The theory is that a person who is dependent on earned income is not in as stable or solid a position as a person who is dependent to some or to the full extent upon investment income. When he has capital upon which he is deriving an investment income, his future is provided for, so long as he can hold on to his capital. A person who is dependent upon earned income is not in that position, so that it is considered fair to tax investment income at a slightly higher rate than non-investment income.
That is what I explained a few minutes ago. Under the existing law it has been largely nominal. There has been a surtax which has been called an investment income surtax, but it was applied on salaries as well as on investment income over and above $14,000. In a very large range there was no distinction whatever; it has been a so-called, an alleged, investment income surtax. I am told that $200 or thereabouts is the largest amount by which one person's income tax can exceed another's on the same income by virtue of that surtax.
a remarkable statement. I refer hon. members to page 52 of the office consolidation of the Income War Tax Act, September, 1940, wherein is set forth "Rates of tax applicable to all persons other than corporations and joint stock companies, in respect of 'investment income'." On an income exceeding $100,000, but not exceeding $150,000, they pay a rate of eight per cent. That does not jibe with what the minister said.
Let us say an able professional man, perhaps a barrister, had a professional income of $150,000. The tax of eight per cent would apply on nearly the whole of that income, and he would be paying within $220 of the income tax being paid by his next door neighbour with an investment income of $150,000.
As I understand it, before this change was made investment income was taxed only if the amount was $5,000 or over. Now, by this change, you are taxing any sum that is liable to ordinary income tax. In other words if a man dies leaving his widow assets from which she will have an income of $1,750 per year, when she comes to pay income tax she will receive an exemption of $750. On the remaining $1,000 she will pay $150 under the new scale, plus an additional $40 under this investment income tax. Is that the situation? If it is I suggest to the minister that he is starting far too low, that he should not start to impose the four per cent investment income tax immediately after the personal exemption has been allowed, because this becomes really a double tax.
Under this resolution there is no exemption at all corresponding to the present provision of $5,000. Under this resolution investment income bears the four per cent tax, in addition to the ordinary income tax, from the first dollar.
I am inclined to think the hon. member is right. I do not want to answer finally, however, because I am under the impression that there is an exemption of a little more than the $750 for investment income. If the hon. gentleman will just let this stand for a while I will get an accurate answer.