June 9, 1922 (14th Parliament, 1st Session)

PRO

George Arthur Brethen

Progressive

Mr. BRETHEN:

If, after forty years of a fair trial, the fiscal system of this country makes it possible for 48 per cent of the people in the urban districts to pay 99S per cent of the income tax collected in Canada, while 62 per cent in the rural districts, as a result of their small incomes, contribute only two-thirds of one per cent, I think any fair-minded member of this House will agree that that system is not equitable or wise, or likely to produce happiness, prosperity and contentment in this country.
Time and again, so often indeed that it has almost become a matter of history, have we seen these circumstances in the rural districts. Two brothers are growing up together on the farm, Tom and James. Tom, the elder, is taken early from school to assist his father in the work upon the farm. And, because he has done his part so well, James, the second boy, goes on to high school and university, and almost inevitably becomes a resident of the city, possibly one of those who contribute to the 99)s per cent of income tax collected in the city. Time goes on, the scene changes, and James, because of his superior educational advantages, becomes the representative of his community in the Parliament of this country. The Jameses evidently who have come to Ottawa have legislated well for the Jameses of this country when it has been possible for them to pay 99i per cent of the income tax collected. James has evidently forgotten good old honest Tom on the farm, with the result that the Toms of this country have been so legislated against that they are only able to pay two-thirds of one per cent of the income tax collected from the whole country. I assure you, Mr. Speaker, that although I come from a rural district some of my dearest friends reside in the urban centres: I am not making any attack upon individuals, but upon the
The Budget-Mr. Brethen

system that makes it possible for these evils to exist. Though the Jameses are not, perhaps as plentiful in the House of Commons as formerly, the Toms are here, and as there is something radically wrong in the system of which I complain they will do their best to right it.
With much in the budget speech of the venerable and honourable Minister of Finance I am in hearty agreement. In the Minister's desire for economy, so forcibly expressed, I believe every member, at least in this part of the House, will agree. But I would draw the attention of the minister, as well as the attention of every other hon. member, to the fact that economy, like charity, begins at home; and I believe that - if we are ever to create confidence in the public mind, and show that we are sincere in our preaching of economy, we should be ready to favour some substantial reduction in that part of the cost of government which affects each one of us personally. With the statement of the Minister of Finance in relation to the method of raising the current revenue I am also heartily in accord. I believe it is highly desirable that the revenue raised should cover current expenditure, but something further is needed to which I invite the attention of the minister: I believe that
at an early date steps should be taken toward the reduction of the national debt. I do not agree with the opinion expressed by some hon. members that it is always advisable to raise money for the public needs by domestic loans. On the contrary, I quite agree with the Minister of Finance that under certain circumstances such would be very inadvisable. For example, where such loans would result in the flow of the public coffers of such a large volume of money that legitimate and desirable businesses would be crippled, and practically annihilated in some instances, I believe it would be very undesirable to raise money by domestic loan. Possibly we are in such a position at the present time, and so I quite agree with the Minister of Finance in his policy of raising this first loan at least, outside the country.
I was very pleased to hear the statement of the Minister of Finance regarding his renewed efforts toward making the reciprocity agreement of 1911 effective. I must confess to the House that I was born a Tory and, up to 1911, adhered to that political faith; and generations of my family, as far back as I have any knowledge

of them, also belonged to that party. However, in the year referred to, the principle of reciprocity appealed to me so strongly that I left the party fold, and I have since had no reason to change my opinion respecting the wisdom of my course. The argument is frequently advanced, whenever trade arrangements between this country and our big neighbours to the south are suggested, that because of their great volume of business, and because of the keen competition they could offer, Canadian industries would be overwhelmed and would face ruin. That reminds me, Mr. Speaker, of an incident that happened many years ago in the history of the world when certain twelve men were sent by their people to inspect the Promised Land. Upon their return and all reported "The land to which thou ser.test us is surely a land flowing with milk and honey." But ten of the twelve brought in a majority report and it was this "But the people be strong that dwell in that land and their cities are walled and very great, and the children of Anak are there, the children of the giants, and we were in our own sight as grasshoppers and so we were in their sight." Looking back ever the years we now recognize the fact that in that case the majority were wrong, and the two were right. May I be permitted to draw the attention of hon. members to the fact that the majority are not always right. In one of the darkest days in the history of this old world a truly great Man was brought before a certain judge who said of Him "I find no fault in Him, see ye to it." A majority took Him ana crucified Him. Again the majority were wrong. In 1911 two men were sent by this House to Washington to investigate and report upon a certain trade proposition. Their report was favourable. The country was asked and gave their verdict. The majority pronounced against it. After eleven years in the wilderness I believe there are thousands of people in Canada to-day who, like my hon. friend from Portage la Prairie (Mr. Leader), frankly confess that they were misled and mistaken at that time an! who would to-day support that trade proposal. I do not think, Mr. Speaker, tha1- we are likely to get reciprocity to-morrow. Nevertheless I believe that to-day it is not only a very live question in Canada, but when that vast army of consumers in the adjacent cities of the eastern United States begin to realize that they are being cramped in their desire to get better food and get it more freely, I believe they will exert their power in trying

The Budget-Mr. Brethen
to have some such agreement as the reciprocity pact renewed. As to the argument, to which I referred a moment ago, that Canadians will be overwhelmed in competition with the United States, I would like to cite an actual experience as to how trade *with the United States works out in the case of pure-bred cattle. In 1918, three men were sent by the Holstein-Priesian Association of Canada to meet the Holstein-Friesian Association of America regarding a reciprocity agreement in records and registration. The fact that the hon. member for Victoria (Mr. Tolmie), who was Minister of Agriculture in what is recognized as a protectionist government, was one of those three men does not detract from my argument. The result of their visit was that the agreement in question was put through, so that as a result we not only have reciprocity in records but every barrier against trading in Holstein cattle between Canada and the United States was removed. As an argument against the removal of trade restrictions between the tv/o countries it is claimed that because of the fact that there are 526,000 Holstcins in the United States and only 100,000 in Canada, a ratio of five to one, the Canadian breeder would be overwhelmed by reciprocity-that his market would be destroyed and that he would face a great financial loss. But what are the facts? I believe 1 am quite in accord with the facts in stating-and hon. members can correct me if I am wrong -that for every Holstein-Friesian animal that came into Canada in the past year, at least fifty Canadian animals entered United States. Not only that, but these animals have sold much above the values in the Canadian market, up to the point where the Hon. A. C. Hardy, now a Senator in this Parliament, sold a five-months Holstein calf for the world record price of $106,000 at St. Paul. This free trade agreement in registered Holstein cattle was so successful that practically every live stock organization in Canada followed suit, so that we had shorthorn breeders, swine breeders, and sheep breeders all doing the same thing. I think this argument proves, as far as Holstein and other pure-bred animals are concerned, that, instead of we Canadians losing and suffering from this trade, it has opened to us one of the widest and best markets in the whole worlds I believe the same argument would hold good with regard to many other things, if people would only lose a little of their hysteria and consider more the fact of the wider market
which is thrown open to us and less the competition that .they feared they might have to contend with. We have in the city of Toronto Mr. T. A. Russell, who is head of a large automobile factory there. He will be remembered by many people as one of those very strong advocates, some time ago, of the doctrine "No truck or -trade with the Yankees." Mr. Russell has also a shorthorn breeding establishment near Toronto, and I have observed that, while he is very strong in his condemnation of any trading in auto-mobiles by Canadians with the United States concerns, he does not assume the same attitude when it comes to selling shorthorn cattle. As a reader of the Breeders' Gazette of Chicago, I have noticed that, when Mr. Russell had cattle to sell, he had a very large advertising space in the Breeders' Gazette, in order to induce American buyers to come to his sale. If they came, as they often did, the success of his sale was assured, and these American buyers took back with them the highest price cattle offered at his sale. I do not blame Mr. Russell for trading freely with United States in shorthorn cattle, |but-"Consistency thou art a jewel."
While I have found several things in the budget speech of the hon. Minister of Finance (Mr. Fielding), the support of which has afforded me great pleasure, I cannot as strongly support the budget itself. I will mention some ways in which I not only have no desire to support it, but I am strongly opposed to it. I am not going into all of these things, but I will deal lightly with them in passing, as I desire to draw the attention of hon. members to my position in regard to them. I oppose the increase in the sales tax for the same reason as given by many hon. members, that it bears too heavily on the persons least able to bear it. My hon. friend from Vancouver centre (Mr. Stevens) yesterday sought to support the doing away with the business profits tax, and he stated it was inadvisable-I believe he made the statement that it was wrong -to tax a man on his profits in order to raise this revenue. As I understand the excess profits tax, it concerns only that man's excess profit. In view of the fact that, not only in the west but right here in the vicinity of Ottawa, there are many men who have been unable to pay their taxes-and if it is wrong to tax the excess profits of any man, it is a crime it seems to me, to tax the man who has no profit and is not able to pay the tax-I would suggest, Mr. Speaker, that the business
The Budget-Mr. Brethen

profits tax and luxury tax be introduced as a source of revenue. I desire to draw attention of the hon. minister to a tax on unimproved land values, as suggested by my hon. friend from Humboldt (Mr. Stewart) the other day, for two reasons: first as a source of revenue, but I have no intention of giving the last word in this matter because I have not made the study of it that some hon. members have. I say that a tax on land values might possibly have the effect of decentralizing the population of this country and avoiding that great evil which we see in any country where they have a few very large cities and a few small towns. If we can do anything to discourage industry going to a few big cities, through higher taxes on the land values there, and can induce or force them to build in thousands of medium-sized towns, we will have a better country. We will have a home market that will be right at the doors of the farmers, and the transportation question will be settled. That will be a real home market. I think the income tax might well be revised on similar lines to those adopted in Great Britain, that the medium or moderately large income would be taxed more heavily. It is all right in theory to tax a big income at a higher rate than they tax in England, but it does not work out very well in Canada, because they are so very scarce, and, as a source of revenue, I think a revision might help some. In the unrevised Hansard, on May 23, page 2910, the hon. minister, in making his budget speech, stated that on cars sold for under $1,200 an excise tax of 5 per cent would be levied and on cars sold for over $1,200 a 10 per cent tax would be imposed. Taking that word "excise" as I read it, I believed it was a tax upon home manufactured cars, and, in view of the fact that these cars were already being protected with the 35 per cent duty, it seemed to me that a prosperous industry highly protected was going to be forced to pay something into the revenue of the country. But what was my sorrow, upon reading more closely, to learn that this 5 per cent excise tax was merely another sales tax applied on imported cars as well as domestic cars, with the inevitable result of any sales tax, that it was passed back to the consumer, and the manufacturer of cars went free. I would like to draw the attention of the minister to the fact that to-day the light car is not a luxury, but a necessity. It is a necessity to the business man as well
as the farmer, and it is a profitable investment. I am quite in accord with the proposal that the duty should be smaller on such a car for the good of the greatest number; but I believe the luxury car could well be taxed much higher than is shown in the budget, because a man who can afford to buy a luxury car should certainly contribute more to the Dominion treasury. In discussions in regard to the protective tariff, the argument is always brought forth that it is a good thing to establish new industries in this country, thereby giving employment, providing more wages and developing for the farmer a home market in which he can sell his products. I should like, for a moment, to deal with this question as it affects the automobile industry in Canada, and as the argument applies equally well to other manufacturing industries, I am going to go into the matter in sufficient detail to make it quite clear. In the Canada Year Book for 1920, the latest edition, it is stated on page 332 that there are in Canada ten automobile manufacturers with 4,668 employees. I may say that the figures are given for the year 1918, and I am using all the figures for that year so that my comparisons will be correct. They pay wages to the extent of $5,558,042, and the total value of the product is over $66,000,000. On these cars there is a protective duty of 35 per cent; that is the Canadian manufacturer is protected to that extent. This works out that Canadian manufacturers of automobiles are protected to the extent of $17,332,217. I want to draw two deductions from this. In other words, we in Canada pay over $17,000,000 to establish industries which pay wages to the extent of about $5,500,000. It seems to me that we are paying rather dear for our whistle. In other words, we might pay the wages of every man employed in the automobile industry in Canada, give him a holiday, ibuy imported cars, and the people of this country would be ahead each year to the extent of some $12,000,000. The argument has been advanced-and it was questioned by the hon. member for Lincoln (Mr. Chaplin) the other night-that under some circumstances, under the protective tariff, for every dollar in revenue that comes into the country, two or three or four dollars go into the pockets of the manufacturer. Taking the figures which I have given, I find that, in the year 1918, the government drew in revenue on imported cars sold in this country $3,961,000, or, in round

The Budget-Mr. Brethen
figures, $4,000,000, and they protected Canadian manufacturers of cars by over $17,000,000. In other words, for every dollar that went into the government coffers, some $3 went into the pockets of the automobile manufacturers.
I understand that Mr. Ford, in reference to his Detroit cars, stated that he was well satisfied to make $20 dear profit on every car; but owing to the workings of this 35 per cent duty in this country, there is a difference between the price of the American Ford and that of the Canadian Ford of anywhere from $140 to $175 per car, with the result that the Ford Motor Car Works, according to the press the other day, are paying $215 revenue per share. From 1905 to the present time, starting with a capital of $125,000 and returning dividends they to-day have a capitalized industry worth $30,000,000. I believe the Minister of Finance would be well advised if, instead of placing another sales tax on a protected industry of this kind, he would impose an excise tax that the manufacturers would have to pay. In that way, I believe, we would be getting some real money from an industry that is well able to pay. I am a free trader in theory, but under conditions as we have them to-day where revenue has to be raised, I do not pose as a free trader. I am, however, absolutely opposed to the principle of protection as displayed in many cases in this budget. I do not object so much to the protection that, according to the bud'get, is being afforded to agricultural implements; it is getting down in the right direction. But I believe there Should be a material reduction in this 35 per cent duty on automobiles, and similar duties on boots and shoes, woollen goods arid many other things that the bulk of the people use. Or, if it would break the hearts of some of my hon. friends opposite to reduce the tariff to any material extent, I think it would be a wise thing at least to impose an excise duty and get some of that protection into the public coffers as revenue.
I believe that "Every tu'b should stand on its own bottom." I believe a manufacturing industry should arise because of a demand. In our local town, we 'have a couple of small industries, large comparatively to the town. One of these is a cheese 'box factory. In former times cheese boxes came in from outside points. The man who started that factory discovered that there was a need, a demand. He started his factory, and he to-day is making cheese boxes for 87 factories. He is making them at a
satisfactory profit to himself, and selling them lower than the cheese box trust, which is after him for cutting prices. That is a manufacturing industry established on a man's personal initiative and capital. It is not bonused by a municipal, government or any other bonus, and it is a success.

Topic:   THE BUDGET
Subtopic:   CONTINUATION OF THE DEBATE ON THE ANNUAL FINANCIAL STATEMENT OF THE MINISTER OF FINANCE
Full View