July 16, 1942

LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

If you listen to them very long I think they will convince you that you ought to start financing this war with 5i per cent tax free bonds, because that was the method they thought was most efficacious during the last war. We will have none of that kind of nonsense to-day.

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NAT

Gordon Graydon

National Government

Mr. GRAYDON:

One of your own ministers was in that government.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Of course; there were many misguided people in that government, and we had to have a good taste of it before we knew what it really meant. But the people of Canada have had their lesson, and they will never again go back to that kind of government.

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NAT

Gordon Graydon

National Government

Mr. GRAYDON:

You still have that

minister, though.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

We have not had any 5i per cent bonds out since 1937.

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NAT

Harry Rutherford Jackman

National Government

Mr. JACKMAN:

If I may be permitted a question, it seems to me that when the hon. member makes an imputation such as that, someone should rise to refute it. Interest rates throughout the whole world were on a very much higher basis during the last war than they are during this war. I ask the hon. member if that is not so.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

My hon. friend says that in the world at that time interest rates were high all over. Of course they were. That was what brought the whole world to disaster, and that is the lesson that should guide us to continue with our programme of reducing the cost of public finance wherever we can. The experts in the finance department are not always right. I should like to draw the attention of this committee to one historic occasion when a

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great chancellor of the British exchequer confessed to the fact that he had been sadly misled by the greatest experts in the world. Speaking in the British House of Commons on April 21, 1932, Mr. Churchill said:

When I was moved by many arguments and forces in 1925 to return to the gold standard I was assured by the highest experts . . . that we were anchoring ourselves to reality and stability; and I accepted their advice. I take for myself and my colleagues of other days whatever degree of blame and burden there may be for having accepted their advice. But what has happened? We have had no reality, no stability.

Continuing, he said:

Is the progress of the human race in this age of almost terrifying expansion to be arbitrarily barred and regulated by fortuitous discoveries of gold mines here and there or by the extent to which we can persuade the existing cornerers and hoarders of gold to put their hoards again into the common stock? Are we to be told that human civilization and society would have been impossible if gold had not happened to be an element in the composition of the globe? These are absurdities, but they are becoming dangerous and deadly absurdities. They have only to be asserted long enough, they have only to be left ungrappled with long enough, to endanger that capitalist and credit system upon which the liberties and enjoyments and prosperity, in my belief, of the vast masses depend. I therefore point to this evil and to the search for the methods of remedying it, as the first, the second and the third of all the problems which should command and rivet our thoughts.

After relegating the gold standard to the place where it properly belongs, and wholly justifying the complete repudiation of the ideas of classical economy and orthodox finance which he formerly championed, Mr. Churchill said that all those rules by which the chancellors of every party, except in war time, were rigidly bound, had now been swept away. How former chancellors would stare! He blandly referred to himself as the last orthodox chancellor of the Victorian epoch, and amidst cheers and laughter appealed to the committee to recognize him as "the last of the Mohicans." Of course we are going to have changes in our economic set-up, and this government will be well advised to pursue the course of reform that it has carried on with remarkable success since 1935. Let not the Minister of Finance or the experts of the treasury board come to the conclusion that the door of human progress in that regard has been closed. We cannot look into the future; but let us go back to the days during the last ten years when some of us were pleading in this house to put the unemployed to work, and when we were told that we had reached the limit of our credit; that to build highways, schools and defence requirements was beyond our ability, that our economy could not stand it. I went across this country

pleading that in the state of the world at that time we should be spending not 130,000,000 or $40,000,000 a year on defence, but that if we were to spend proportionately to what Australia and New Zealand and Great Britain were spending we should be spending $400,000,000 a year. Any man to-day knows that the false economy which denied us the right to go to work during the last ten years has brought a deficit which we shall pay for with human lives and human blood. Do not make any mistake about that.

I want to repeat to this government that I believe democracy can and will survive.

I am confident that we shall go through this terrible trial with success, because I do not believe that 65,000,000 Germans and 70,000,000 Japanese can bring to defeat 80,000,000 Anglo-Celts in the British empire, 130,000,000 of the people of the United States of -America who are united with us as they were never united before, and 170,000,000 Russians who have proved that they can and will fight to the finish. But there can be no continuation of the imposition upon us of the hobbles and fetters which deny to us the use of all the means and all the powers that are at our disposal. I plead with the Minister of Finance and his expert advisers not to close their minds to the value of national currency in this crisis. I believe that Lincoln was right when, in 1839, he declared:

No duty is more imperative on the government than the duty it owes the people of furnishing them with a sound and uniform currency.

Issuing debts is, in my humble opinion, a more dangerous course toward the inflationary conditions which bring disaster than is the issue of a national currency for national service under proper regulation and control.

Twenty-five years after making that statement on the duty of national government to provide the people with a sound and uniform currency, Lincoln wrote a letter on what he thought about national currency in that nation. It reads as follows:

My dear Colonel Dick:

I have long determined to make public the origin of the greenback and tell the world that it is one of Dick Taylor's creations. You have always been friendly to me and when troublous times fell upon us and my shoulders, though broad and willing, were weak, and myself surrounded by such circumstances and such people that I knew not -whom to trust; then I said in my extremity, "I will send for Colonel Taylor, he will know what to do." I think it was in January, 1862, on or about the 16th, that I did so. You came and I said to you "What can we do?" Said you: "Why, issue treasury notes, bearing no interest, printed on the best banking paper. Issue enough to pay off the army expenses and declare it legal tender." Chase thought-

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Chase was the secretary of the treasury at that time.

Chase thought it a hazardous thing, but we finally accomplished it and gave it to the people of this republic, the greatest blessing they ever had-their own paper to pay their own debts.

I do not want to stress an issue of this kind in the dying days of the session, but I have not- pressed my ideas upon the house during the last three years. What I do say is, and1 I think every hon. member will agree with me, that we have seen some terrific changes in the twentieth century. We are going to see some more, and I venture to offer this suggestion. While I am not being laughed at and sneered at as I was when I advocated the reforms which have come into being in this nation and others, there are still men who doubt the capacity of democratic government in the twentieth century to control the issue of its national currency to the preservation of the nation, to the service of the nation, and for the progress of the people of the nation. Just stop and think to-day. This budget provides for an enormous programme. Does it do anything for the old age pensioner?

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SC
LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Does it do anything for the dependent?

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?

Some hon. MEMBERS:

No.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

Does it do anything for the removal of discriminatory taxation?

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?

Some hon. MEMBERS:

No.

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LIB

Gerald Grattan McGeer

Liberal

Mr. McGEER:

These are some of the things that the nation must carry on if it is going to justify its right to be looked upon as one of the great democratic, progressive nations of this age. I know it probably would be dangerous to issue billions of dollars of national currency, but could we not issue enough to alleviate the tax on one-cent candies? Are we down to the point that we cannot use our power to create and issue money for the purpose of alleviating some of the needs that go alongside of the needs of war? Yes, Mr. Chairman, I believe that we can do these things, and I believe that if we will put our minds to some of these great problems we can not only finance our full and greater share of the war's responsibilities but strengthen ourselves in the progress of the war and come to the victory stronger and more capable of mastering the problems in a manner which will make the peace worth while.

Do not discard too freely some of the great powers which we possess. Let us not be afraid to venture against the danger of the

fMr. McGe.r.l

accumulation of too much interest-bearing debt. Let us keep carefully in mind that the issue of debts has brought Europe to disaster. Funding and refunding, piling up and pyramiding, brought some of our provincial governments, some of our cities in Canada, to the doorstep of bankruptcy. There must be some way of keeping, within the limits of all the obligations we must assume, a national, provincial and municipal solvency in our nation.

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LIB

Joseph-Hermas Leclerc

Liberal

Mr. LECLERC:

It is not very often that I rise to speak in the House of Commons, especially to speak in English. The reason is probably that we French Canadians would be speaking in a language with which we are not familiar. I often think that our English friends speak their language too freely because they make the sessions last much longer than they should. I listened attentively to what was said yesterday, and I agree with those who have said that the Minister of Finance (Mr. Ilsley) has placed as heavy a burden upon the shoulders of the Canadian taxpayer as it is possible to carry. The hon. member for Parry Sound (Mr. Slaght) gave us a good picture of the punishment the people are receiving at the hands of the Minister of Finance. The hon. member demonstrated that the married man, especially the married man with two children, is under a heavy burden. The hon. member did not, however, give us all the picture. I do not consider a family of two children as being a family. If he had multiplied that number by two or three, and made the family four or six, he would have made out a better case.

The Minister of Finance has left children over eighteen years of age out of the picture, but I would remind him that many parents, if they want to give their children a decent education, must support children over that age. More consideration should be given to the man receiving a medium-sized salary who has a family to support. Our war effort is reflected by the taxation imposed upon us. If this taxation makes this clear to the Canadian people in general, especially those who claim that Canada is not making a real war effort, it will have accomplished something. In order to make up for the other speakers, I shall not take up any more of the time of the committee. I urge the minister to give serious consideration to the married man with a medium-sized salary.

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LIB

William Ross Macdonald

Liberal

Mr. MACDONALD (Brantford City):

I

do not intend to take part in the discussion on monetary reform, or monetary chaos, depending upon one's point of view, but I should like to revert to the subject we were

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discussing when, we got into the debate on monetary reform. We were talking about the payment of income tax by officers in our armed forces. At the present time officers in Canada pay an income tax, while officers abroad' are relieved of that burden. Other ranks, both at home and abroad, do not pay an income tax. During this last week I have received numerous letters from wives of officers who are overseas. These women are alarmed at reports which are current to the effect that their husbands' incomes are to be taxed. I trust there is no foundation for the rumour. I do not think the people of this country would receive kindly any amendment to the act which would tax the incomes of officers who are now overseas. There is a feeling that the day is drawing close when these officers will be engaged in an offensive action against the enemy, the thing for which they have been preparing all these years, and it would be a deplorable thing to tax them when they are about to enter upon that offensive. I hope the minister will be able to reassure the country and the wives of these men that the salaries of officers who are now abroad will not be subject to income tax.

I should like to refer to the taxation which is imposed at the present time upon the salaries of officers within Canada. Most of these men are anxious to go overseas, and I understand that every commissioned officer has volunteered for overseas service. It is not their wish that they should remain at home; if they had their way they would be outside Canada at the present time. They are now paying the full tax, and I do not think they should be called upon to do this. They are not in as favourable a position as the man in civilian life. The man in civilian life is carrying on his business as usual and, when the war is over, he will continue in the same way he is going now. But what about the officer in the army or in any of the armed forces? He has broken entirely his connection with his business at home. What has he to look forward to when the war is over? He must start anew, for he will have no business to which to return. Is it fair that this officer should have to pay the same income tax as the man in civilian life?

The man in civilian life enjoys the comforts and conveniences of his home. The officers must face many transportation problems. Most of them are practically keeping up two homes. That is, they must pay the expenses of running the homes which they left, and they must pay the dues in the messes to which they belong. Most men in civilian life have had increases in income since the war started. They have enjoyed either a straight increase

in income because of increased business, or they have had an increased salary or are in receipt of a cost of living bonus. Practically every man not in the armed forces is making more money to-day than he was when the war broke out. When I say he is making more money I do not mean that :his net income after paying taxes is more, but his gross income has increased.

What about the officers in our armed forces? Has there been any increase in their pay since war broke out? There has not. Yet they are being called upon to pay full taxation. I know an officer who before he joined up was getting a large income from professional fees. Of his own free will he left his profession to go into the army where he now holds the rank of captain. Before going into the army he incurred, certain obligations in connection with building a home, and he hoped to pay those obligations from his income. With the pay he now receives from the army he is just able to keep up his home, that is, make the payments called for by the agreement with the building company, supply his wife and family with the necessities of life and pay the present income tax. Under the new schedule he will not, after keeping up his home, have sufficient left to pay his income tax.

I would also remind the minister that at the present time an officer pays income tax not only on the amount of his pay but on subsistence as well. Suppose he makes $3 a day. Is his income tax on $3 a day? No; it is said that he gets a living allowance, and therefore the sum of seventy cents is added to his pay-

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NAT

Howard Charles Green

National Government

Mr. GREEN:

One dollar in some instances.

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LIB

William Ross Macdonald

Liberal

Mr. MACDONALD (Brantford City):

My hon. friend says "$1 in some instances." The principle is the same, but I am taking the case of the officer to whose pay is added seventy cents a day for living allowance. He pays income tax, not on $3 a day, but on S3 a day plus seventy cents, or on $3.70. I think that is going a little too far.

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NAT

Howard Charles Green

National Government

Mr. GREEN:

And on dependents' allowance too.

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LIB

William Ross Macdonald

Liberal

Mr. MACDONALD (Brantford City):

My hon. friend says "on dependents' allowance too"; that that is added to the amount on which the officer pays income tax.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Is it not all income, theoretically?

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July 16, 1942