July 15, 1942

NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It would just blow up.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I want to tell him that if we put into circulation a billion dollars of new money, it would blow the price ceiling to kingdom come before you could say "Jack Robinson''. I say this too, that if by some miracle we were able to keep that price ceiling on we would have to keep it on for many, many years, because we would never dare take it off.

44561-270J

You can do only so much by bureaucratic methods. You can do only so much by repression, by policing. Our prosecutions are starting now; I see them in the papers: a

prosecution, I think, in Winnipeg, another somewhere else. There was a prosecution in Montreal of a restaurant which charged too much for a meal. Black markets will undoubtedly develop. People will be violating our regulations, and there will be no way in the world to prevent that from happening. The only way we can preserve that price ceiling is to take away from the people by borrowing and taxation just as much as we possibly can, so as to relieve that upward pressure on the price ceiling and on prices. I want to say that anyone who thinks an issue of a billion dollars of new money, national currency, Bank of Canada notes, can be effected without the slightest inflation is simply deluding himself.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

An hon. MEMBER:

Tommyrot!

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The Social Credit party, of course, do not agree with that, and I do not expect them to agree with it. But I think it would be a terrible thing if any substantial proportion of the membership of this house espoused those views or were convinced by that argument.

I do not know that I have very much more to say this evening. I do not believe there were many more points made in regard to this method of financing. Let me say that it is as old as the hills; it is as old as the ancient empires. It was done in France; it was done in Germany. But Germany at the present time is not relying on this method of financing. Germany has a tremendously heavy taxation load on its people, and is borrowing from them to relieve the upward pressure on its price ceiling, which is a much better price ceiling, I have no doubt, than ours. But to think that we in this democratic country, with the great freedom there is of expression and the great interest in individual liberty, could, by sheer brute force of pressure on people, maintain a price ceiling if we set loose another billion dollars of national currency at this time, is just not to have a conception of the gravity of the situation, of the might of the inflationary forces which would be set loose.

My hon. friend opened his speech with some remarks on the item, and I want to thank him for his tribute to myself. He says that I haye done a good job, but it seems to me that he cannot think so, because I have been wrong all along if he is right. I have been fundamentally wrong if he is right, and I do not think that I have. Why,

Income War Tax Act

Mr. Chairman, rather than do what my hon. friend has suggested I would walk out in a minute.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

An hon. MEMBER:

It might be a good thing.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It might be a go'od thing, yes, but I would not try. I would not make an attempt to finance or try to conduct the finances of this country if I ran away from the hard way, which is the only way and the only fair way, the way of imposing obligations in accordance with ability to pay, and took this easy, downward, fatal course to the abyss-which it would be.

I want now to come back to the item and say a few words with regard to soldiers and officers. As I told the committee this afternoon, I am going to have some proposal to make about that before these resolutions are through the house. I know there is discrimination there; I know there are several discriminations; and I think I shall have some proposals which may have the effect of ironing out the discriminations, but not, I think, the proposals which have been made in this chamber this afternoon and to-night.

With regard to single and married men, I wish to put a finger on the fallacy in my hon. friend's argument. He seems to think that the difference between the tax which the single man pays and the married man pays is the amount which the married man's wife and children are supposed to live on. No such theory was ever before promulgated. It was the principal amount upon which this is the tax that lies at the basis. My hon. friend has worked out some differences here. For instance, he takes the taxpayer who is in receipt of $3,000. He says that the new tax plus the refundable proportion of money, savings required is, for a single person without dependents, $1,064; for a married person without children, $884; and for a married person with two children, $668. The comparison should have been, I submit, between taxes, not between amounts which include refundable taxes or compulsory savings, and there the difference is considerably greater. But even so, the difference in taxes is not sufficient to enable a man to support his wife or his wife and children, and was never intended to be.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I think

that on the whole we are indebted to the member for Parry Sound (Mr. Slaght) for having stirred up interest in a very important subject matter in this house and for having

at least given us some intellectual entertainment, when we have listened to, shall I say, the brilliant reply of the Minister of Finance (Mr. Ilsley). I may have flirted with the idea

of fiat money in the early stages of the war, but I should not like anyone to say that I am a believer in the issue of national currency as a method of financing this war. All history, as the Minister of Finance has said, cries out against it. There is no easy way of financing war, as the minister has also stated.

The speech of the member for Parry Sound to-night was reminiscent of the evidence which the member for Vancouver-Burrard (Mr. McGeer) gave to the Macmillan commission on banking as long ago as 1933, and was also reminiscent of a speech which the same hon. gentleman made before the banking and commerce committee of this House of Commons in 1934, and it is by no means a new suggestion. If we were to adopt the methods advocated by the hon. gentleman, and so ably controverted by the Minister of Finance to-night, this country, sooner or later, notwithstanding all the controls that human ingenuity could devise, would finally blow the lid off, as has happened in every other country in which resort has been had to these methods-that is, so long as you maintain the capitalist system. If you have a system of socialism and are a self-contained nation; if you do not owe foreign debts and do not have to pay for goods you import from outside, then I suppose one might consider that theory. I know this will not please my hon. friends in the comer to my left, but I suggest that their theories can operate only if you are in an air-tight compartment of a nation and do not have to deal with other people, who will not accept money against which there is not a sense of security.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

An hon. MEMBER:

Give some evidence of what you are saying.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

My common sense is evidence enough. I do not want to get into a discussion of social credit principles.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

An hon. MEMBER:

You cannot.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I have been listening to these theories since 1923 before any of the present hon. gentlemen ever graced a seat in this house. I remember when Major Douglas first appeared on the scene, and I remember the second time he came. He would not leave until we paid him a fee, to which I was opposed, by the way.

I believe there was never a greater monetary faker in the history of this country than that same Major Douglas. I am satisfied on that point.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
SC

John Horne Blackmore

Social Credit

Mr. BLACKMORE:

That is just your opinion.

Income War Tax Act

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

I had some near-hand dealing with that gentleman. He offered to come to Ottawa in 1934 for his expenses, but before we could get rid of him and get him off the expense account he had to have a fee, and against my protest the banking and commerce committee agreed to pay him. But that is by the way. If we were to pursue the course advocated by the member for Parry Sound, on the basis of the monetary theories of the member for Vancouver-Burrard, this country within a short time, at the rate we are spending money in the war, would simply blow the whole lid off. We never could carry on, and the people of the country would hide their wealth and not make it available to the government. I may be old-fashioned-

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

Some hon. MEMBERS:

Hear, hear.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It is prob- ' ably true I am, but my opinions are based on the established theories and practice of decades and decades of public finance, and until it can be demonstrated that Canada can finance the war on the basis of fiat money, then I am going to adhere to the old-fashioned principle which the Minister of Finance advocated here to-night.

The only criticism I have of the minister's war finance method is that in this budget, I fear, he is attempting to tax too highly, when one has regard to the fact that this war may continue for a long time. He may dry up some of the sources. Notwithstanding that, the Canadian people are willing to make the sacrifice, but they would be very distrustful of a government which has proceeded for three years on one basis of war finance if it suddenly switched to another basis. That is a factor which must be given consideration. So that much as one may be attracted by this theory of financing >the war by means of national institutions, let us think this matter clear through before we adopt any such theories.

I hope that any remarks I have made are not of such a provocative nature as to cause this debate to go on for a long time, because we are anxious to get back to the resolutions. But I think I should support the minister, believing what I do with respect to orthodox finance, and I do support him.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT

William Kemble Esling

National Government

Mr. ESLING:

My sympathy is with the Minister of Finance. He has had an unhappy and difficult task in the preparation of this budget, and has done it well, and it is because of the confidence which the people have in our present Minister of Finance that they accept this budget with less complaint than ordinarily. The proposals in this income tax resolution come home more directly to everybody in

Canada than do some of the other resolutions. But I would not slight the taxation measures in the other resolutions, because if any tax which financial ingenuity could suggest has been overlooked in this budget we may be assured that it was not intentional on the part of the minister. I think also that he will welcome any suggestion or reminder of any other tax which he might impose. Therefore, if I may be permitted, I will offer such a suggestion.

Of course there is concern about taxation at this time. But the minister has brought the people of this country to a realization of the fact that we must find ways and means for the conduct of the war. There are some features of the budget requiring correction. One was mentioned by the leader of the opposition, namely, the omission of exemption from the refundable tax on agreements of sale.

Under the national housing plan we have some 23,000 units constructed in Canada and a guarantee on the part of the federal government of some $73,000,000. At least there is $73,000,000 that has gone into this plan. Then many industries are contributing to or assisting in the building of houses for their employees. In my district one company has lent its employees some $2,000,000 for the construction of houses. It makes a substantial community.

Also there is concern about the churches. Naturally we must all retrench and economize, and the first inclination of some people is to cut down their church contributions. It is an easy thing to do, but it is regrettable, because the churches must be maintained, particularly in such critical times as those through which we are now passing.

I should like to refer to the provision in this resolution as to the amount upon which there is total exemption from any tax, namely, $660. That amount I think applies primarily to grade 1 civil servants. For grade 1 civil servants whose homes and parents are in Ottawa the situation is perhaps not so serious, but for grade 1 clerks who come from afar the situation is very serious. My suggestion before I sit down will be that the basic rate of pay for a grade 1 clerk be $70 a month instead of $60, and I propose to show then that the government is not going too far.

What is the situation? The government has some 3,200 stenographers and typists at $60 a month, plus a cost of living bonus of $6.60. They have perhaps three or four thousand more doing clerical work. These girls are war workers just as much as the man or woman in a munitions plant. Without their assistance the Department of Munitions

Income War Tax Act

to-day not only the Canadian Performing Right Society, which is a subsidiary of the parent concern in the United States, but also Broadcast Music Incorporated. It is a very small concern at present, but it will grow, and as others see its success more companies will be formed.

So I say to the minister that I hope he will see that the Copyright Act is amended at the next session and that, the Performing Right Society be required to register and to pay for every piece of music for which it exacts tribute from the Canadian people.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Mr. Chairman, I had not intended to enter into this discussion, because I believe, and I think the great majority of the members of this house will agree with me, that these are times when even though you disagree with the government the best thing to do, if you are in the minority, is to let the majority which the government represents go forward without interference, because of the enormous responsibility which every government of the united nations is carrying at this time.

However, the leader of the opposition was kind enough to refer to the remarks of the hon. member for Parry Sound as expressing the monetary system of the member for Van-couver-Burrard, and was also kind enough to declare that they recalled memories to him of the time when he sat as chairman of the banking and commerce committee of this parliament in 1934, upon whose recommendations the banking legislation was changed to the five per cent tax reserve basis and the Bank of Canada was established with a 25 per cent reserve gold basis, removable in its entirety by order in council.

I happen to have some pleasure in recalling the representations that I had the honour of making before that banking and commerce committee. They were not welcomed by the chairman, and I did not get much assistance from him in placing my views before the committee. But I was able to place them all before the committee despite him and his prime minister of that day. What was the difference between myself and the Bennett-dominated committee of 1934?

I advocated at the time certain things. One was that the Bank of Canada should be a wholly publicly-owned institution. That idea was scorned and sneered at; and even when we were returned in the election of 1935 pledged, as I believe, to bring about that reform, we had another battle on the floor

of this house. That battle was won in two rounds. The first was when we got the Bank of Canada 51 per cent publicly owned, and the next was when it came to be an institution owned and controlled as the greatest public utility service in our nation by the people of Canada. That is a reform which will never be taken away. Yes, I had the privilege of advocating that in 1934, but it was repudiated by my hon. friend's committee and by his government and by the parliament that was dominated by his party.

Another suggestion that we made was that gold had outlived its usefulness as a security for the value of currency, and we advocated that the Bank of Canada should be free to issue currency in terms of public need and national necessity, unrestricted by the amount of gold which the government could buy or secure.

What has happened to gold? Does any member of this house advocate the restoration of the limitation of our money in use by going back to the gold basis? Let me give the committee one illustration of what has happened.

I have the greatest sympathy for the Minister of Finance in the position of responsibility that he holds at the moment; but it is well not to be too dogmatic in one's conclusions because it might be that in this day and generation we might be able to manage currency a little better than they did two hundred years ago in France, or a little better than when they were managing currency to win the continental revolution, or a little better than when they were managing the greenback currency of the United States which Lincoln issued to save the nation from disunion and disaster. We to-day can thank the memory of Lincoln that he did not fear to use the national currency because, if democracy is going to survive this war, it is because the most powerful republic that was ever saved by the issue of national currency, the United States, has joined with the British empire in this war to preserve a world that Lincoln thought ought to be preserved for people to live in of the kind that he established in the United States.

Easy, of course, it is to sneer at the power of a nation to issue currency. There have been terrible tragedies in the abuses of monopoly and privilege by the private owners of money scattered down throughout the pages of history, but there is something more to be said for national currency and its power as a medium of exchange of a nation than

Income War Tax Act

merely to try to dismiss it as something that was tried a few centuries ago and did not happen to get a fair chance.

Let me give another illustration of the absurdity of gold as a basis. The sound money men, these experts, told us that we could not have any money to put the unemployed to work for the decade before the disaster. I remember some of the terrible warnings that we got from other ministers of finance that if we dared to put the unemployed of this nation to work by using national currency we would wreck the credit of the nation. Do not make any mistake about that. What did we do? We decided on this continent to gather gold. We gave away our scrap iron; we gave away our scrap steel at prices disastrously low; we threw away our copper, our nickel, our lead and our zinc; all these useful metals we gave away because we were led to believe that there was some virtue in the accumulation of gold. So we tucked twenty thousand million dollars worth of gold in the hills of Kentucky while the Japanese were building nut of our scrap iron a fleet to wipe us out of the Pacific.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
NAT
LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

They have made a fairly good start, and we certainly have great difficulty in finding any virtue in the gold that we have to stop them. That is quite beside the question. The hon. member knows that I have no doubt about our ultimate capacity to defeat Japan, but what I am pointing out to this committee is that we gave away our useful metals and gathered a useless metal. We found that we could not build any battleships or planes or guns or fighting equipment out of this useless metal called gold. True, by a common arrangement, the United States is still paying us a good deal more than it costs us to take it out of the ground, but just how long they are going to keep on adding to their useless hoard at that price I do not know, and I do not think any reasonable man would care to hazard a guess. I do know, however, that our currency to-day unsecured by gold is just as valuable as it was at any time when it was supposed to have been secured by gold. There were two things proposed which in a short period of a decade have moved from the ridiculous to the sublime.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink
?

Some hon. MEMBERS:

Oh, oh.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAK TAX ACT
Permalink

July 15, 1942