Good afternoon ladies and gentlemen.
I want to speak to you today about some of my ideas on the Canadian economy.
I want to help build a Canada that is socially progressive, economically competitive and environmentally responsible. It will be a country that will not waste time on narrow ideological debates but rather set out to tackle the challenges and seize the opportunities of the 21st century.
My background as a businessperson and an investment banker helps inform my ideas on what itís going to take to make Canada a global economic leader. After all, I started my first company at university when I was just 19 years old.. And as an MP and especially as a cabinet minister, Iíve always applied business principles to getting better results for taxpayers.
Today, unemployment is at a 30-year low. Inflation is under control. We have trade and current account surpluses. Economic growth is robust.
Certainly our Liberal government deserves credit for strong fiscal management. But as good as we were, we didnít put the oil and gas into the ground in western Canada or under the sea off Newfoundland and Nova Scotia. Obviously, our generation of Canadians enjoys extraordinary wealth in natural resources.
Iím part of a lucky generation of Canadians Ė one that has both a moral responsibility and the economic opportunity to do even more for generations to follow. We simply canít squander our good luck.
Unfortunately, this monthís Conservative budget didnít reveal much understanding of that responsibility. It was neither forward looking nor visionary. It tried to score political points by cutting the GST. It had a grab bag of unrelated one-off tax cuts. There was little for innovation or productivity or a prosperity agenda to prepare Canadians for the 21st century.
From that perspective the Conservative budget was an utter failure. The cut to the GST was the dumbest tax cut possible. Stephen Harper is more interested in buying votes than building prosperity.
In the modern global economy we simply canít sit still. Weíre either moving forward or weíre falling behind. And I want to move Canada boldly forward.
To do so, Canadians and their politicians must confront some deeply held beliefs about this country Ė about our economic policies, our tax system, and about how federal and provincial governments deliver services, particularly to the disadvantaged in our country.
To do what we need to we will have to tackle some sacred cows.
Too many politicians are afraid to tackle what have become cultural dogmas. They govern according to what polls tell them and tell voters only what they want to hear.
Well, as leader of the Liberal party and as Prime Minister of Canada, I would be willing to make fundamental changes. Iím going to tell you how I would begin doing so.
For the country to move forward, our tax and regulatory policies need a complete overhaul. Tinkering wonít cut it. Right now, the mish mash of our antiquated tax system and income support systems can actually leave poor Canadians stuck in a dead-end.
I want to make it easier for Canadian businesses to compete and succeed globally. We can and we must do better.
Number 13 on the World Economic Forumís Global Competitiveness Ratings is just not good enough.
We must encourage productivity and investment. Letís start by dramatically reducing business taxes, and all forms of taxes on capital and investment.
I believe you can have broad social investment and a thriving business environment at the same time Ė if we create a smarter tax system
A smarter tax system would better respect the hard-earned dollars of working men and women. It would give young Canadians or people without much money a better chance to build wealth and generate savings. And a smarter tax system would dramatically reduce the tax burden on corporations.
Itís easy to see how our tax system now fails Canadians.
If someone earning $28,000 a year, increases his or her earnings by $5,000, they lose their child tax credit. They lose their GST credit. They move to a higher tax bracket. Just when we should be giving them a hand up, weíre giving them a slap down.
And it isnít smart to have older people whoíve tried to save a little money all their lives turn into victims of clawed-back tax credits. This approach only discourages people from doing the right thing: saving money for the future.
We need to go further Ė with tax and pension reform aimed at encouraging and maximizing the contribution of older workers.
It isnít smart when some families on social assistance find it makes more economic sense to stay on welfare because taking a job means they would lose cash and lose some benefits. Can you blame them for making a rational decision when faced with an irrational policy?
So, what would I do about this?
I would increase the ďworking income tax benefitĒ introduced by the previous Liberal government - a measure the Conservatives chose to ignore. The intent of this benefit is to reduce the likelihood of the welfare trap that Iíve just described and improve the standard of living for Canadaís working poor.
I also think the employment insurance system can be used to better promote fairness and productivity
We should lower EI premiums for companies whose employees rarely draw from employment insurance and increase the premiums for companies whose employees draw more frequently.
We could also consider the idea of setting up individual EI accounts. A worker who did not draw on the system for a decade could use the money in that account to fund further training and education.
Further training could help underemployed Canadians get the skills they need to better themselves, to get ahead.
Another tax reform that merits exploration would be a tax credit targeted at the first 12 years of full-time work for younger Canadians.
Thanks to such a credit, the first $25,000 young people would earn each year in their first twelve years of work would be completely tax free. This would be a huge break for young Canadians as they pay off student debt and start their careers and families.
When it comes to business taxes, Canada still has one of the highest effective tax burdens in the world.
We all know of Irelandís successful experience in business tax reform. Even Sweden has cut its marginal corporate tax rate to around 11% when itís more like 36% in Canada. Australia has followed suit. What is Canada waiting for?
We havenít had meaningful tax reform in this country since the Carter Commission in 1971.
So, weíre long overdue for a hard and extensive look at what works in our tax system and what doesnít. We have many innovative thinkers in this country. And quite often their skills go untapped.
I donít have all the answers, but I will ask the right questions and Iíll have the courage to defend the best ideas.
I like the tax and social policy ideas of people such as Roger Martin of the Rotman School of Management at the University of Toronto. I trust Jack Mintz of the C.D. Howe Institute, Brian Lee Crowley of AIMS, Ken Battle of the Caledon Institute of Social Policy, Jodi White of the Public Policy Forum, David Pecaut of the Toronto City Summit Alliance, and Anne Golden of the Conference Board of Canada.
These people may come at some questions differently but they all have valuable ideas and perspectives on how to build a better tax system and a progressive and prosperous Canada.
These are the kinds of people I would want to engage as Liberal leader and as Prime Minister in a broader policy review on taxation. Perhaps the basic personal exemption shouldnít be universal, but instead increased dramatically for low and middle income Canadians.
Perhaps we should look at basing the tax system not on annual earnings but rather on lifetime earnings. All of this deserves investigation and creativity.
Itís been 35 years since the Carter CommissionÖ 35 years of the greatest rate of change in the history of the global economy. Itís time to fix Canadaís broken tax system.
We need an extensive federal-provincial discussion on competitiveness and on tax and regulatory reform. We have to get rid of provincial capital taxes Ė inefficient taxes that hurt investment and productivity. We need to design a revenue neutral system where the federal government would vacate tax room in one area and allow provincial governments to take over with the understanding that they would then eliminate their capital taxes
Itís time to get rid of inter-provincial trade barriers, reform regulations and enhance productivity. Regulations are a form of hidden taxation that increase the cost of doing business and stifle Canadian enterprise. We have taken some positive first steps, but we must do more to ensure that when regulations are put on the books, they donít automatically stay there forever.
Furthermore, we need to work with our trading partners to harmonize our regulatory frameworks to eliminate non-tariff barriers for Canadian companies while protecting the safety and security of Canadians.
I would work with the provinces to set up a national securities regulator with inter-provincial co-operation and the sharing of costs and revenue. This would reduce costs, help monitor capital market activities, lead to better corporate governance and restore the faith of Canadian investors
We may not get to one national regulator all at once. However, I predict any province that stayed outside the system would soon join in because of pressure from capital markets and investors.
There must also be smarter cooperation between federal and provincial governments to eliminate inefficiencies. For example, why have federal services housed in one building and provincial services in another nearby? We could build on the Service Canada model of one-stop shopping. If Wendyís and Tim Hortons can co-locate, I think the federal and provincial governments can do the same. After all there is only one taxpayer. Just as Tim Hortons and Wendyí share the same shareholder.
While weíre on the topic of creating more efficient government, Iíd like to speak about my experience as minister of Public Works.
I was part of expenditure review Ė an exercise to reallocate $11 billion in spending over five years. And I am proud to say that my former department of Public Works delivered about one third of that amount. By using private sector discipline, we found $3.4 billion in savings over four years with more than a billion dollars a year savings on a go-forward basis. We both respected hard-earned tax dollars and delivered better services to Canadians. So, it can be done.
In the course of this campaign I will have more to say about social policy and health policy and environmental policy. But I come at this from the perspective that good social policy, good health policy and good environmental policy can also be good economic policies.
For example the wrong-headed canceling of the Liberal child care and learning initiative. It doesnít make sense socially. And it doesnít make sense economically.
Ladies and gentlemen, I want to leave you with this promise: I will always seek out the bold ideas this country needs to recreate itself into a global competitor. I have a curiosity for new ideas and the courage to make them reality.
You know, thereís talk in this Liberal leadership race of uniting the left. I donít care about uniting the left or the right. I want to unite the bright.
The next generation of Liberal leadership has the responsibility of setting the country on course to new successes Ė at home and around the world. Thatís what I stand for.
I want to lead a Liberal party that earns the trust of Canadians by telling them what we stand forÖ what we believe inÖ with ideas that give Canadians hope for a better future.
I want to lead the most socially progressive, economically innovative, environmentally responsible government in Canadian history to give Canadians pride in a better Canada.
Itís the least that my lucky generation can do.