July 17, 1942

LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

When I asked for exemption I was limiting my request on behalf of those who are medically fit for overseas service. I do not think those who are not in that category are entitled to such consideration. Could the minister give us any idea as to the number who are medically fit?

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

No, I cannot.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
PC

George Russell Boucher

Progressive Conservative

Mr. BOUCHER:

While we are on this point,

I wonder if the minister has considered the matter of compulsory saving as far as this particular class of people is concerned. It seems to me there is some divergence of opinion with regard to what is fair with regard to the taxation of soldiers going overseas, soldiers returning from overseas, the ladies, and the soldiers who are' here in Canada. But it seems to me that it would be pretty sound policy to embark on a system of compulsory savings, even in excess of that under the present act, for the soldiers in that particular position, so that the government could have the use of the money during the war. The spending power of the soldier in Canada would be reduced and the rehabilitation problem would be greatly facilitated by the soldier having that reserve coming to him when the war is over. In all these questions we have been discussing for the last fifteen or twenty minutes, I believe a very interesting sphere of research would be along the line of a policy of compulsory savings, even in lieu of taxation to a great extent.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Howard Charles Green

National Government

Mr. GREEN:

If I may interrupt on that

just for a moment; if such a suggestion were adopted it would strike at the root of all the legislation to help soldiers, the general plan of which is that the government will help the

Income War Tax Act

soldier to become rehabilitated; that is certainly the responsibility of the government. This plan of compulsory savings, on the other hand, is the civilian's way of helping himself to become rehabilitated after the war, and I would argue just the opposite way to the hon. member for Carleton-that the refundable portion should not be charged against the soldier.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

William Ross Macdonald

Liberal

Mr. MACDONALD (Brantford City):

I

would associate myself with the hon. member for Vancouver South in that regard.

Mr. LEDUC; Nobody has more sympathy than I have for the rank and file of the soldiers who are in uniform, but I quite agree with the leader of the opposition in the remark he made this afternoon about these men holding office here in Ottawa. I do not know how many there are. I know some people who have been working here in Ottawa ever since the beginning of the war. They are wearing uniforms, and we do not know for whom we should have respect. It is about time we should know whether a man is an impostor or not.

At six o'clock the committee took recess.

After Recess

The committee resumed at eight o'clock.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Douglas Gooderham Ross

National Government

Mr. ROSS (St. Paul's):

I should like to say a word as to the officers. It is all very well to say that these officers should not pay any income tax, but I do not see why they should be treated differently from warrant officers. A warrant officer class B has a net income of $2,167.25: living allowance, $480; trade pay, $263.75; salary, $1,423.50.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
?

An hon. MEMBER:

How many warrant officers are there in the army?

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Douglas Gooderham Ross

National Government

Mr. ROSS (St. Paul's):

I do not know, but why should you stop at a warrant officer; why should you not tax him just as you do a lieutenant? A second lieutenant gets $1,551.25 plus separation allowance of $540; his tax is $470. Therefore, he has a net income of $1,620. The difference is between $2,167 and $1,620. You can go all up the line. Take a lieutenant, his net income is $1,773.60. He receives $1,825 pay and $540 separation allowance, and the tax amounts to $591.

A captain gets $2,372.50, plus separation allowance of $600. His tax amounts to $871, leaving his net income $2,101.50.

The least that I think should be done is that the separation allowance should be free from tax. All these officers are willing to go over-

seas. Not only that; a great many of them are separated from their families; in many cases they have to maintain two homes, and the separation allowance is hardly adequate at the best. In addition, the officer has to contribute to the cost and upkeep of his mess. Yet he has to pay 70 cents a day income tax.

Let us take some other men in the service. Take our dollar-a-year men. They can deduct all their expenses, while the man in the army cannot. Men who for various reasons are put in the army cannot deduct any living allowance. When the war is over, the man who is in the army is going to be at a tremendous disadvantage when he comes back into civilian competition. It seems to me that in all fairness he ought to have some opportunity to build up something for the future.

I have a letter from an officer who says:

Most of the officers known to me have taken advantage of the generous offer by the banks and borrowed the money from them and paid last year's tax in full and face the twelve monthly payments from March, 1941, to March, 1942. In most cases wTe have assigned pay to our wives as pay cannot be assigned directly to the bank. If the finance department start taxing our pay at the source next September most of us will be most seriously embarrassed. There are very few officers that I know that have not scaled their living down to the limit and most that I talk to are seriously considering applying for permission to leave the service as they feel they cannot carry on.

Many of them have commitments for war bonds and war savings stamps. I do not say that they should have total exemption, but there should be some way of getting them some exemption, something that is free from taxation. I hope the minister will give this matter his closest consideration.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Richard Burpee Hanson (Leader of the Official Opposition)

National Government

Mr. HANSON (York-Sunbury):

The

amendment refers only to earned income?

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Of married women, yes.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
ND

Walter Frederick Kuhl

New Democracy

Mr. KUHL:

Just a few words by way of relating the necessity of this increase and these imposts to fundamentals. The other day the Minister of Finance, in replying to the hon. member for Parry Sound, made this statement:

We are talking about realities. This is not a question of money at all; it is a question of things and people. It is elemental. We are just confusing it if we think it is a question of money.

I wish to say a few words from the point of view of realities. The minister, as the financial adviser to the government, the government as a whole, and the country as a whole, would make a great deal more progress if the minister actually carried out the ideas implied in that statement. He seems to imply there that, after all, money is

Income War Tax Act

a secondary consideration, and from the point of view of providing money I agree that money is a secondary consideration. It is the cheapest commodity on earth to obtain, nothing but paper and ink. As far as procuring money is concerned I agree with the minister if that is what he implied, that money is a secondary consideration. I agree that the all-important factor, whether we are considering war-time or peace-time requirements, is the men and the materials available.

From the point of view of the necessity for the increase in the income tax on the lower incomes I believe everyone will concede as a fundamental that no country, neither Canada nor any other part of the empire, nor any of the united nations, can make its most effective contribution to the war effort unless the people at home who are working in the industries, as well as those in the armed forces, are in the best state of health. I believe everyone will concede that workers in industry, and in fact anyone doing work of any kind, can do his best and contribute his maximum only if his standard of living is such that he enjoys the best of health and can work at the highest possible efficiency. If there is any factor contributing to the impairment of a man's efficiency in this war work, then I say that factor, whatever it may be, whether it be an increase in the income tax or any other kind of impost, is doing a decided disservice to the war effort, and is actually subversive. If we are going to contribute the maximum in all fields of production, then surely the first fundamental we should establish is that every individual worker should be allowed an income which will permit him to work with the greatest possible efficiency. Does this budget promote that efficiency on the part of the large majority of the workers in this country? If one may judge from the remarks that have been made by many hon. members, the imposts contained in this budget will not bring about that result. Many people will be denied health services. Many will be denied even some of the necessities of life, some of those things which contribute greatly to their ability to produce. Therefore, from the point of view of realities, surely the minister must admit that in connection with these lower income brackets this budget does not promote the greatest war effort.

Let us now consider the matter still farther from the point of view of realities. Men and materials, as the minister has said in the past and as we in this corner have said many times, are the fundamental considerations. If we have the men and the materials, then we have nothing to worry about. Surely no one will deny that we have not the wherewithal, as far as food or clothing or shelter is concerned, adequately to take care of our war workers. These things are not beyond our _ reach; they can be produced, for the physical essentials are here. It is just a matter of apportioning to domestic requirements the maximum we feel we can afford to devote to those purposes; and surely we cannot afford to apportion to our living standard any less than will give all workers a decent standard of living.

As far as the money angle is concerned, the same reasoning holds true. This budget is going to bring about a great increase in our national debt. After all, what is our financial system? Is it anything more than an accounting system? The debate that took place yesterday and the day previous in connection with the question of national money was very interesting; but in all that has been said with regard to the issuing of national money I I believe too much emphasis has been laid on the question of currency. Currency is a very minor part of our monetary system, It amounts to possibly less than 5 per cent of the complete operation of our financial system, while by far the greater part of that system is carried on through bookkeeping transactions which are the simplest things on earth to perform. The costs that are involved in operating the financial system are being met from day to day, in the same manner that we are meeting the real costs of the war. We provide from day to day all essential labour with which to produce the munitions of war at home. Those in the armed forces are jeopardizing their lives, sometimes losing their lives, and munitions and supplies are being blown up. But from the physical point of view the costs are being met from day to day. Does that not apply with equal force to the matter of finances? After all, the money we use is created simply through bookkeeping transactions, with a little depreciation in connection with bank equipment and buildings, and some clerical work. This work energy is being provided from day to day by those engaged in the banking business. All the physical requirements, all the essentials, are being met from day to day in our banking system. Consequently, as the minister has suggested, from the point of view of realities we are meeting all costs, physical as well as financial, from day to day. Therefore I see absolutely no reason why there should be any debt in connection with Canada's war effort, and of course that also would apply in peace time.

Now a word as to the need for securing funds from those in the lower income groups in order to finance the war effort. From the point of view of physical realities I see

Income War Tax Act

absolutely no reason for that at all. After all, the money system is merely a monetization of the real wealth that exists in the country; and the reason why the government has been obliged to obtain funds from the chartered banks, in addition to what has been taken from the people in the form of taxation and war savings, is simply that there is never sufficient money put into circulation completely to monetize the actual wealth of the country. It has been our constant contention that when the funds in circulation, the money paid out in the course of production, whether during peace time or war time, is insufficient to monetize all the goods, then additional money ought to be obtained from the Bank of Canada or from the government's monetary set-up, at cost. The fact that the government is going to be obliged to borrow $1,228,000,000 during the ensuing year indicates that there is not enough money in existence, to begin with to monetize the complete production of the nation. Consequently I cannot see that it is anything but reasonable to suggest that the government itself should bring about this monetization at cost, rather than put the people as a whole into debt for the amount of this monetization plus the interest rates that are charged. I feel therefore that until this field is explored and utilized to the fullest possible extent, the people of Canada can never make their maximum contribution to the war effort.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

Joseph-Hermas Leclerc

Liberal

Mr. LECLERC:

I hold in my hand something that may prove to the exponents of easy money what easy money means after all. I have here a menu from a dining car plying between the United States and Mexico, and here are some of the different prices on that bill of fare: Fried fillet of fresh fish,

tartar sauce, chopped beef steak, et cetera, $1.20 in American money-this is printed in English and in Mexican-or $6 in Mexican money. The next item is $1.15 in American money or $5.75 in Mexican money.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT
?

Mr LECLERC:

The next is $1.10 in

American money or $5.50 in Mexican money; and the 85 cent meal, in American money, is $4.25 in Mexican. When you have to pull out a $10 bill every time you have a meal with your wife you realize that easy money goes as easily as it comes.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Gordon Knapman Fraser

National Government

Mr. FRASER (Peterborough West):

When the national defence tax is deducted from the employee's wages now he is given a slip showing the deduction, but on that slip the man's name is not shown nor does the name of the firm appear.

[Mr. Kuhl.l

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I am informed that that is not correct.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Gordon Knapman Fraser

National Government

Mr. FRASER (Peterborough West):

Is the man's name on it?

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Yes.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
NAT

Gordon Knapman Fraser

National Government

Mr. FRASER (Peterborough West):

How long does it take to get the refund? I understand that there are some cases that have been pending for about eight months.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink
LIB

Colin William George Gibson (Minister of National Revenue)

Liberal

Mr. GIBSON:

I have already given one answer to the question of refunds. They are made at the end of the fiscal year after the returns for the entire year have been filed. There are a great many returns filed in April. The man's return has to be compared with the employer's, and sometimes with the returns of three or four employers, and it takes a good deal of time to get all the refunds checked and ready for payment. It is a new branch that has had to be built up, and actually it has not been working as rapidly at first as we hope to have it working in the future. It has taken some time to get these refunds made, and it will be a considerable time before the great mass of them can be paid.

Topic:   WAYS AND MEANS
Subtopic:   INCREASE IN TAX ALONE
Permalink

July 17, 1942