April 16, 1924

PROPOSED INCOME TAX AMENDMENTS

LIB

Joseph Archambault

Liberal

Mr. JOSEPH ARCHAMBAULT (Chambly and Vercheres) moved:

That, in the opinion of this House, the government should consider the advisability of amending the Income Tax Act by making the following changes: (1) To increase from $300 to $500 the exemption granted for every child; (2) to differentiate in the

amount of taxation against invested capital and that placed against revenue derived from salaries or wages; (3) to grant to pepple married under the community regime an exemption equal to that which is granted to people married under the regime of separate maintenance.

He said: Mr. Speaker, the matter involved in the resolution that stands in my name has been brought before this House by myself on many occasions, with more or less success. It i3 evident that in bringing forward arguments in favour of the resolution I shall have to repeat myself, and I therefore crave the indulgence and the attention of hon. members for a few moments.

As hon. members will notice, the resolution is threefold in its purpose, but all relating to the same subject, the income tax. The first object sought is to increase from $300 to $500 the exemption granted for each child; the second is to differentiate in the amount of taxation against invested capital and that placed against revenue derived from salaries

Income Tax Amendments

or wages; and the third is to grant to people married under the community regime an exemption equal to that which is granted to people married under the regime of separate maintenance. My task will be much easier this afternoon, because the Acting Minister of Finance (Mr. Robb) has given notice of a resolution, which is now on the order paper, embodying an increase in thje epempition for children from $300 to $500, thus giving effect to the wish of the House as expressed last year. I shall therefore refrain from making any remarks on that first point, reserving any observations I may find it necessary to make for the time when the resolution will be brought down. But I wish to congratulate the government heartily upon bringing in this legislation, which I with many other members have been advocating for many years. Under the old administration, which seemed to be in favour of birth control, I advocated on many occasions that this increased Exemption be granted, but without success. I remember the first time I introduced a similar resolution, in 1919 or 1921, I think it was. That resolution was opposed and defeated at the request of the ex-Minister of Finance (Sir Henry Drayton), and those members who were in the House at the time will recollect the incongruous and uncouth remarks and objections that were made by some hon. members. They may remember, for instance, that the then hon. member for Peterborough, Mr. Burnham, opposed the resolution because, he said, it would be an encouragement to animal instincts. The then hon. member for Fron-tenac, Doctor Edwards, opposed the resolution because, he said, it was a disguised way of allowing the province of Quebec to avoid paying their share of the taxes. However, I am glad to say that the first year this government were in power they increased the exemption from $200 to $300, and now this year there is a resolution on the order paper in the name of the Acting Minister of Finance for increasing it from $300 to $500. I repeat again, the government are to be congratulated on this step, which I am sure will win the gratitude of all those who believe that the best citizen, after all, is the Canadian bom, and the best immigrant the one that God himself brings into your home.

There remain, Mr. Speaker, two other points in my resolution, which I will discuss very briefly. The first one is a ruling by the Department of Taxation regarding the tax imposed on persons married under the regime of community of property. I may explain to hon. members who may not be entirely

familiar with the civil law of Quebec that in the province of Quebec there are two marriage regimes. There is the regime of community of property, and there is the regime of separation of property. If people are married without a contract they fall under the first regime, that of community of property. The properties and the moneys belonging to the wife or to the husband before marriage and the properties or monies that they may receive after marriage form one whole. When they are married under the regime of separation of property, the husband and the wife each keeps the property or moneys, they may have had before entering into marriage and any moneys or property they may inherit after they ara married.

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LIB

William F. Carroll

Liberal

Mr. CARROLL:

Does the regime of community of property apply to the Mennonite settlement in the West, where the property is held by trustees?

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LIB

Joseph Archambault

Liberal

Mr. ARCHAMBAULT:

I could not tell

my hon. friend. It might be so. But what I am discussing is a ruling that has been made by the department regarding the regime of community of property as we have it in Quebec. The same ruling may have been made with regard to the Mennonites in the West. At all events, under the ruling of the department, if the people are married separate as to property they enjoy the benefit of two exemptions, and if they are married under the regime of community of property they enjoy the benefit of only one exemption. Let me give an example. Suppose a married couple has an income of $6,000, the husband earning a salary of $3,000, and the wife possessing an income of $3,000, derived from inheritance or otherwise. If they are married under the regime of separation as to property the husband gets his exemption of $2,000, and the wife gets her exemption of $2,000. Therefore, out of that sum of $6,000, $4,000 is exempted, and they pay a tax on only $2,000, the 4 per cent normal tax, making $80. But if the same parties are married under the regime of community property, under what I might call the absurd ruling of the department they are given only one exemption, that is, only $2,000 is exempted, and they pay $160 on the other $4,000; that is just double the amount paid by those who are married under the regime of separation as to property. I pointed out this ruling last year, Mr. Speaker, and I thought it would be changed. The injustice is apparent, and I hope that when the Acting Minister of Finance brings in his amendments to the Income Tax Act he will have this ruling changed. I trust that he will give orders to

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the effect that the people who are married under the regime of community as to property will get the same benefit of two exemptions enjoyed by those who are married under the regime of separation as to property.

My second point, Mr. Speaker, is regarding the differentiation that should be made in income tax from earned and unearned income.

I consider earned income to be, for instance, profits of office, pensions, income derived from farms, or from professions, or from trade. In order to be more explicit I shall read to the House the definition in the English law of earned income:

The expression "earned income" means-

Profits of office.-Any income arising in respect of any office or employment of profit held by the individual.

Pensions.-Income in respect of any pension, superannuation, or other allowance, deferred pay, or compensation for loss of office given in respect of the past services of the individual or of the husband or parent of the individual in any office or employment of profit, whether the individual or husband or parent of the individual shall have contributed to such pension, superannuation allowance, or deferred pay or not.

Property emoluments of office.-Any income from any property which is attached to or forms part of the emoluments of any office or employment of profit held by the individual.

Any income derived from farms.

Any income derived from a profession or trade.

All other income, outside of that just defined, is unearned income. In my opinion this differentiation is most commendable. The man who derives his money from his daily toil, from his daily work, should not be asked to pay as much tax as the one who derives an income from money invested or money inherited. The salary of a man is his capital. When a man, earning $5,000 a year, for instance, dies, his family is practically left with nothing because he has been forced to spend the most of his salary during his lifetime to provide for his wife and children. On the other hand, when a man who derives an income of $5,000 from money invested dies, his wife and family still have the $5,000 income, plus the capital probably of $100,000 from which the income is taken.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

Take the case of a farmer retired on the money he has worked for and earned, and his income is, say, $1,500 a year, would my hon. friend consider that income as not earned?

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LIB

Joseph Archambault

Liberal

Mr. ARCHAMBAULT:

I expected the

remark from the right hon. gentleman. It is not a new one, it was made last year. First of all the right hon. gentleman should be aware that the farmer who derives an income of $1,500 does not pay one cent of income tax if he is married. He only has to

pay when his income is above $2,000. That is the law.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

That is the case, of

course, but it does not affect the principle. It is not the case in the city income taxation.

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LIB

Joseph Archambault

Liberal

Mr. ARCHAMBAULT:

It is the federal

income tax that I am discussing. We might fix another day to discuss municipal and provincial taxation if it be deemed necessary.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

But it illustrates the

principle.

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LIB

Joseph Archambault

Liberal

Mr. ARCHAMBAULT:

What my right

hon. friend probably wishes to point out is this, that it would not be fair to tax a farmer or a labourer who has accumulated a certain amount of money and derives an income from it more than a man who earns a very high salary. I think my right hon. friend is right in his contention. I was going to explain that my idea was to create three rates of income taxation in order that the state should derive practically the same income. At the present time the normal tax is 4 per cent. Now, I submit that a fair adjustment of the income tax would be the following:

Income derived from inheritance money I would tax at 6 per cent.

Income derived from money that has been set aside by a certain person through his work I would tax at 4 per cent.

Salary and the different earnings I have mentioned in speaking of earned income I would tax at 2 per cent.

Regarding salaries I would consider that the tax of 2 per cent should only apply to a reasonable living salary, limited, say, to $10,000. I believe that legislation of this character would be very sound. If you look into the income tax returns you find that those who pay the most are the salaried and professional people. Consequently there should be a fair readjustment and reapportionment of the tax. I will not occupy any more of the time of the House in discussing this matter. In closing, however, I wish to congratulate the government for having acceded to the first point of my resolution and raised the amount of exemption from $300 to $500. But they should also consider at the earliest opportunity the advisability of changing the law regarding the two points which I have dwelt on this afternoon.

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LIB

Joseph-Éloi Fontaine

Liberal

Mr. FONTAINE (Hull) (Translation):

It affords me, Mr. Speaker, much pleasure to second the resolution which the hon. member for Chambly and Vercheres (Mr. Archam-bault) has so ably proposed to the House.

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I am especially pleased to support such a resolution for the reason that a great number of the electors whom I have the honour to represent in this House, have asked me to do so, among these I may mention the "Cercle Catholique des Voyageurs de Commerce" of Hull. It is hardfy necessary for me to speak at length on this question, the hon. Acting Minister of Finance (Mr. Robb) having recently announced that a bill would soon be brought down to grant the first part of the resolution, that is to say the part which refers to the increase of the exemption from $300 to $500 for each child under 18 years old. I wish to thank the government on their decision, it is another popular measure which will redound to their credit. Indeed, Sir, no one in this House will contend, I am sure, that schooling, education and bringing up of a child only, costs $300 per year. I am speaking of a child to whom we wish to give the necessary means of earning a good living, so that he may be in a position to do his share of work and good for his country, especially in our dear province of Quebec where, let us thank God, families are large. The present act is certainly a hardship and hindrance to the education of the children, and I am not astonished that the hon. Acting Minister of Finance, who lives in our province, and therefore knows the facts upon which this resolution is based, has decided to increase to $500 the amount of the exemption for each child.

I also think that the second request mentioned in this resolution should be allowed. Indeed, Sir, in my opinion, the government should establish a difference between the tax levied, on the salary and the one levied on the income of money invested in companies or paying enterprises. It is only fair that the salary of the person who works-even if it is large-should not be taxed as high as the income of the person who has. inherited his capital or receives large dividends without having to work.

Finally, I come to the third and last part of this resolution, namely: That married

people under the regime of community of property should enjoy the same privilege, as regards exemption, as those married under the regime of separation of property. I think, Sir, that it should not be necessary to insist upon this point. It should be sufficient to bring out the facts so as to show that there is a serious injustice. Indeed, here are two neighbours of whom one is married under the system of separation of property, he is entitled to an exemption of $2,000 and his

wife is also entitled to an exemption of $2,000, that is $4,000 for the two, while the other neighbour who is married under the regime of community of property is only entitled to $2,000 and his wife gets no exemption. As you are aware, Sir, this only affects our province, since the regime of community of property only exists in the province of Quebec.

Before resuming my seat, I wish to congratulate the hon. member for Chambly and Vercheres for his courage and perseverance in demanding justice, and I trust that the government who have already acquiesed in the first part of the resolution, will consent, after further consideration of the question, to adopt the other two parts of the resolution.

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Right Hon. ARTHUR MEIGHEN (Leader of the Opposition):

There has not .been much discussion on this motion, and I do not feel that my opinions on all the points of the resolution are matured; but I feel like stating them,, such as they are, as respects all three. I am in full accord with the first portion of the resolution. I have always felt that the allowance in respect of children was not adequate, having regard to the individual and to the married man, and having regard, of course, as well to the high cost of living now prevailing, making the lot of him who had a family, particularly a large one, much more difficult than the lot of the single man. Of course $500 is a very considerable increase from $300, but, in my individual opinion I feel it is not too much even yet. Of course, when the tax was put on, as with many other features, we awaited the working out of it, and we learned in respect to it by experience, just as we have learned in respect of many other things. I think I recall the other unreasonable objection by the member for Peterborough at that time, referred to by the hon. member for Chambly and Vercheres (Mr. Archam-bault); and as he referred to it, I could not help also recollecting that the same member for Peterborough was the only one man to tne right of the chair who agreed with the equally absurd contention of hon. members opposite that the government of that day was usurping power.

I do not feel at all convinced of the wisdom of the second portion of the resolution. I mentioned to the hon. member, just by way of illustration, in the hope that the question would lead to a free elucidation, the instance, of a man who has earned at farming, or some other hard labour, a competence for his old age, has it invested, secures the revenue, and I questioned the hon. member whether he considered that revenue any less earned than that

Income Tax Amendments

earned by the bank president, say, $50,000, or that of the railway general manager, or some other highly paid official of a large concern. He answered me by saying first of all, that the man with $1,500 had no tax to pay. Well I do not think he is right to begin with, but even if he were it would not be an answer. He is not, if the subject is a married man; but if he is a single man, as I understand the law, his exemption is only $1,000. So that I was scarcely entitled to the rebuke wnich the hon. gentleman administered. I would consider it nothing but the grossest hardship to come with special emphasis on a man in receipt of a small income upon which he hopes to maintain himself in old age, and tell him, "That is something you did not earn, something coming to you as a result of fortune or legacy, so we are going to tax you extra on that amount," while saying to his brother in receipt of a very large income, because it took the name of a salary, "We will let you off practically free, and what we lose from you, we will exact from the fellow who has lived upon the money he has earned." I know other countries have adopted that proposition.

I know particularly that cities and towns have adopted it, and I think provinces as well, but I have myself seen the grossest hardship as a result of its adoption. I have seen instances where, as a consequence, there being no exemption at all in cases of persons who had not sufficient income to live upon, the result of accumulation of a lifetime, there was an invasion of the capital in order that this money might be exacted for the benefit of the municipality. I am not at all convinced that there is any rule different in character between incomes that are honestly earned. If the income is honestly accumulated by work and toil, or by the use of brain or body, I have never been able to convince myself that the state has a right to classify one as against the other, and to say that one may be exempted and the less fortunate one penalized. There may be cases where the incidence would be fair, but there would be very many where the incidence would be anything but fair.

The hon. member proceeds further and says "In case of . property that comes clown through legacy, I would pounce on that harder still; I would exact six per cent; whereas in the case of income derived from other unearned investment only 4 per cent would be exacted." Well, what is going to be the result of that. Very much that comes through legacy is pretty hardly earned. The son on the farm who labours till he is thirty or forty-say twenty-five-gets by legacy a portion of the homestead. Is it to be said that that is not earned, that because it coifies to him under a will he will

have, to pay an extra tax upon it, in order that some other propertj'' which perhaps is a result of speculation, may be partially exempt?

A man becomes the owner of property, partly the result, say, of legacy, partly the result of his own toil and partly the result perhaps of one of the many investments that turn out fortunately. How in the world is the state going to examine his property to ascertain just what part of that is legacy, what part is the result of his brain, properly exercised, and what part is the result of the labour of his body? For the life of me, I do not know how that is going to be done. It may be done immediately with some fair accuracy; but after a few years, how is it going to be done? Some of his property is lost. Against what share is that going to be assessed? What part is going to be reduced of those three divisions, in order that the state may apply this complicated system on what remains? In respect of the division of assets, although, of course, one can make a very forcible case for what one might describe as the earner as against the man who is in receipt of a revenue from investments that he earned before, I do not believe you are going to get very far, and in my humble judgment, you are going to produce more complication and do more harm than good. Undoubtedly, in many cases you are going to impose hardships on individuals.

Coming to the third phase of the resolution, I am not quite certain yet that I am clear upon it. So far as I know, in the provinces in which I have lived, there are no divisions as respects classes of marriages. I do not know that that can be said absolutely. There may be cases where . property is held in common, even though it is 4 p.m. not a consequence of the marriage settlement, and there certainly are cases where husband and) wife would have individual properties and individual incomes assessable under the law. The hon. member pointed out that in case, for example, of an income of $6,000, where $3,000 is income from property rights of the wife, and $3,000 income from property rights of the husband, if those are held separately under the separate income marriage, there are two exemptions of $2,000 each, whereas, in the case of the same property, with $6,000 of income derived therefrom, where it is held under a community system, the exemption is only $2,000. I would presume there would be some discrimination, but for the life of me I do not know how you are going very fairly to get over it in the way the hon. member describes. I would be disposed

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to get over it in the other way-to take the case of the wife who has an income and the husband an income and allow the two of them only the one exemption, dividing it half way between them. There is really only one home, one unit, and it does not seem to me fair that there should be the total exemption, particularly the total married exemption, if I may so describe it, attributable to both the husband and the wife where each has a separate income. These things tend to an apportionment of what really was the property of the one amongst the two in order that double exemption jnay be enjoyed. Would this difficulty not be met in the straightest, easiest, as well as the fairest way, by allowing the one home the one exemption, added, of course, to the one exemption being the exemption in favour of the children?

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LIB

Paul Mercier

Liberal

Mr. PAUL MERCIER (Westmount-St. Henri (Translation):

more appropriate to help the country's children and give them the schooling and education necessary, so that some day the country may make use of their strength and intelligence to help in developing our resources in every sphere. I think it would be regrettable to lose sight of that aim owing to a. very badly conceived legislation which would prevent us giving a good education to our youths and oblige us to look towards immigration to obtain the brains which we need to administer our affairs.

As to the difference which exists between married people, under the system of separation of property and those under the system of community of property, this act seems to unjustly hit this class of citizens who bring as a part of their marriage the sacramental condition, which is love, while it favours, I will not say those who unite without love, but those who seem not to have lost sight in their marriage of the pecuniary side of the question. I fail to see why two married women, equally subject to taxation, should not be placed on an equal footing, and, if there is to be any discrimination, I think it should be the one who is under the regime of separation of property that should be taxed, and not the former, because the woman under the regime of separation of property is more often than otherwise in a position to contri-but to the treasury.

I believe that the married man, the head of a large family, does his share for the country and it is in him that our hopes must rest for the safeguard and building up of our country. This is demonstrated, in a most striking manner, in every war. It is especially the families that have sons who win the wars and certainly render the greatest services in that connection. One must never,

I think, draw a parallel between money values and human lives. We saw during the last war many people, very patriotic in words, who wanted to send everybody overseas, not having sons themselves, while they remained here and succeeded in winning the title of what is known to-day as war profiteers. These people made a great fuss to win the war. Today when our country is overburdened with debts, I do not see why we should allow to remain on our statutes laws sponsored by them to protect their own interests. Under these circumstances I deem it my duty to strongly support the resolution of the hon. member for Chambly and Vercheres. Being fully aware of the sense of justice and uprightness of the hon. Acting Minister of Finance (Mr. Robb), I hope that, at this present session, we shall receive a square deal in connection with this legislation.

Mr. E. C. St. PERE (Hochelaga) (Translation) : The resolution, Mr. Speaker, that

the hon. member for Chambly and Vercheres (Mr. Archambault) has introduced, seems to express the request of a great number of people, if one may judge from the numerous petitions addressed to members. The present system of taxation on incomes, which is so much in evidence since it has been imposed upon us to defray the expenses of the war, seems to me the most equitable, because it must be commensurate, according to our progressive system, with the resources of each one. This does not imply that it is not susceptible to improvement. The champions of progressive taxation must be guided by the rules governing strict justice. Indeed1, it is through sacrifices that each citizen shoulders his share of social burdens. The sacrifice of the poor is always felt more than that of the rich. The former tells on'the necessities of life, the latter bears on luxuries. Wrongly is taxation considered as a spoliation. It is the acknowledgement of a public service and it is. unjust and disloyal, on the part of citizens, to cheat the law or seek, by underhand dealings, to avoid it. However, if all members of a community are forced to contribute to the public taxes, it does not follow that they must all do so in the same proportion. As a principle, every one is held to pay for a service according to his means and the benefit he may derive. It is self-evident that large land owners or manufacturers, who have important interests at stake, benefit in a greater measure from the protection of the law and the public services than the man whose interest consists in the work that his two hands perform; the former must therefore contribute in a greater measure to their support. I approve of the suggestion of increasing from $300 to $500 the margin of exemption allowed for each child under 18 years old, but I add that this exemption of the tax is cut off exactly when it becomes most needed. You have, for instance, a son who is just eighteen. He is endowed with talent, and you intend to give him a profession which he will later on do honour and exercise for the welfare of society. Up to the day he is received a lawyer, a doctor, and so forth, he will entail heavier expenses from year to year, yet it is just the time chosen to cut off the exemption. Does the legislator wish to punish you for working to provide for the future of your child, when you might have unburdened yourself of a great yearly expense by placing him in apprenticeship in some trade, the moment he has reached the age when the law obligingly dispenses him with further schooling? No doubt, such was not

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the intention of the law but the exact result nevertheless is to discourage education among those who are not wealthy, or in other words, it aims at restricting education to those who are favoured by fortune. In the case of boys it has especially an economic bearing. However, when it comes to girls, we meet with a problem which has to do with the home life of a family. At eighteen, it is the age when, under normal conditions, a young girl leaves the convent. Back to her home, what will be her future. "There are parents whose thoughts dwell only on the mighty dollar;" they have already heavy burdens; they will not add another one, the young girl must therefore earn her living, she is given her full freedom, a position must be found for her in a manufacture, a store, an office, or-a superlative honour and blissfulness-"in the government." what will be her fate, it is of small consequence, what is there to be feared? "Miss so and so" earns her living.

It is the reverse with other parents, they look after the future of their daughters. They must think of means so as to support, feed, clothe them, also do a little entertaining, and this is not accomplished without money. On the other hand, the young girl at home, under the eye of her mother, will learn how to keep house, prepare and cook the food, sew, and so forth, in a word to equip herself so as to be a good wife and a good mother. You may think that the father should receive some compensation? You are wrong. Since he has chosen to keep his daughter at home until she finds a suitable husband, instead of giving her the opportunity of following some line of business and leaving her without protection amid the dangers which surround such existences, let him pay for it. He does not deserve to be exempted from taxation. What is most astonishing, is that a heavier tax is not levied for having lost his business acumen.

To establish a difference between the portion of taxation which is applied to the income on capital and that which is applied to salary or wages. Everything, in this world, Sir, harmonizes through the relation, which one thing bears to another, for progression is always, so to speak, a kind of proportion. In the case we are dealing with at present, it means that the rate increases in proportion to the amount taxed, it matters little whether the income is derived from unearned capital or consists in a salary or wages.

An employee on a small salary, let us say between $3,000 and $4,000 per year, must necessarily be very sparing to make both ends meet. In the advent of sickness or 91

death, his family will be left without a cent; and yet during all his life he will have paid to the state the same rate of taxation as the person enjoying the same income from investments which will shelter his heirs from want. Let us take the case of a father with three children having a yearly earned income of $5,000. He has an exemption to the amount of $2,000 plus $900 as long as his children are under 18 years. On what remains he will have to pay a tax of $84. Do you expect that this man, at his death, will leave a fortune to be compared to Croesus' wealth? No, for the cost of living, to-day, is too high for those who wish to give their children the education so necessary to encounter the struggle for life. If success belongs to the most qualified, we must not take away from those in charge of their education, the means of starting them in life. My hon. colleague from Chambly and Vercheres (Mr. Archambault) asks us to discriminate in the rate of taxation on the earned and the unearned income. When should an income be considered as earned? The committee on Ways and Means of the United States Congress are of the opinion that the said income should never exceed the sum of $20,000, and that all salary above this amount must come under the maximum tax and surtax. I think it is but right to establish this difference, because it removes from the class of reasonable salaries and minimum taxation, those who, among the people on a salary, receive large amounts for their services. If the citizens of a state must contribute to the maintenance of the government, each, as much as possible, to the extent of his ability, that is, in proportion to the income he receives under the protection of the state, I think that the system favoured by the committee on Ways and Means of the United States Congress is the most equitable. It protects the workman and the wage-earner who have begun to set aside their savings, rewards the person who, after having saved, is receiving a small income from his investments in real estate, and allows the merchants to provide for financial crises brought on by trade depression. Should the amount of $20,000, as mentioned, appear too high as an earned income let us adopt the amount favoured by the United States farming group, that is $6,000, and, all incomes above this sum must be debarred from the minimum rate of taxation, under the term of earned interest.

Should we adopt either one system or the other, equally destined to protect the small wage earner while not ruining the magnates of the financial world, we must apply the

Income Tax Amendments

maximum tax and surtax to all the incomes over the amounts above stated. The government could not do otherwise in these days when money is needed to meet the expenses of the country.

This side issue, Sir, does not alter in any way the just and equitable principle of the second part of the resolution under debate. It only throws more light on the subject and demands more precision as to the definition "in dollars" on the income earned or income derived from labour..

I cannot conceive, Sir, that a salary earned or the income derived from labour can apply indifferently, and in the same way, to the wages of a mechanic of the Angus shops and to that of a general manager of an important bank, or of any other large financial institution or railway company. It would be the proportional taxation instead of the progressive one. The Italian government had to face a similar problem which it solved in the following manner: Income

earned, income mixed and income derived from capital. These mixed incomes are partly derived from labour and partly from income on capital. It is thought in Italy that these mixed incomes are better applied to small merchants and to farmers than all other systems. People are taxed in a proportion known as intermediate between the income earned and the income unearned.

As regards the proposal to give married people under the system of community of property the same exemption as to those under the separation of property system, I think it is but just and necessary.

However, it is absolutely indispensable that in all well organized society, the old maxim of the "stronger supporting the weaker" should continue to be put into practice and I think that the government were well advised-and I congratulate them-in showing their sympathy and giving their support to the first part of the so needed resolution which the hon, member for Chambly and Vercheres has introduced.

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LIB

Henri-Edgar Lavigueur

Liberal

Mr. LAVIGUEUR (Quebec County) (Translation) :

It is, Sir, a genuine pleasure to

associate myself with those who have supported the resolution of the hon. member for Chambly and Vercheres (Mr. Archambault) I think it is fair and equitable to establish a distinction between the father of a large family and one who has no dependents. It is true that the present act allows an exemption of $300 per child; but on the other hand, if we consider what it costs to a father of a family for schooling, education and the incidental expenses of bringing up children, the

increase of the exemption which is proposed in the resolution before the House, is simply a trifle.

Years ago, the government of the province of Quebec, then under the leadership of the late Hon. Honore Mercier, made a grant to all fathers of twelve children. This legislation was a beneficial act, and I think that it is an example which can well be pointed out to this House, especially at a time when we are deploring the emigration of our Canadian families to the United States. Who are the families that are thus leaving the country? They are, generally, those of good farmers of the province of Quebec and of other provinces; our labourers with large families who toil and find it hard to provide for their children. Well, Sir, if it is desired to stem the tide of emigration towards the United States, is not this resolution of a nature to bring back hope to our worthy bread earners, in the province of Quebec, who are on the eve of emigrating.

Moreover, Sir, should the head of a family having ten or twelve children be taxed at the same rate? I feel satisfied that we should go one step further than the resolution of the hon. member does, and that the father of a family of ten or twelve children should entirely be exempted of the income tax.

I now come to the second part of this resolution. It would only be right and equitable that persons having inherited of a capital which they did not earn, should contribute more in taxes than a poor wage earner who must support his dependents out of a salary hardly sufficient to meet the necessities of life.

I also think, Sir, that it would be quite right and just to further consider the third part of this resolution and accept it, so as to remedy this unjust distinction which exists between married persons under the regime of separation of property and those who are under the regime of community of property. If married persons under the former system have a right to an exemption of $4,000, I do not see why married persons under the system of community of property should not enjoy the same exemption.

I deemed it my duty, for the reasons given above, to address the House in support of the resolution of the hon. member for Chambly and Vercheres (Mr. Archambault) for which I intend to vote.

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IND

William Charles Good

Independent Progressive

Mr. W. C. GOOD (Brant):

Mr. Speaker,

I think the hon. member for Chambly and Vercheres (Mr. Archambault) deserves to be commended for bringing this matter to the attention of the House. I very heartily endorse the first paragraph of the resolution; I

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suppose there is very little difference of opinion among hon. members with regard to increasing the tax exemption for every child.

With respect to the second paragraph, it seems to me that the phrase, "invested capital" does not indicate the distinction which the hon. member and many of us would make, that is, the distinction between earned and unearned income. The right hon. leader of the opposition (Mr. Meighen) has already pointed out that the income on savings is earned. I think there should be no discrimination against such income. I do believe, however, that in the administration of income tax we ought to make a distinction between earned and unearned income, and during the debate on the budget, when I trust the hon. member will be in his seat, I shall discuss the matter more fully than I care to at present.

With regard to the third clause, it seems to me that the right hon. leader of the opposition has made a very practical suggestion to avoid what is obviously unfair at present; that is, that the family shall be taken as a unit in considering the income. If I understood the hon. member for Chambly and Vercheres correctly, he advocates the splitting up of the unit income into two parts, that of the husband and that of the wife. In this event we would have the double exemption in practically every case.

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LIB

Joseph Archambault

Liberal

Mr. ARCHAMBAULT:

May I point out

to my hon. friend that the ruling of the department is that in the case of people married under separation of property there are two exemptions, one for the husband and one for the wife; but that those who are married under the regime of community of property are entitled to only one exemption. My hon. friend will appreciate the difference in taxation. In the one case there is taxation on $2,000 only-$80; in the other case there is taxation on $4,000-$160.

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IND

William Charles Good

Independent Progressive

Mr. GOOD:

The ruling of the department is obviously illogical and absurd, as the hon. member has pointed out, and I think some remedy should be devised. I would suggest that the family be considered a unit, and that the particular ruling which applies to people married under the regime of separate maintenance should be abrogated. If that is the intention of the hon. member, I shall be very glad to endorse his position. Again, I commend my hon. friend for bringing this matter to the attention of the House.

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LIB

Hyacinthe-Adélard Fortier

Liberal

Mr. FORTIER (Labelle) (Translation):

Mr. Speaker, the resolution of the hon. member for Chambly and Vercheres (Mr. Arch-91i

ambault) aims at amending the Income Tax Act, so as to decrease the burden which weighs upon heads of families. It is a most popular resolution. It has the support of all heads of families in this country, and certainly the hon. Acting Minister of Finance (Mr. Robb), who acceded to this request, performed an act deserving the approbation of the country by assuring us that this tax exemption for each child under 18 years old, will be changed from $300 to $500.

Do we always do the right thing, when legislating for the head of a family, for the one who has the care of a home, for the father who is surrounded by numerous children whom he is obliged to bring up, feed and provide with the necessary education? Do we perform our entire duty towards the head of a family? For my part, when it is a question to help my electors, the person who is at the head of a large family is always given preference. I think that we can never do too much to acknowledge the sacrifices he makes so as to bring up his family in a proper way. One of our great statesmen of the province of Quebec, the hon. Honore Mercier, had one of the most popular measures passed which consisted in the grant of a parcel of land containing 100 acres to the father of twelve children. His successors carried out the same policy for a certain time. Unfortunately, to-day, this grant is abolished. The example given by this great statesman should be followed, I think it is somewhat in this spirit that the hon. Acting Minister of Finance has promised this House to further help the head of a family by unburdening him of the income tax which weighs so heavily upon him. By lightening the burden, it is, in a way, the country which comes to the rescue of the toiler, of this home provider, of one who has brought up numerous children; and rightly are we doing so. Glancing over this land of ours, I notice that as a whole the country reflects the development of its smaller units which are the towns and parishes. And who are those responsible for the development of these smaller units of our fatherland? They are the heads of families. They are the ones who, by their sacrifices, create the activities extant in these small country places and it is the latter which ensure the prosperity and wealth of our country.

There is another reason that should induce us to protect the head of large families, it is that to be powerful, countries are bound to have numerous subjects. The great nations, are those that are peopled by millions

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of citizens, such as England, France, the United States and all the countries that are densely populated. In our young country we strive to increase the number of our inhabitants. Should we not favour the makers of homes, should we not encourage the heads of families, should not our thoughts dwell on the cradle? We do give some thoughts to all this when we support the resolution of the hon. member for. Chambly and Vercheres. It is, therefore, with pleasure that I give my sincere support to this resolution. I know not of any more popular measure which can be adopted by the government to further lighten the burden of taxation.

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LIB

James Alexander Robb (Minister of Immigration and Colonization)

Liberal

Hon. J. A. ROBB (Acting Minister of Finance) :

Mr. Speaker, the hon. member for Chambly and Vercheres (Mr. Archambault) has, if anything, added to his already widespread popularity by again bringing forward this resolution. I recall that in response to the resolution and the speeches of the hon. member on this subject on a former occasion, the exemption of $200 which was in the original act was increased in 1922 to $300, and I am willing to give him the credit for having advanced that idea. This year the government, recognizing the justice of the request, have proposed to increase that exemption to $500, and the resolutions are now on the order paper.

As I listened to the hon. member for Chambly and Vercheres it occurred to me that I would like to enlist his sympathies and his energy and support toward trying to collect taxes from those who apparently sit up at night trying to evade the just payment of them. It is apparent from the experience of the administration that there are a good many people trying to evade taxes who are quite able to pay and that we have the least trouble collecting taxes from those who, perhaps, are the least able to pay. I admit that there are some defects in the act and that the legislation should possibly be reviewed. I am inclined to agree with the right hon. leader of the opposition (Mr. Meighen) in his observations in regard to the exemptions as between husband and wife. It seems to me that the fairer method would be to recognize the home as a single unit.

I do not wish to delay the House more than to say this: All that the hon. member

for Chambly and Vercheres asks is that we give the matter consideration. We are always prepared to give fair consideration to all measures brought before the House. The government offer no objection to this resolution.

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Motion agreed to.


April 16, 1924