July 16, 1942

LIB

William Ross Macdonald

Liberal

Mr. MACDONALD (Brantford City):

not know whether it is the income tax department or the Department of National Defence -has entertained that an officer's food and other things he gets are worth at least seventy cents a day, and although he does not get that seventy cents, he is taxed on that seventy cents. I think he should, in any event, be relieved of that taxation.

It is not only the officers for whom I would make a special plea. I would also bring to the attention of the minister the men who are acting as instructors in elementary flying schools. As members of the committee know, elementary flying schools are now operated by private companies, the instructors being lent by the Royal Canadian Air Force to the elementary flying school. When they are lent by the Royal Canadian Air Force they lose their rank for the time being. Most of them are sergeant pilots and, as members of the committee know, a sergeant pilot does not pay income tax. As a matter of fact, no sergeant in any branch of the service pays income tax. I was going on to say that officers who fly in Canada and are on the general list are also exempt from income tax in the Royal Canadian Air Force, whereas all men who serve on the ground pay income tax. But let me come back to the point I was making. These sergeants who are lent are freed from paying income tax when they are in the Royal Canadian Air Force, but once they join the civilian school as instructors they pay income tax. The increase in the tax will weigh very heavily upon them. If any relief is to be given to officers, I trust that some consideration will also be given to these instructors at the elementary flying schools.

I want to press with all the force I can the suggestion that officers at home should receive some consideration in respect of the payment of income tax. I do not consider that they should pay the same income tax as a man who is not in the service, a man who has not volunteered to save his country but is carrying on his business to-day, true under difficulties, but nevertheless carrying it on, and who, when the war is over, will be allowed to continue to carry on his business, whereas the men in the armed forces will come back to what? They will come back to starting life all over again. I cannot press too strongly upon the minister the fact that these men are serving their country; they are sacrificing greatly, and therefore they are entitled to some consideration.

At six o'clock the committee took recess.

tMr. W. R. Macdonald.]

After Recess

The committee resumed at eight o'clock.

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LIB

John James Kinley

Liberal

Mr. KINLEY:

First of all let me express my personal pleasure at having again this afternoon been able to see in this house my esteemed friend the hon. member for Van-couver-Burrard (Mr. McGeer). He has returned to us after a long and critical illness, and I am sure that we are all glad to know that apparently he is in such good health and that he has not lost any of his power of self-expression so ably displayed in his speech this afternoon.

Last night he referred to those who are exponents of sound money. It seems to me that that is almost a geographical term in Canada. I believe it applies especially to the maritime provinces. Why that is, it may be difficult to say. It may be because, being poor, we learned the value of money in our youth. Again, it may be that in what is known as the golden age of Nova Scotia we were great traders. We had a great foreign trade; our ships sailed to all parts of the world and brought back the treasures of many lands. Perhaps that had something to do with our opinion on money matters. However, to be referred to as one of those who believe in sound money is not too bad a compliment for anyone to receive, and I hope that we in the maritime provinces are sound on money matters in their application to progress with respect to the needs of the Canadian people.

In our economy in the days of wooden ships, Nova Scotia had many banks; nearly every town of importance had a bank to serve its people. When the days of wooden ships became a passing show the first places to feel the effect were the banking institutions of that province. Some failed and others survived and had an influence on the banking institutions of Canada. While I have no brief for the banks, I believe that our banking system is an object of admiration not only in this country but abroad. When greater countries had chaos in the days of the depression, so far as their banking and commerce were concerned, the banks of Canada nobly survived that depression and performed the services which we knew they would do because of their stability and strength.

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NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

It was because the then Prime Minister put the whole resources of Canada behind all our financial institutions.

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LIB
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

Of course it is, but he never got much credit.

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LIB

John James Kinley

Liberal

Mr. KINLEY:

General Sherman, a great United States soldier, said that "war is hell". This country is at war, and perhaps that is the best reason we can give for this extraordinary budget so ably presented to the house by the Minister of Finance (Mr. Ilsley), who comes from Nova Scotia. The virtues of Nova Scotia in financial matters have long been recognized in the dominion. In my memory there have been five ministers of finance in Canada who came from that province. We had Fielding, Maclean, Rhodes, Ralston, and now we have our present Minister of Finance. Without detracting from the virtues of those who have gone before, may I say this of the present Minister of Finance. His speech last night, together with the work he has done since he became Minister of Finance, has convinced us, and I am sure it has convinced the country, that there are still giants in Israel. He is one of the great ministers of finance.

There was some opposition to this budget, but it was not serious. It is the function of the opposition to criticize, and I say this advisedly. The leader of the opposition (Mr. Hanson) who, I believe, was to-day confirmed in his office-I am glad of the fact, because he is a fellow maritimer-has not only the duty but the privilege of criticizing and finding out the vulnerable points in the government of the country. While hon. gentlemen did criticize, they gave abundant praise to the Minister of Finance. They appreciate the work he has done, and1 they believe he is the right man for the job at this particular time.

Some of the criticism, I thought, was pretty small, especially that part of it which referred to the candy being taken from the babies. I was taught when I was young that too much sweet stuff in the form of candy was not good for a child, that it caused decay of the teeth and made the child a subject for the dentist.

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NAT

Karl Kenneth Homuth

National Government

Mr. HOMUTH:

What did you give yours? Porridge?

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LIB

John James Kinley

Liberal

Mr. KINLEY:

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mystery where you did not understand it at all. Under such conditions it would be hard for me, a plain business man and a humble member of this house, to say that I understood all the complex theories and problems of finance to-day. The hon. member for Vancouver-Burrard was not so sure this afternoon; he was willing to admit that there are two sides to the question, but last night the hon. member for Parry Sound (Mr. Slaght) was rather sure that he had an easy way to finance this war.

Since this matter is one of more or less mystery, let us reduce it if we can to the simple things of life, so that he who runs may read. While at present I am addressing members of this house, we must remember that we are here for the purpose of informing the country, and that all the people in the country are not as well informed or as alert as members of the house. In the last few days we have been discussing here ways and means, and we have now Bill No. 110 which gives us a lesson on values for duty. In this bill I read this:

Spirits: On every gallon of the strength of proof distilled in Canada, except as hereinafter otherwise provided, nine dollars, and so in proportion for any greater or less strength than the strength of proof and for any less quantity than a gallon.

The value for duty is based on the alcoholic content of the strength of proof. Would anybody suggest that by adding to a gallon of these spirits a gallon of water you would have any more spirits? It is true it might make it more palatable, but you have no more of the intoxicating ingredients than when it was of its original strength. Inflating the money is watering the money. Or, take for instance, a farmer. There is little rain and the pastures are getting dry. Suppose this farmer who has milk customers in Ottawa said, "I have not enough milk from the cows to supply my customers; I will put the can under the pump, pump the can full of water and take it to the city." He has no more milk, but he has more quantity and can supply his customers. If. however, he did that he would be committing a criminal offence and would be brought before the courts. He is doing nothing more than diluting the substance which he is selling to the people.

The hon. member for Parry Sound talked inflation. There are different methods of inflation. Take corporations. A corporation that has a stock structure and waters that stock structure for the purpose of making greater profits, without having other assets, is watering the stock. Watering the stock and watering the money are similar things; one is a creation of good times and the other a

creation of bad times, but they both want something for nothing, something for which other people must pay.

The hon. member for Parry Sound in what was apparently intended to be an intellectual argument on money reform rather descended I thought to the level of a stump speech, because he said in effect that the government was afraid to put extra money into the hands of the people. This is what he said yesterday, as reported at page 4266 of Hansard:

Let me now return to the question of inflation. By inflation is meant that you are putting too much cash in the hands of the people of this country, particularly the working people and the farmers, and the 85 per cent that are termed the very modest earners; you are giving them too much money, and they will go and spend it. Will any of my hon. friends tell me, . . .

Then he exhibited a $100 bill. Well, we will do nothing of the kind. The workingman will have to work for every dollar he gets notwithstanding that it is inflation. Hon. members of the Social Credit group are more frank about the matter. It will be remembered that they were going to give this money away to the people, $20 a month as a bonus-

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?

Some hon. MEMBERS:

Twenty-five dollars.

Mr. KINLEY; Twenty-five dollars a month as a bonus. They never gave it, which is to their credit; but when the hon. member for Parry Sound tries to make a point that the government is afraid that there will be too much money in the hands of the people he is not only doing them an injustice but doing an injustice to himself as a lawyer of great ability. We know that wages are frozen in this country, and he would add to that the indignity of giving the labourers of this country diluted money.

We have heard a great deal about these money schemes that come before us from time to time. Yesterday the hon. member for Parry Sound exhibited a $100 bill, and told us it was a promise to pay. That is true. But if you put that $100 bill in the bank, at the end of the year you can collect a year's interest. Our friends of the Social Credit group issued money too, and I have here-I have had it in my pocket for years-what they call a prosperity certificate, $1. These are the terms upon which this certificate was issued by these money reformers, who would give everyone plenty so that there would be abundance in the country:

The provincial treasurer will pay to the bearer the sum of one dollar on the expiration of two years from date of issue hereof upon presentation hereof, provided there are then attached to the back hereof one hundred and four one-cent certificate stamps.

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In other words, I would have to place 104 one-cent, certificate stamps on this certificate in order to redeem it. This certificate was issued August 5, 1936. If I want to spend it to-day I caDnot; it will cost me 4 cents in order to give it away. We talk about theories, but this is something that was actually done. Then they come and tell us this is the way to finance this country.

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SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON (Bow River):

You are

certainly doing a swell job for the war. Get on with the war.

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LIB

John James Kinley

Liberal

Mr. KINLEY:

The hon. member for

Vancouver-Burrard said that we went through days of depression.

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SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON (Bow River):

You are

a good example of the whole party.

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LIB

John James Kinley

Liberal

Mr. KINLEY:

I hope my hon. friend is

not angry. The hon. member for Vancouver-Burrard said that there was great distress in Canada during the depression days. That is true. He also said that municipal and provincial governments had fallen down, that they had gone into default and were unable to carry on. That disease did not strike the maritimes. We are referred to as the sound money men of this country, but it seems to me that the disease referred to by the hon. member was not so prevalent in eastern Canada. Yet now we are getting advice from those who have the theory, but not the successful practice, of how to run a country without depending on the government.

This question of exchange is an important matter; and, as I said in the beginning, we in Nova Scotia have had an education in foreign trade. I want to remind hon. members that in our reciprocity agreement with the United States this was considered a matter of great concern and was embodied in article XIII of the agreement, which reads:

If a wide variation should occur in the rate of exchange between the currencies of Canada and the United States of America, and if the government of either country should consider the variation so substantial as to prejudice the industries or commerce of that country, it shall be free to propose negotiations for the modification of this agreement: and if agreement with respect thereto is not reached within thirty days following receipt of such proposal, the government making such proposal shall be free to terminate this agreement in its entirety on thirty days' written notice.

Our financial relations with the United States are most important. We are their best customer. They are our best customer to-day, except for our shipments overseas of war supplies, and it is important that we travel along with the United States and shape our financial policies to conform as far as possible to what they do, so that we may have

harmony, so that we may do business together without disrupting our agreements. Last night the hon. member for Parry Sound rather surprised me when he spoke of inflation. Let us see whom it would help. Let us suppose a man had an income of $50,000, and I assume there are people in this country with such incomes. His tax would be about $30,000. It might be better for the temporary preservation of that income if the minister would raise the money he needs through the printing press rather than by taxing it from the people, for naturally and properly the tax falls heaviest upon those who have the largest incomes.

The hon. member's argument was also subtle with regard to single and married men, especially that portion of it having to do with the refundable portion of the tax. If a man is married, has two children and an income of $3,000, his computed tax is $668, of which $334 is refundable or deductible, making a balance of $334 which he must pay. Thus he is left $2,332 to maintain his family, exclusive of his allowance for insurance premiums, superannuation or mortgage payments. On the assumption that he has insurance to pay or similar obligations to meet which will equal the deductible portion of the tax, his tax is increased by $119 over last year. Under the last budget his tax amounted to $215. A bachelor with an income of $3,000 is assessed $1,064, of which $240 is deductible, which means that, under the same conditions, his actual cost would be $824. Under the last budget the bachelor would pay $622, so that his tax is increased by $202. In private life a man does not get a larger salary when he marries. He is supposed to save while he is single, in order to be able to support a wife when he gets married; and the obligations of marriage hardly depend upon the income tax budget. This is severe and drastic taxation, but it is part of the terrible burden of this war. We must not forget that a bachelor, if he is between the ages of twenty and forty, is called to military service, which is not required of the man with a family.

I regard this compulsory saving as a splendid feature of the budget. If, in former days, a man has been doing the good thing by his family, by taking out insurance and buying a home, he is protected to an extent in these obligations, which he may deduct from his income tax. I believe this compulsory saving will do four things. In the first place it will provide funds for the carrying on of this war. In the second place the people will make fewer demands on consumer goods in this country, thereby freeing men and materials for the war effort. In the third place it is saving for a rainy day, which is always a

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cardinal principle of those who want to succeed. In the fourth place, the money will be invested in the safest possible place. I recall that in the province of Quebec there is an old saying, that in the course of his lifetime each man must eat a certain amount of black bread, and that he had better eat it while he has his teeth. Therefore those who save in their youth are more likely to have plenty in their old age.

We are not so much concerned with our immediate financial conditon. As yet no one has gone hungry or cold; in fact, the mass of the people are better off than they were during the depression, even with these very heavy taxes. The majority of the people of Canada have more money left for themselves than they had five years ago, except in certain exceptional cases, which in themselves prove the rule. Canada is yet able to pay her bills. The United States is the only country that will to-day redeem its obligations in gold. Canada is a gold-producing country; and while it is true that gold has been discontinued as a basis of finance in most countries, if we are going to have an international basis after the war it must be something of value and something which everybody will accept.

It seems to me that Canada, as a producer of gold, might lean a little toward the gold standard. The United States is the one country in the world that will redeem its obligations to-day. It is the one country in the world which will be a citadel of strength to pay the expenses of the war, and around that citadel Canada will be in the most prominent place. Inflation comes from fear and dire necessity, and it is quite possible that a time might come when dire necessity would drive us to the place where we could tide over the situation for a time and prevent immediate disaster, but we would certainly pay the price in the future. This, as indicated by the Minister of Finance last night, is not even thought of.

Let us get back to fundamentals. Let us think of the parable of the talents, a lesson to everybody which should not be easily forgotten. Let us remember that through the tumult of the ages all these questions were discussed and all these theories brought forward, and that it was only countries in despair and not the strong countries of the world which adopted inflation or other methods of merely temporary advantage. Canada is still a strong country. Let us hope that she will long continue to be strong, to carry on this conflict to the end, and that the people will travel that hard road which is the proper road to success. Then, when the time comtes that victory crowns our banners, we shall be sound

fMr. Kinley.]

not only in a monetary sense, but in our body politic, in our ideas, in our constitution, that we shall have preserved them all and go forward to the future with courage and in a spirit of progress, in the way that the people shall direct. Then, I am convinced, this country will be greater in the future than it ever was in the past.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I am sure that the hon. member who has just resumed his seat will excuse me if I do not follow the line he has taken. I did not hear very much of what he said, and what I did hear did not make sense. It seems to me that he is one of those museum pieces that have been worshipping at the shrine of the golden bull, and as we know to-day, it is mostly "bull". I believe I would do better if I followed the line taken by some other members of his party, such as the hon. member for Vancouver-Burrard (Mr. McGeer) and the hon. member for Parry Sound (Mr. Slaght).

Before passing on, I might make reference to the "prosperity certificates" to which he refers. I could take the hon. member into Alberta and show him many, many miles of good roads which were built with those certificates, and the people who built those roads received a dollar's worth of value for a dollar's worth of work.

I had not intended to speak at this time, but in view of the fact that the Minister of Finance (Mr. Ilsley) made a few references to this group I should like to present some comments on what he said.

In Hansard, July 15, at page 4270, the minister is reported as having said:

It is all very well for the group in the corner to be talking. There are not a great many people who take them seriously. . . .

I shall not take serious exception to that remark, although I would say to the minister that I find to-day a greater number of people taking interest in monetary reform than ever before. Throughout the country people are asking themselves whether a financial system can be sound which compels people to remain unemployed in times of peace and yet can find billions of dollars in times of war. I do not think our men when they return from the war, or those who are discharged from factories, will be willing to remain in the ranks of the unemployed or on relief just because the Minister of Finance says there is no money available to put them to work.

As I have said, I do not take serious exception to his remark because I realize that the press of this country to a very large extent is owned and controlled by large

Income War Tax Act

financial syndicates or by individuals of large financial means, and ever since this group came to this house the press have tried on every possible occasion to discredit us and to misrepresent what we have said. In view of the fact that the people throughout the country depend very largely on the press for their knowledge of financial matters, it is only natural that these people should not be seriously impressed by what the press has said that we have said.

In so far as the members of the Liberal party are concerned, of course they are not faced with that difficulty; other ways and means are found of dealing with them. Members of the Liberal party are dissuaded from criticizing the financial policy of the government in this house. We have had plenty of examples of Liberal members in the past criticizing the financial policy of the government for one year, or two years, and then suddenly becoming silent, so that it was not necessary for the press to criticize those members. No doubt, however, from a high sense of patriotism, the hon. member for Parry Sound and the hon. member for Vancouver-Burrard felt obliged to protest a continuation of the government's present financial policy, because they know very well that in its operation since the beginning of the war it has seriously retarded our war effort in many respects. Therefore, no matter what the consequences might be so far as they are concerned, they felt it necessary to rise in their places and criticize the continuation of that sort of policy.

I recall speeches made by the hon. member for Yancouver-Burrard in this chamber during 1936, 1937 and 1938. I believe that in 1938 he made one short speech, which was the last he made on this question until to-day. A statement of his on that last occasion is well worth remembering. He closed by remarking that members of this house should do all they could to guide the Department of Finance out of that swamp of financial ignorance in which it seemed to be lost. Can we blame the hon. member for having made that statement when we recall that from 1935 to 1939 we allowed industry in this country to remain in a state of stagnation; that we allowed half a million men to remain unemployed, roving across this country looking for work; that our shipyards remained idle, and that the defences of this country were not built up in spite of the fact that we knew that Germany, Italy and Japan were steadily arming? Is it any wonder that people lose confidence in a policy which allows a condition of that kind to remain in existence?

From 1934 to 1939 we maintained in this

country a favourable balance of payments averaging $218,000,000 a year. Yet at the same time Germany, Japan and Italy were steadily building up their armaments. In order to maintain that favourable balance of payments we shipped large quantities of war materials to those countries.

The Minister of Finance and his predecessor continually criticized the proposals of this group. I should like to remind the minister that step by step he is having to adopt many of the proposals which we made in the past and which he himself ridiculed. When he becomes so dogmatic in this house he should recall that fact. For instance, I have in mind the matter of price control. I referred to this once before, and the leader of the opposition (Mr. Hanson) has referred to it. When we were urging the greatest development possible of our natural resources and stressing the fact that it would be necessary to have price control in order to prevent inflation, the Minister of Finance ridiculed the idea. He said it would not be practicable to try to put price control into operation; that it could be done only if we had a spy in every grocery store; that we would require a gestapo. To-day we have price control in this country. Therefore I say again that he should not be so dogmatic when he is criticizing our proposals, because it is likely that he will some day be doing the very things he is criticizing to-day.

We have often urged upon the minister the desirability of subsidizing industry so- that it might sell below the cost of production. In the years from 1935 to 1939 we found it very hard to maintain an effective demand against our production, and we urged the government to put the unemployed to work and give industry a subsidy so that it could sell below the cost of production in order to balance consumption with production. The minister criticized such a policy as being crude inflation; yet only the other day in this house he stated that the policy of subsidizing industry to sell below the cost of production was an insurance against inflation. Step by step the minister is having to retract his statements and adopt the proposals that we have urged in the past.

This budget imposes a tremendous burden of taxation upon the people of this country, This group has admitted consistently in this house that it is necessary to maintain heavy taxation during war time in order to make more production available for war purposes. On the other hand it is well to realize that taxation should not be so heavy that the standard of living of the people is reduced to such a point that their efficiency is thereby

Income War Tax Act

reduced. I believe that in some regards taxation to-day has approached that point. When we read that certain married women are resigning their jobs because they cannot afford to work under this heavy taxation, it looks as though we have increased taxation to the point where we are decreasing the efficiency of the people.

We have always opposed heavy taxation in peace time, because we realized then, as apparently the government only realizes now, that taxation does curtail consumption, does curtail the demand against goods. In peace . time our main problem is to maintain an effective demand against production; our main problem is to find a market for goods so that, naturally, it is not a sound policy to maintain heavy taxation, thereby reducing the demand against goods. But an entirely different situation faces us to-day. When the minister attacks us on the ground that we are opposed to taxation he forgets that there is a war on to-day and that we advocate heavy taxation in times of war.

The minister has stressed the fact that the main purpose of taxation and the sale of bonds is to curtail the spending power of the people, and he has stated that this taxation should be based upon the ability to pay, always keeping in mind the ideal of equality of service and sacrifice. I am of the opinion that this budget definitely defeats that principle. The minister has continually warned this house against the danger of inflation, and yet by this budget he is bringing about inflation in the price of many commodities. The minister has attacked the method of withdrawing purchasing power from circulation by increasing prices, on the ground that that method is not fair, but he is doing that very thing with the war revenue taxes. Not only has he withdrawn purchasing power from the people, but he has imposed a tax of 30 per cent on candies in order to withdraw the purchasing power of our children. I think that must be regarded as a most detestable form of tax.

At the outbreak of this war we stressed the need for equality of service and sacrifice. In September, 1939, we stated that if people could go through this war and maintain their pre-war savings intact, continue to have a decent standard of living and be able to set aside a little for a rainy day, they should consider themselves most fortunate. Mr. Nash, the former minister of finance of New Zealand, expressed similar sentiments when he said that the man who goes overseas should not be any worse off for having gone overseas, and the man who stays home should not be any better off as a result of staying at home.

As a result of the minister's financial policy; as a result of this budget, we find that many people who stayed at home are accumulating large holdings of bonds. It is not equality of sacrifice and service when, on the one hand, you have men going overseas and giving up their lives and, on the other hand, men staying at home and accumulating large holdings of bonds which will be a claim against future production. The hoardings we see across the country are positively nauseating. We see placards saying: "We are all in the front line now; buy more war savings certificates." Is it not insulting our front-line men to suggest that the man who stays at home and buys war savings certificates is in the front line?

If the minister is really sincere in his desire to reduce the purchasing power of the people by taxation and the sale of bonds, I would ask him why it is that the chartered banks should be allowed, to create hundreds of millions of dollars in order to lend money to people in order to buy bonds? If the purpose of the sale of bonds is to withdraw purchasing power from circulation, why do we allow the chartered banks to create money to permit people to buy those bonds, thereby defeating the very thing the issue of bonds is supposed to accomplish? In the past two years the chartered banks have lent more than $350,000,000 to the people for that very purpose ; and since the declaration of war they have lent directly and indirectly, to the government in the neighbourhood of one billion dollars; around $660,000,000 directly, and $350,000,000 through the people.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Has not a lot of that latter amount, the $350,000,000, been paid off?

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

Some may have been, but on the other hand the banks are buying bonds from the people which will largely counteract that. I am satisfied that as this taxation increases, and the burden imposed upon the people becomes heavier, more and more people will be taking their bonds to the banks and cashing them, and at the end of the war, the banks will, I am sure, have very large holdings of these bonds. That happened in the last war, and it will happen in this war, because when you impose taxation to a point where it becomes almost impossible for a person to live, then, naturally, if he has in his possession any bonds, he will have to sell them.

The minister talks about the danger of inflation when we utilize the Bank of Canada. Ever since the declaration of war we have consistently taken the stand, that to the extent that the proceeds from taxation and the sale of war savings certificates fail to provide

Income War Tax Act

the money which the government requires to meet its expenditures, the Bank of Canada should be utilized. The minister attacks this proposal on the ground that to utilize the Bank of Canada is more inflationary than to use the chartered banks. He gave that reply to the hon. member for Parry Sound last night, and I was very much surprised that the Minister of Finance should again trot out that hoary old reason which his predecessor, Mr. Dunning, used to give when we made this proposal. All that the Minister of Finance is doing when he makes that declaration is this: He is frankly admitting that we have no effective control of the chartered banks to-day because, if we had, they would not be able to expand their loans on the basis of the money issued by the Bank of Canada.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. member knows the answer to that.

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SC

Victor Quelch

Social Credit

Mr. QUELCH:

I do not, and I shall be very glad if the minister will give me the answer.

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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

The hon. member is suggesting that we insist on a 100 per cent reserve so that the cash reserve cannot be multiplied into a greater volume of bank deposits. That is the suggestion, is it not?

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAR TAX ACT
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July 16, 1942