the people and which, owing to our confused system oi finances, is of such a character that no one really knows how much money is taken or how it is expended. If, after the imposition of such a tax the budget failed to balance I am quite sure that by practising the real economies I have spoken of the ill would be cured.
We are told that the farmers are still suffering and that they have a strong antipathy to a protective tariff. Really I have been much amused during the progress of this debate to observe some of the statements which have been made. For example, the leader of the Progressive party during his speech said that he lived close to the international boundary line, and that he could buy more cheaply on the other side of that line and that he could obtain a higher price for his products. I could not help but think that the hon. member should have paused for a moment to consider where that kind of argument led him, because if there is any country in the world that has a tariff "as high as Haman's gallows" it is the United States. There is where you have a real high tariff protectionist country. Yet the leader of the Progressives tells us that we ought to have free trade in Canada, and that if he crosses the boundary line into that highly protected country which is so near to him he can buy-he did not say everything- but he can buy many articles much more cheaply and if he went to sell his farm products he could get a much higher price. A short time ago I had the pleasure of reading a biography of William Henry Seward, a very distinguished man, an Olympian, who was overtopped only by Abraham Lincoln. He was the Secretary of State in Lincoln's cabinet
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He was an orator, a patriot and a public man of the highest integrity, and in making a political speech seventy-five years ago, before any of the Progressives were born he said:
Industry falls into three classes in this country, agriculture, manufacture and trade.
He said also:
Some say that agriculture is a basic industry. It is but they are all basic industries. The three of them are so associated and dovetailed together that it is impossible to benefit one without benefiting the others.
It is impossible to do an injury to one without hurting the others and equally it is impossible to in any way do anything which will displace one either up or down without affecting the other two.
He said further:
There are some who argue in favour of a lower tariff. I will admit that if this world were composed of a number of Utopias, theoretically the argument is correct, but I have lived in this country, and I have seen that every time the tariff was advanced this country prospered and every time the tariff was lowered this country suffered. With that experienc I can do nothing else than say that I am for a higher tariff.
And he concluded by saying that the prosperity that the United States had up to that time-and it was borne out by the history of the United States-had been brought about by the high tariff imposed. It is the same thing to-day, Mr. Speaker. We are told the United States is prosperous. We are not prosperous to the extent the United States is, and I submit the reason is that we have not enough tariff protection. Only a short time ago, through the kindness of the Minister of Trade and Commerce (Mr. Robb) there was distributed to us a memorandum showing that there had been imported into this country during the last twelve months $208,000,000 worth of farm products, brought in to compete with the products of our Canadian farmers. I can only say, Mr. Speaker, that if I had the opportunity I would make it perfectly certain that any taxes which the United States imposed upon farm products going into the United States from Canada *would be imposed by Canada upon that $208,000,000 worth of products that came into this country, and I would make it abundantly plain that any man who wanted grapefruit for breakfast would know he was paying for it, and that he could get a Northern Spy apple at much less cost than he could obtain grape fruit or foreign fruit from the southern parts of the United States. I do not see why that argument is not sound, and I believe the course I suggest is in keeping with our selfrespect. Why should we as a people admit produce from the United States amounting to more than one-fourth of our total imports and not tax as freely as we are taxed? That is the self-respecting course in dealings between man and man. You are not going to allow one man "to put it all over you," as the saying is, and so I say that much of these ills that we have suffered, much of the deficits that we have to meet by taxes levied upon ourselves, could be taken care of by a proper tax upon the $208,000,000 worth of the products of the farm, because it includes food and all products as well.
Subtopic: CONTINUATION OF DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE