TAX CUTS FOR PEOPLE AND FOR SMALL BUSINESS ACT, 1998 LOI DE 1998 SUR LA RÉDUCTION DES IMPÔTS DES PARTICULIERS ET DES PETITES ENTREPRISES

MINISTRY OF FINANCE

ONTARIO COALITION AGAINST GAMBLING EXPANSION

COALITION FOR A PUBLIC INQUIRY INTO THE DEATH OF DUDLEY GEORGE

NESBITT BURNS

CONTENTS

Monday 8 June 1998

Tax Cuts for People and for Small Business Act, 1998, Bill 15, Mr Eves /

Loi de 1998 sur la réduction des impôts des particuliers

et des petites entreprises, projet de loi 15, M. Eves

Ministry of Finance briefing

Mr Tom Sweeting, assistant deputy minister, office of the budget and taxation

Ms Ann Langleben, director, tax design and legislation

Ontario Coalition Against Gambling Expansion

Mr Wayne Olson

Coalition for a Public Inquiry into the Death of Dudley George

Ms Ann Pohl

Nesbitt Burns

Mr David Rosenberg

STANDING COMMITTEE ON ADMINISTRATION OF JUSTICE

Chair / Président

Mr Jerry J. Ouellette (Oshawa PC)

Vice-Chair / Vice-Président

Mr E.J. Douglas Rollins (Quinte PC)

Mr Dave Boushy (Sarnia PC)

Mr Bruce Crozier (Essex South / -Sud L)

Mr Peter Kormos (Welland-Thorold ND)

Mr Gerry Martiniuk (Cambridge PC)

Mr Jerry J. Ouellette (Oshawa PC)

Mr David Ramsay (Timiskaming L)

Mr E.J. Douglas Rollins (Quinte PC)

Mr R. Gary Stewart (Peterborough PC)

Mr Bob Wood (London South / -Sud PC)

Substitutions / Membres remplaçants

Mr Gilles Pouliot (Lake Nipigon / Lac-Nipigon ND)

Mr Terence H. Young (Halton Centre / -Centre PC)

Also taking part / Autres participants et participantes

Mr John Whitehead, senior budget adviser/manager, Ministry of Finance

Mr Pat Deutscher, director, macroeconomics analysis and policy, Ministry of Finance

Mr David Aronoff, assistant deputy minister, Management Board of Cabinet

Mr Bud Wildman (Algoma ND)

Clerk / Greffier

Mr Douglas Arnott

Staff / Personnel

Mr Avrum Fenson, research officer, Legislative Research Service

The committee met at 1532 in room 228.

TAX CUTS FOR PEOPLE AND FOR SMALL BUSINESS ACT, 1998 LOI DE 1998 SUR LA RÉDUCTION DES IMPÔTS DES PARTICULIERS ET DES PETITES ENTREPRISES

Consideration of Bill 15, An Act to cut taxes for people and for small business and to implement other measures contained in the 1998 Budget / Projet de loi 15, Loi visant à réduire les impôts des particuliers et des petites entreprises et à mettre en oeuvre d'autres mesures contenues dans le budget de 1998.

The Chair (Mr Jerry J. Ouellette): We'll call to order the standing committee on administration of justice. First is a report of the subcommittee on committee business dealing with Bill 15, dated Wednesday, June 3, 1998. Can we have a motion to adopt the report?

Mr E.J. Douglas Rollins (Quinte): We have a motion to adopt that report, Mr Chair.

The Chair: So moved by Mr Rollins. Any discussion? Seeing no discussion, all those in favour? Opposed? The motion's carried.

At this time, I believe we can move to the technical briefing on Bill 15. If the individuals doing the presentations could come forward and identify yourselves for Hansard, we would appreciate that, please. Welcome. We have an hour for presentation time, which takes in questions and answers afterwards. You may begin.

MINISTRY OF FINANCE

Mr Tom Sweeting: My name is Tom Sweeting. I'm assistant deputy minister, office of the budget and taxation in the Ministry of Finance. On my right is Ann Langleben, who's the director of the tax design and legislation branch in the Ministry of Finance. I've provided a hard copy of the presentation that we will be making for committee members' benefit this afternoon.

Bill 15, the bill under discussion, is the first bill bringing forward measures proposed in the 1998 Ontario budget. There are other measures that were proposed in this budget that are not covered by this bill, but they will be introduced at a later point in the fall.

The second page of the presentation, by way of context for the measures that are in the bill, highlights some of the key measures that were in the 1998 Ontario budget.

Foremost among those, of course, was tax cuts to create jobs and in that area the government brought forward 36 additional tax cuts on top of the 30 that had been previously proposed. There are measures as well as income tax cuts for people in businesses. There are also measures related to digital animation and other high-tech sectors as well as tax cuts to support workplace day care and workplace accessibility.

The budget talks about reductions in the provincial deficit. The deficit is estimated at $4.2 billion for 1998-99, down from $5.2 billion in 1997-98. There are a number of measures in the budget that represent investments to create future jobs investments in the R & D sector through the fund that's investing in university and other research, and there are a variety of additional spending programs, highway infrastructure that is aimed at creating future jobs. There are a number of learning opportunities for young people announced in the budget. There's assistance to working families through the new Ontario child care supplement for working families. Measures are proposed that represent strengthening health care. Additional dollars are provided for classroom funding, and there are a number of enhanced community safety measures.

Starting with the personal income tax cut, the 1996 budget, as the slide show on page 3 indicates, said, "In 1999, Ontario's tax rate will be 40.5%. That's 30.2% less than it is today." For members' benefit, I'm sure you're probably aware, but Ontario's income tax rate is calculated as a percentage of the federal income tax rate, it's not calculated as a percentage of income, so when we talk of a rate of 40.5%, that's 40.5% of tax that's calculated for federal tax purposes.

In the 1996 budget, the tax rate dropped from 58% to 54% on July 1, 1996. Again on January 1, 1997, it dropped from 54% to 49%. The 1997 budget announced the second set of changes on the personal income tax. The tax rate dropped from 49% to 47% on July 1, 1997, and then from 47% to 45% in January 1998. The 1998 budget completed the tax cut by reducing it from 45% to a proposed 40.5% as of July 1, 1998. This puts in place the final stage of the tax cut six months ahead of schedule.

The actual mechanics of delivering the tax cut require that the PIT rate be set at 42.75% for the full year 1998. That is the average rate when you have 45% for the first six months and 40.5% for the last six months, amounting to 42.75% for the year. In 1999 and future years the tax rate will be at 40.5%.

The personal income tax cut, as page 5 indicates, is distributed in a way that the government proposes as fair. All taxpayers in Ontario benefit from the tax cut. Enrichments to the Ontario tax reduction and the introduction of the fair share health care levy all are part of ensuring that the benefits are distributed fairly, by increasing the benefits received at the lower end and reducing the benefits received at the upper end of income. Every taxpayer with $60,000 or less in income gets a tax cut of at least 30%, and 64% of the tax cut goes to taxpayers with incomes between $25,000 and $75,000.

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The chart on page 6 illustrates the distribution of the tax cut by income group. As you can see, the average percentage tax cut received declines as income increases. The tax cut has a differential impact depending on income and family status, and the best way to show this is perhaps by representative examples. We have three examples that show three different scenarios: an individual with modest income who gets more than a 30% cut; a family with average earnings who gets the full 30% cut; and an individual with above-average income who gets less.

On page 8 is the example of a modest-income family, a single parent with two children and, as you can see, it illustrates the impact of the tax cut from 1995 through 1999. To help with reading the chart, in 1996 the value of the tax cut in the first phase that was introduced to this taxpayer was $70. In 1997, as the tax cut was implemented further, that value grew to $380. In 1998, at the rate of 42.75% that was referred to just a couple of minutes ago, it'll be worth $700, and at full implementation in 1999, it'll be worth $845. Altogether that's a little over $2,000 in tax relief for this particular situation over the period of the introduction of the tax cut.

On page 9 there is a chart which looks at the average-income situation: $160 in the first year; $795 in 1997; $1,210 would be the value in 1998 if the legislation were to pass; and at maturity it would be $1,385, for a total of $3,550 and an average tax cut of 30.2%, compared to the previous table where the average tax cut was 43.2%. I'm not referring to the child care portion in this presentation.

For a higher-income situation, in this particular case a self-employed individual with a net income of $126,500, the tax cut is worth $440, growing to $2,225, growing to $3,710, and reaching $4,360 when it's fully implemented, and that amounts to about a 20.5% reduction in income taxes for that particular person.

On page 11 there is an interprovincial comparison of PIT rates. Before the first PIT cut rate was introduced in 1996, Ontario's PIT rate at 58% was fifth lowest. In 1999 Ontario's tax rate would be the lowest at 40.5% if Bill 15 was enacted, and you can see the comparison of tax rates between the various provinces in the accompanying chart.

Page 12 looks at the comparison from the standpoint of the top marginal rate. In 1996, before Ontario's income tax cut was implemented, the top marginal rate was the third highest in the country at 53.2%. In 1999 it would be the third lowest at 49.64% if Bill 15 is enacted. That would still be slightly higher than the rate in New Brunswick, 49.3%, and considerably higher than the rate in Alberta. If the entrepreneurs who paid the self-employed health tax were taken into account, they paid at a rate of 54.7% before the budget was introduced, and that will fall to 49.6% if the tax cut is fully implemented.

The personal income tax cut supports the government's job creation agenda by leaving extra money in people's pockets to make purchases, giving families more opportunity to pay off debt, providing entrepreneurs with incentives to form new businesses and reinvest in businesses and improving attractiveness as a place to locate for highly skilled individuals. The budget indicated the implication and certainly the job creation performance since the introduction of the tax cut, and that's shown on page 14.

Along with the reduction in the personal income tax rate was the introduction of the fair share health care levy. The fair share health care levy is an extra tax paid by high-income people to replace the revenue that was forgone by the government's proposal, and indeed plan, to eliminate the payroll tax paid by small businesses. It reduces the value of the tax cut but it does not entirely eliminate the tax cut. In 1999 the fair share health care levy is proposed to apply only to people reporting more than $3,845 in Ontario income tax. It'll apply to about 10% of the taxpaying population.

Every Ontario taxpayer gets a tax cut. The minimum cut in 1998 is 13.1%, and when the system is fully matured next year the minimum tax cut would be 16.2%.

The proposed amendments in Bill 15 are shown on page 16. Those amendments review the numbers for the fair share health care levy. In the 1998 taxation year the fair share health care levy is 20% of Ontario income tax in excess of $4,057.50, plus 33% in excess of $5,217.50, and for 1999 the fair share health care levy will be an extra 20% of Ontario income tax in excess of $3,845, plus 36% of Ontario income tax in excess of $4,800.

The slide on page 17 illustrates the interaction between the personal income tax rate cut and the introduction of the fair share health care levy. Using the example of the single person with no dependants with $100,000 in income, in 1995 that person paid $13,400 in Ontario income tax and $2,120 in the surtax that applied at that point in time. For 1996 their income tax fell from $13,400 to $12,945 as a result of the first step of the tax cut, and the fair share health care levy came in at $2,215. It incorporated the revenue raised from the previous surtax as well as the additional revenue necessary to meet the commitment to fund the EHT exemption.

Moving to 1997, the income tax for this particular example fell from $12,945 to $11,090 and the fair share health care levy grew to $2,585. Similarly, the pattern continues in 1998: The basic PIT falls again and the fair share health care levy grows. By the end of the mature system in 1999 you can see that there has been a substantial reduction in personal income tax from $13,400 to $9,360 offset by an increase in the fair share health care levy of over $600, from $2,120 in the original surtax to $2,745 -- as a result, the statement that the fair share health care levy reduces the tax cut but doesn't completely eliminate the tax cut. Then the example with $200,000 in income is a similar type of explanation.

As well as personal income tax cuts, Bill 15 also proposes tax cuts for small business. The proposal in the budget and in the bill is that the small business corporations tax rate will be cut in half to 4.75%, the lowest rate in Canada, over the next eight years. This tax cut would benefit more than 90,000 small businesses and help them continue to create jobs. When the proposed rate reduction is fully phased in, Ontario will have the lowest CIT rate in the country, while currently having the highest small business CIT rate in the country. It will help small businesses with financing, as they typically have more difficult access to capital markets, and allow them to expand their retained earnings to invest and create more jobs.

The tax cut recognizes the role that small business plays in creating jobs. They create more jobs than any other sector. An estimated 82% of all new private sector jobs in Ontario are created by the small business sector. This income tax cut supplements or accompanies the 1996 budget proposal that introduced a $400,000 payroll tax exemption to support small business. The 1996 and 1997 budgets implemented phase-in steps of that payroll tax exemption. The 1998 budget accelerates the final step, although it is not a matter that's dealt with in Bill 15.

On page 20 you will see the income tax rate comparison that I was referring to. Ontario currently has a small business corporate income tax rate of 9.5% compared to various other provinces that are displayed, and that would decline to 4.75% once the cut is fully phased in in eight years.

The actual mechanics of the bill are to introduce a rate of 9% effective May 5, 1998, a rate of 8.5% on January 1, 1999, with a reduction of 0.5% each year until January 1, 2005. At that point the rate will be 5.5% and the legislation proposes that on January 1, 2006, the legislation will be 4.75% as far as the rate is concerned.

We'll skip over the next two pages as they deal with items that are in the budget but are not in Bill 15 itself and we'll move to page 24, which is the other amendments. I'm going to ask Ann Langleben to take the committee through the other amendments contained in Bill 15.

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Ms Ann Langleben: As Tom mentioned, just beginning on page 24, I'd like to take you through some of the more technical amendments in the bill. Part I of the bill deals with the Income Tax Act. In addition to the personal income tax rate cuts, which Tom discussed, there's a measure that would simplify the administration of the "fairness" legislation as it applies to Ontario's personal income tax credits. At present, fairness claims for Ontario tax credits are administered by Revenue Canada by way of remission. These are generally hardship cases, where someone may have been, for example, institutionalized for several years and wouldn't have filed a return, or other hardship cases. Under the proposed amendment, Ontario would allow Revenue Canada to process Ontario tax credit fairness claims as an assessment or reassessment of tax, and this would reduce the administrative steps involved in the processing.

Moving to page 25, part II of the act deals with the Corporations Tax Act. In addition to the cut in the small business income tax rate, we have tax initiatives that were announced in November 1997 to ensure that Ontario remains a leading player in film and television productions in North America. Sections 13 and 14 deal with the Ontario film and television tax credit enhancement. Eligibility is extended to a broader range of production activity and per project and annual corporate tax credit limits are eliminated. Section 17 introduces the 11% refundable tax credit on Ontario labour expenditures available to foreign-based and domestic production companies that are not eligible for the Ontario film and television tax credits.

There are other technical amendments in the Corporations Tax Act. Sections 6, 7, 8 and 9 deal with the Ontario new technology tax incentive. This involves the repeal of a redundant provision because new corporate reorganization regulations caused these rules now to no longer be necessary.

We also have an amendment to the Ontario book publishing tax credit, which would ensure that this credit applies properly in the expenditure rules. There is also a standard provision which would provide the Ministry of Citizenship, Culture and Recreation with authority to revoke an eligibility certificate if it was granted based on incorrect or misleading information.

The Ontario computer and animation special effects tax credit includes an amendment that would clarify that productions are eligible for this credit if they're not excluded as eligible productions for the film tax credit. Basically, this clarifies wording to ensure that a company claiming the credit can be controlled, that it is extended to companies beyond residents, provided that the company itself is an Ontario resident.

Regarding the small business investment tax credit, we have certain technical measures such as the correction of the calculation and the clarification of eligible investment.

Part III of the bill deals with the Highway Traffic Act. The bill proposes to increase the minimum fine for failing to obey a red or amber light from $68 to $150, and it also includes a technical amendment to ensure that heavier fines can be properly imposed for subsequent offences.

Part IV of the bill deals with the Land Transfer Tax Act. There is an extension of the LTT refund for first-time home buyers of newly constructed homes. The act currently permits the refund of tax payable on the purchase on or before March 31, 1998. Bill 15 extends the deadlines for purchase, occupation and registration of title by one year. There are a couple of technical measures which reinstate two provisions that were inadvertently omitted in a prior amendment.

Part V of the bill enacts the Ontario Loan Act, which would permit the Lieutenant Governor in Council to borrow up to $4.6 billion for the consolidated revenue fund.

Part VI of the bill amends the Ontario Lottery Corporation Act. The bill proposes to expand the list of purposes for which the net profits of the corporation may be appropriated by the Legislature to include health care, charities, non-profit corporations and the funding of community activities and programs. It also authorizes the corporation to make payments from its revenues in accordance with agreements approved by the Minister of Finance for distribution of proceeds of lottery schemes for charitable organizations and non-profit corporations, and the bill would repeal provisions relating to video lottery terminals.

Part VII of the bill deals with the Retail Sales Tax Act. There is the extension of the rebate on building materials for farmers to support rural communities and create jobs. The temporary rebate for the purchase of building materials used in farm buildings would be extended to March 31, 1999. The exemption for 1-800 and 1-888 toll-free phone numbers is extended to include 1-877 numbers. There are technical measures exempting transfers of assets from the province to municipalities where the transfer results from restructuring or local services realignment. To harmonize Ontario's sales tax with other jurisdictions, an exemption is proposed for 25-cent local telephone calls that are made via coin-operated telephones.

There is also some clarification of RST legislation on border collection to facilitate negotiations with Revenue Canada for the collection of RST on taxable items at the border. To ensure consistent treatment relating to the exemption for hospital restructuring, the definition of "public hospital" is proposed to be amended to include hospitals under the Mental Health Act. Another technical measure would see limitations and conditions on tobacco tax collectors under the act.

The Chair: Does that conclude the presentation?

Mr Sweeting: It does.

The Chair: That allows us approximately 13 minutes per caucus for questions and answers. We will begin with the official opposition.

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Mr Bruce Crozier (Essex South): That's a very extensive review of the charts and graphs from the budget, certainly informative, although I'm a bit surprised that a couple of graphs were left out.

One is on the budget on page 24 where it showed the debt as a percentage of the GDP. It was the lowest in 1989 and 1990 that it has been in the last 10 years, and I'm just a bit surprised that they would leave that out. It happened to be the Liberal government that was in power at the time. There was another graph in the budget that I know is just an oversight, but that's on page 118 of the budget, where the finance minister's own graph shows that in the years from 1989 to 1990 the debt didn't grow, so obviously that was a balanced budget in that year and the first one in 23 years. I know those are just oversights that the minister has left out.

Today in the Legislature the Minister of Economic Development, Trade and Tourism said that the budget had doubled, I think it was, in the years from 1985 to 1990 in which the Liberals held the government, and I must admit the debt did go up by $9 billion, but it certainly didn't double by any means. It was $30 billion that was left by the Tory government before that and it therefore went up perhaps about 25%, but as I point out, that graph on page 118 shows that there was the only balanced budget we've seen in recent history in the years 1989 and 1990. I just wanted to clarify the record and perhaps the members opposite would like to mark those pages in their budget books so they'll be able to refer to them in the Legislature as we do.

One other thing, although I know the people from the ministry can't verify this, but during the recession, 1981 to 1984, Premier Harris was part of a government at that time that increased taxes by $1.823 billion -- those were in areas such as OHIP premiums, beer taxes, fuel taxes, tobacco taxes, retail sales tax and the corporate income tax -- and even supported the implementation of the social services maintenance tax at about 5%. I appreciate that the folks from the ministry can't verify those, but I just would have thought again that in reading into the record about all these tax cuts here we would want to note as a matter of fact that Taxfighter Mike Harris supported those tax increases during the time of recession.

I have a question with regard to the technical adjustment for the exemption of transfers of assets from the province to municipalities where the transfer results from restructuring and a local service realignment. It's said to be a technical adjustment. Is that another way of saying that when the original legislation was drafted it was missed?

Ms Langleben: I'm not sure if it was missed or not, but clearly the purpose of the amendment is to exempt transfer of assets from the province to municipalities upon restructuring and we certainly have that provision in the Land Transfer Tax Act.

Mr Crozier: I appreciate that and I think then, from that answer and from what's given to us here, I'd have to assume that it's another case of some mismanagement where the government has tried to proceed rather quickly, some would say, with this kind of legislation and in doing so simply didn't cover all the bases. I appreciate the fact that we're being given the opportunity to help the government clarify that.

The other is in part 6, I believe, the Ontario Lottery Corp. We had a briefing this morning, and it was very helpful. The problem was that there wasn't anyone there from the lottery corporation who could answer any specific questions. I wondered if there was anyone here this afternoon who could help us with that.

The Chair: Are you able to answer any questions on that?

Mr Sweeting: Yes, I'd like to bring up David Aronoff. I'll ask David to introduce himself and respond to your questions.

The Chair: If you could introduce yourself for Hansard, please.

Mr David Aronoff: Sure. David Aronoff, assistant deputy minister, gaming secretariat, Management Board of Cabinet.

Mr Crozier: I want to go back to when video lottery terminals were first proposed and legislation passed that would authorize video lottery terminals in Ontario. At that time it was intended, as was stated by the government, to legalize them so that we could stamp out all the illegal ones. I understand under a video lottery terminal setup the government has all the terminals linked so you can identify practically by place all the legal terminals in Ontario. Would that be the case under a VLT system?

Mr Aronoff: There is a centralized system that actually attaches to all of the machines so that they are essentially controlled by one automated computer system.

Mr Crozier: Notwithstanding our objection to the introduction of VLTs, it's my understanding now that you've eliminated VLTs and are going to mechanical slot machines in charity gaming houses and racetracks. There's no link there so that you can identify all the legal machines?

Mr Aronoff: There is actually a central system available for mechanical slot machines as well, and it is our intention to have that system set up for those. The difference is really one of, for video lottery terminals, the centralized system was much more comprehensive because it would deal with the fact that video lottery terminals can be in small numbers in a vast number of locations. In the case of the new initiative, we've restricted the slot machines to only racetracks and as many as 44 charity casinos. So the centralized system for slot machines can handle that narrowly defined number of sites and, given the government's stated intention of not going beyond that and cancelling the expansion into the hospitality industry, the essential system can handle that number of locations and does.

Mr Crozier: I'm pleased to hear that because I don't recall that we'd had that information before, and I think that goes a long way at least in those sites to controlling the illegal machines or any that may be illegal.

In this change of policy with regard to mechanical slot machines, can the government control the payout the way they would have or could have controlled the payout with video terminals?

Mr Aronoff: Mechanical slot machines don't have the discretion that video lottery terminals do in that respect. No, they don't.

Mr Crozier: Will the individual locations be able to control their own payout?

Mr Aronoff: The entire initiative is actually controlled in terms of the initiative being conducted and managed by the province and then through its agent, the Ontario Lottery Corp. The Ontario Lottery Corp is the only body which could be responsible for any of those types of changes. Individual locations do not have discretion to change the payout ratios.

Mr Crozier: Will technicians from the lottery corporation have to come in and do that physically?

Mr Aronoff: It's not our intention to actually change them and to have different levels at different sites. Plus, there isn't that discretion with the slot machines anyway. But the authority rests with the lottery corporation to do that and the lottery corporation actually has to go to their board and get authority to do that and their board has to go to the minister. So there's certainly a variety of checks and balances to ensure that isn't the case.

Mr Crozier: So that will be done by regulation?

Mr Aronoff: Yes.

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Mr Crozier: This may be a finance question or for the lottery corporation, I'm not sure which. But in April of this year, the Chair of Management Board said that charities will receive 100% of net revenue from the table games at charity casinos and that they would receive somewhere in the neighbourhood of $40 million from the slot machine proceeds. Does it under the payment in this legislation indicate that that's the case, or are they receiving less than 100% from tables?

Mr Aronoff: The legislation is in two parts: that a first 50% goes directly to those charities participating at the charity casinos and a second 50% goes to charities through the Trillium Foundation. So the legislation enables both halves of that.

Mr Crozier: So we can be assured that 100% of the net revenue from gaming tables goes to charities?

Mr Aronoff: Absolutely.

Mr Crozier: The government has said more recently that revenues from gambling will go to health care. Perhaps you can help clarify for me. In these amendments it would appear there are a number of areas to which gaming revenue can go, which would include the Trillium Foundation, physical fitness, sports, recreation and cultural activities, and then the net profits of the corporation are paid into the consolidated revenue fund and that part not apportioned in the fiscal year for one or more purposes set out will be used for hospitals. Can you explain to me in point form a little better where this money goes?

Mr Aronoff: The lottery corporation in terms of its conventional lottery business always had a variety of aspects of money where it would actually flow. The Trillium Foundation, the operation of hospitals, the production of the environment, culture, athletic facilities were always part of what conventional lottery funding was appropriated for. What we've done is to add health care to that list, so that health care can be captured with respect to the new funding that's being channelled in from the charity gaming initiative.

The Chair: You've got about 30 seconds left, if you want to use that.

Mr Crozier: The amount that goes into health care then can be increased or decreased by the amount of money that goes into these other areas and health care kind of gets what's left?

Mr Aronoff: No. Health care gets the committed amount with respect to the ministry, so that all the proceeds from the charity gaming initiative go to health care in terms of the slot machine revenues. That's why that's now enabled in the legislation. Operation of hospitals is after all of that has been dealt with. Hospitals are at the end of it.

Mr Gilles Pouliot (Lake Nipigon): Let me begin by apologizing for not being very knowledgeable or versed in these matters. I'm here in the capacity of replacing our deputy leader and our finance critic, Mr Tony Silipo. I too would like to take a moment to thank the four people who took time. We shared in your expertise and we want to thank you for your presentation earlier on this morning.

One last apology, Chair, if you will bear with me, is for my lateness. I understand I was four or five minutes late. I have never imagined that the subject matter being addressed here would come, with high respect, under the capacity of this committee, so I went out looking for another committee. I thought this was dedicated to the death of one of our first Canadians and its ramifications, Mr Dudley George.

I have a question from page 8 of your presentation: $3,855 total Ontario tax savings, and that's the total savings from 1996 to 1999 after total implementation and also factoring in the health tax levy. Now this is a single parent --

Mr Sweeting: Sorry, Mr Pouliot. It's the PIT reduction, the dark grey bars, plus the new proposed child care supplement for working families, the light bars, totalling together $1,885. There of course is no fair share health care levy in this chart. It's only paid at the upper end.

Mr Pouliot: I thank you. I didn't think there was a need to clarify fairness, but the point is well taken. The first one, single parent with two children in tow, net income $32,500. What you have just said results in a saving of $3,855. C'est ça?

Mr Sweeting: That's correct.

Mr Pouliot: Bon. Same people, except the following year their circumstances change dramatically -- not in percentages, please, in dollars. I'm a simple person. That's what I understand. If the net income is 10 times the $32,500, that would give $325,000. Right?

Mr Sweeting: Yes.

Mr Pouliot: Okay. Can you tell me what the amount of total Ontario tax savings would be in dollars, please?

Mr Sweeting: I don't have a number here. It would have to be calculated given this family's circumstances and that income. I'm looking in the budget to see if there are any examples that are close to that. I see that the highest income example in the budget is $186,500 for a two-earner couple. I don't have a specific figure. I can bring back the figure.

Mr Pouliot: I would be pleased because I too am trying to clarify fairness and, naïvely perhaps but certainly candidly, I assumed that, given the same circumstances, if it was $3,855 in savings per annum, then if you make 10 times that, the saving would be $3,855 multiplied by 10, would it not?

Mr Sweeting: No. I'll have to do the example because --

Mr Pouliot: You mean it would be more? It would be 20 times more instead of 10 times more -- or 30 times more?

Mr Sweeting: I'm not sure if it would be more or less. It could be more than that figure because you have to take into account your starting point. Your starting point was that the lower-income person now pays substantially less tax to begin with. You have to factor in your starting points. You're not starting from similar points. You're starting from relatively small amounts of tax and cutting them.

Mr Pouliot: Let's cut to the chase. At that level, if you were to make 10 times more, in terms of money you would pocket 30 times more money.

Mr Sweeting: I don't know. We'll do the numbers.

Mr Pouliot: That's fair.

Under part V of the bill, the way I read it, you've indicated that it gives the go-ahead to finance borrowing up to $4.6 billion. Right?

Mr Sweeting: That's correct.

Mr Pouliot: That's a large sum. If we were to -- grosso modo, it doesn't have to be of any exactitude -- calculate the impact of the 30% tax cut minus the two instalments which are blocked and will reach us on July 1, the 30% minus the two that were announced in the budget, and you give yourself the capacity to borrow $4.6 billion, would that be pretty well the amount of money that the tax cut is costing you?

Mr Sweeting: The budget indicates that the tax cut costs about $4.6 billion at maturity, which would be a number that, certainly in the next fiscal year, is an estimate of the cost.

Mr Pouliot: Thank you.

Ms Langleben: I would like to mention, though, that this is something that is done every year.

Mr Pouliot: I thank you very kindly. How much does it cost to service the coupons, the debt now? Is it costing $5 billion a year, $9 billion a year, $9.5 billion a year?

Mr Sweeting: That's a question I'm unable to answer.

Mr Pouliot: Assuming it would be close to $9.5 billion a year -- and the way I look at this, Mr Chairman, I'll be very frank with you, this is borrowed money. These people are big spenders and they seem to have a philosophy that if you don't have the money, you borrow it. I mean spend, spend, spend and borrow, borrow, borrow. If I adhere to their philosophy, they'll have me in the poorhouse within a generation.

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I want to go back to what you've answered Mr Crozier about the proceeds, the profits from table gaming. I came away from our briefing this morning -- and again I thank you -- with the impression that when all was said and done, as long as it was for the benefit of Ontarians, that would suffice in terms of the allocation but, to make sure, they've thrown in the kitchen sink. It goes to hospitals, it goes to this, it goes to that. Simply put, the money is not really dedicated.

My friend and distinguished colleague has mentioned that there's nothing stopping the government from lessening the allocation and just making it up with lottery money. So when all is said and done, when they take the money out of the vat, out of that black hole which is general revenue, the Minister of Finance and his friend the Premier can pretty well do what they wish with the profits of table gaming; that it's a lure, that anybody who sells different snake oils becomes a conjurer of illusion because it doesn't matter, and they can do what they wish because of its vagueness in description in the act. Am I right in assuming this, or have I become cynical over the years?

Mr Sweeting: Either choice.

Mr Pouliot: I can handle it. That's okay.

Mr Aronoff: The minister has suggested, and in the legislation there is reference to the fact that the Chair of Management Board will make public and to the House a listing of and disclosure of where all the proceeds went. From that perspective, at the end of the year there will be a report tabled in the House which will show the proceeds in the form and in the dollar figures and in the levels and ratios that were enunciated in the announcement.

Mr Pouliot: I don't follow these things. I live away up north and we have enough on our plate. We don't have access to the daily newspapers in the big city, but candidly, I see another $4.6 billion being borrowed. It has been referred to as the engine, the breadbasket of the country. Could it be that Ontario will be the last province in Canada to erase its deficit? Take a chance.

Mr Sweeting: I don't know. The only answer I can give to your question is that the budget indicates that the plan to reduce and eliminate the deficit by 2001 is on track. There's a reduction this year of $600 million below the plan, but the plan is still on track.

Mr Pouliot: We lived in an apartment on the waterfront in Montreal for many years. Then I moved to New York City, but I decided that Ontario was perhaps a better place to learn English. We weren't rich, but the future was unlimited and we were filled with expectations and some anxiety and really life was starting to border on a dream. In fact, some of us even made it to the suburbs. But before leaving for the suburbs, my older brother was counselled by my mom and dad, and my mother said: "André, always pay your mortgage. When your mortgage is paid, then we'll have a Latino party like only we can throw a party." It won't be the NDP party; this will be a real party. Alas, my brother -- events took over and I'm not so sure that he adhered to that philosophy, but those words stayed with me. I really believed that if you're in debt, you pay your debt first.

That's very, very good economics and it has been proven time and time after time, but these guys go on another binge. They've become insatiable and again -- Mr Chair, I have no more questions -- it seems to me that if they don't have the money, they just go out into the international marketplace and they borrow money, and the price of their coupons, although it is quite competitive -- I mean in times of prosperity with so many jobs being created by the forces of the marketplace there is no way that they should be saddled with an AA-, the same as we experienced ourselves during the very acute depth of the last recession.

I commend you. You're doing quite well. It's the fourth or fifth attempt. Our revolutionaries get tired and they make mistakes, but I'm very, very disappointed that they have missed the opportunity and that this generation and future generations will have to carry the guilt because, among that lot, there are not too many people who are impressed in terms of economics. They're under the tutelage, under the direction, of M. Mike Harris and the cohorts. It does not augur well for the future. It does paint a good picture at present, but you will pay when the cycle hits, and I will be there to remind you that it's a sad legacy that you're leaving.

Thank you very much for your presentation.

The Chair: We'll move to the government members.

Mr Terence H. Young (Halton Centre): Our government has added about 240,000 low-income people to receive Ontario drug benefits, people who under the previous government may have had to actually quit a job they had in order to get the free drugs they need to function in day-to-day life. There are also now about 270,000 less people in Ontario living on family benefits and welfare. I wonder if you could tell me how many new low-income people in Ontario and how many total will not be paying any Ontario tax at all under this budget and this bill.

Mr Sweeting: Yes, I believe we have those figures. I'd like to ask Mr John Whitehead to come up and answer that question.

Mr Young: While he's on his way up, may I ask you another question referring to your chart, Mr Sweeting? The chart says that a single parent with two children by 1999, if you include the child tax credit, if those two children are under 7 years old, if that person has an income of $32,500, they will receive a tax cut in the order of 96%. Am I correct about that?

Mr Sweeting: That's correct.

Mr Young: So they would be at the top end of the people I mean, that person is almost paying no Ontario tax.

Mr Sweeting: Yes, when you put together the Ontario tax cut, which in that example is worth $845, together with the $1,040 available as a child care supplement, then that would be almost the entire income tax that's paid by that person.

Mr Young: So if that person's income were slightly lower, they'd pay no income tax at all, I assume.

Mr Sweeting: Yes, that's correct. There are examples where the changes eliminate people from paying any tax.

Mr Young: Maybe this gentleman can tell us what the numbers are.

Mr John Whitehead: Sure. I'm John Whitehead and I'm with the tax policy branch at the Ministry of Finance.

The Ontario tax reduction drives the higher-than-30% reductions in income tax. In total, 630,000 people have had their tax reduced by more than 30%, and of these, 360,000 taxpayers benefit from the program as a result of this government's initiatives.

Mr Young: How many people in Ontario, low-income Ontarians, pay no income tax at all?

Mr Whitehead: It's well over a million at this point. I'd have to get you the exact number.

Mr Young: What percentage of the total Ontario tax revenue comes from those people who have larger incomes, in fact those who pay the surtax that was brought in by the previous government? Our total tax revenue, I understand, is about $16 billion. What percentage of that is paid by people who have upper-level incomes?

Mr Whitehead: At this point, almost half of the Ontario income tax revenue comes from people who are in the top 10% of the income-earning scale, so roughly half from people earning in excess of about $50,000.

Mr Young: For people who earn about $100,000 a year or more, about what percentage would their tax cut be?

Mr Whitehead: On average?

Mr Young: If you include the fair share health care levy.

Mr Whitehead: You'd be looking at between about 18% and 20% tax cuts on average for that group and they would be sharing in approximately just under 15% of the tax cut.

Mr Young: Clearly the net effect of the personal income tax cut and the fair share health care levy, as you pointed out on this chart, is that it's a progressive tax; that is, people who have higher earnings benefit less.

Mr Sweeting: That's correct. In fact, the progressivity, which is the measure of what percentage of tax is paid by what income group, is actually higher after the tax cut than before. High-income people pay a bigger share of the overall personal income tax revenues raised than was the case before the tax cut was introduced.

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Mr Young: I would assume that would please Mr Pouliot.

One of my constituents told me that when he looked at his income tax this year he felt that his taxes might not have gone down. I said, "No, they absolutely have," but it appeared to him on looking at the Ontario page of his federal tax form that his taxes hadn't gone down. Can you explain to me why that confusion has arisen?

Mr Whitehead: The fair share health care levy replaced the pre-existing surtax. There was already a surtax in place when this government took office. I think Tom talked a little earlier about a chart which shows that although the gross amount of Ontario income tax falls over the period of the tax cut, what used to be the surtax in the case of the $100,000 earner, for example, went from $2,120 to a fair share health care levy now of $2,745. So although the amount has grown overall, the income tax has been cut. In fact, the worst a person will do under this tax cut is a 16.2% cut.

Mr Young: Two thirds of the tax cut, as a sum of money, goes to low-income and middle-income people who make $25,000 to $75,000 a year. How much money is that?

Mr Whitehead: Just about $3 billion in round numbers.

Mr Young: That's going back into the pockets of people who earn $25,000 to $75,000 a year.

How much money has gone back into the pockets of first-time home buyers because of the land transfer tax rebate?

Mr Whitehead: If you'll just give me a second --

Mr Young: Just while he's looking for that, Mr Sweeting, maybe I'll ask you: The chart you have on job creation, which I think is probably the best news that any government or any people could ask for, shows that by 1998 the government's initiatives will have created an environment that created 427,000 net new private sector jobs, with a higher end of another 53,000, but that it will go up by the year 2000 to 737,000 net new jobs and perhaps as high as 825,000 net new jobs.

Everything I've seen that has come out of our finance ministry in this government has been small-c conservative projections so in effect we have always underpromised and overdelivered on good economic news. Can you please tell me what figures are used or how you came up with this chart on page 14 on the net new private sector jobs, what resources you used?

Mr Sweeting: I'd like to have Pat Deutscher answer that question, please.

Mr Pat Deutscher: I'm Pat Deutscher of the macroeconomics branch of Ontario finance.

I have to clarify that what the chart shows isn't private sector jobs; this is total employment gains since the middle of 1995 and projected out through the end of the year 2000.

Mr Young: That's even better.

Mr Deutscher: These are essentially numbers, the ranges shown, that are consistent with our macroeconomics projections for the province.

Mr Young: Do you consult with the private sector, with the financial institutions etc?

Mr Deutscher: We do review and see what other people are saying about the national economy and about the province of Ontario's economy. It's a fairly small group of people that would forecast for the province. Essentially, these are consistent with the range of private sector forecasts that exist for employment for Ontario at the present time.

Mr Young: Do we have the figure on the land transfer tax rebate?

Mr Sweeting: Yes. As of the announcement of April 1 of the extension of the land transfer tax rebate, $33 million in LTT refunds had been paid out to families purchasing their first home.

Mr Young: Okay. Now, one of the slides here talks about putting money back into the hands of people and creating economic activity. Can you just expand a little bit on that? What do you think these people who are first-time home buyers are doing with the $33 million that they have had put back into their hands that is creating new jobs?

Mr Sweeting: I think they have a range of choices as to what they do with the money. Quite often it's used for furniture purchases and other furnishings that are associated with the new house, but clearly there are various other types of consumption that they may choose to use, depending on their own particular circumstances.

The Chair: Mr Stewart, you had some questions as well. You have three minutes.

Mr R. Gary Stewart (Peterborough): I want to pick up on what my friend Mr Pouliot was talking about, where he was suggesting that the right under the Ontario Loan Act to borrow up to -- I want to emphasize the "up to" -- $4.6 billion was what the tax cut was costing us. I know Mr Pouliot knows that you must spend money to make money; whether it be in business or bonds or stocks, if you want to make some dollars, you have to do it.

It was interesting last night on television to see Pataki, the Governor of New York, come on and say that with their 20% tax cut they have generated, I forget how many jobs, but it was phenomenal. I think this is a route most responsible governments are going over against the past.

I go back to borrowing up to that amount of money. I suggest, and maybe you could answer me, that there must be some very major obligations and some commitments that have been made over the last number of years that could possibly be coming due, whatever. I think any business has to have that right to borrow additional funds to meet their commitments even though -- you could answer this question as well -- but I understand the revenue is something like $3 billion.

I guess my point is that it's easy to say that's what the tax cut is costing, but there must be tremendous obligations, debentures etc that have to be paid back.

Mr Sweeting: I'm sorry, I don't have an answer to the question in terms of the detail of what the authority would be deployed to support. I can get that if you wish, but certainly it is the case --

Mr Stewart: Am I wrong with my thinking? I guess that's what I'm trying to suggest.

Mr Sweeting: It's certainly the case that government borrows to meet a variety of obligations including previous years' obligations coming due, various capital expenditures, and the need to manage the day-to-day, week-to-week and month-to-month finances.

Mr Stewart: We're not suggesting for one moment that this money we're now going to borrow or can borrow "up to" is because of the tax cut, when you look at the revenues that have increased over the last year.

Mr Sweeting: That's the authority that's been asked for. Mr Pouliot asked what the cost of the tax cut was and the budget reports it at $4.6 billion, so that's a connection that was made in the previous discussion and not by us.

Mr Stewart: Mr Pouliot was talking about the dream he had when he was a youngster, which was only a very few years ago, but I certainly know that with this type of an act the dream is about to come to reality again.

The Chair: Thank you very much for your presentation. We very much appreciate your taking the time to come here today.

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ONTARIO COALITION AGAINST GAMBLING EXPANSION

The Chair: At this time we'll call forward our first presenters, the Ontario Coalition Against Gambling Expansion.

Mr Young: On a point of order, Mr Chair: We welcome the representatives from the Ontario Coalition Against Gambling Expansion. I just thought it would be courteous of us to remember that presentations today must refer to the sections contained in the bill or matters contained in Bill 15.

Mr Crozier: I have a point of order too, Mr Chair. It will be very quick. The parliamentary assistant in his comments referred to the fact that some people may have had to quit their job to receive free drug benefits. I would just ask that the parliamentary assistant table any information he has regarding the number of people who may have had to do that. If he has that kind of information, the committee might appreciate it.

The Chair: The request has been put forward.

You have 15 minutes for presentation time. At the end of your presentation if there's any time remaining, it's divided equally between the three parties.

Mr Wayne Olson: My name is Wayne Olson. I am spokesperson for the Ontario Coalition Against Gambling Expansion, or OCAGE. I appreciate the opportunity to be here to have input on Bill 15, specifically part VI, as it relates to the proposed amendments to the Ontario Lottery Corporation Act.

For your information, OCAGE is a network of grassroots community groups across the province, groups that have sprung up in communities including Barrie, Brantford, Belleville, Hamilton, London, Ottawa-Carleton, North Bay, Thunder Bay, Toronto, Oakville, Kingston and Gananoque. Without exception, these groups have formed locally out of concern related to the government's intention to implement what is seen as a massive expansion of community-based gambling across Ontario.

Among our network are business people, professionals, teachers, clergy, retirees, homemakers, grandparents, parents, single parents, yuppies and guppies; in other words, pretty well a cross-section of the province we live in.

Some of us approach the issue of gambling expansion from a strong faith perspective. Many of us simply believe this plan is a badly conceived social and economic policy. We cross all party lines and political affiliations. Many of us have not been active in political issues before this time.

A little bit on the context of Bill 15, if I may, and the context of why I'm here today: OCAGE has recently written to Minister Chris Hodgson, as the Chair of Management Board of Cabinet, requesting an arm's-length inquiry into the following issues:

(1) Has the gambling industry had undue influence on government policy with respect to gambling expansion in Ontario?

(2) Have Ontarians been misled as to the true nature of the province's gambling expansion initiatives?

These questions reflect OCAGE and, we think, public concerns about whether Ontarians have accurate information regarding this plan, and whether the government and other gambling expansion proponents are being as straightforward as they could be about their intentions.

We have been told over and over again that the plan for up to 44 new casinos and thousands of gambling machines is intended to assist Ontario charities.

Some months ago OCAGE hired lawyer Clayton Ruby who provided a legal opinion that the province's planned gambling expansion was illegal under the Criminal Code of Canada, section 207(l)(b), pertaining to charity gaming, which requires that adequate percentages of the take go to charities. At this time the government, we think, could have simply committed to providing all net revenues to charities, thus satisfying the Criminal Code pertaining to charity gaming, and giving charities an absolute guarantee that future revenues would not be commandeered by either the casino operators or a future provincial government. Instead the government shifted the gambling initiative to section 207(l)(a) of the Criminal Code which pertains to commercial-type gambling operations such as Windsor, Rama or Niagara.

We now are faced with up to 44 commercial-type casinos instead of the promised charity gaming clubs, and Under 207(l)(a), charities have no guarantee under federal law that they will receive any funds in the future. This clearly raised concerns and questions about intent. But on April 9, 1998, the Chair of Management Board, Mr Hodgson, provided assurances that, firstly, charities will get 100% of net proceeds from table games, and secondly, that charities will get access to half of the funds through allocation by local municipalities, and the other half through Trillium.

Presumably, then, if the primary objective is to assist Ontario charities, Bill 15 should include legal guarantees that charities are going to be the prime beneficiaries and that the allocation of the funds to charities will happen in an arm's-length way from government. It might also be expected that Bill 15 would solidify other government promises and assurances in legislation.

Now I'd like to get to specific comments on Bill 15, if I may, firstly to section 34 of Bill 15 which withdraws the definition of "video lottery" and "video lottery terminal." We presume the intention here is to show that, as Minister Hodgson said on April 9, the government has "listened to the concerns of communities" and cancelled VLT implementation permanently.

I would like to be able say that this is a relief to communities across the province. It would be nice to be able to say thank you to Mike Harris for listening to our concerns. Unfortunately, at the same time Minister Hodgson announced the withdrawal of VLTs, essentially electronic slot machines, he announced the introduction of at least 13,200 new slot machines. At no time, to my knowledge, did any citizens' group in Ontario, or any of the dozens of municipalities that voted no to gambling expansion last November, request to have hundreds of slot machines substituted for VLTs in their communities.

In fact, we may have been forgiven for believing that slot machines were not an issue in light of the following assurance made by Minister of Consumer and Commercial Relations, Norman Sterling, during Bill 75 public hearings. On August 6, 1996, he said, "There's no intention of Ontario to allow slot machines to be anyplace other than a commercial casino, as we now have two in our province, one being at Rama and the other being at Windsor." So 13,000 and change in new slot machines do not appear to be a concession to community wishes as much as perhaps a sleight of hand.

Slot machines certainly can be both mesmerizing and addictive, as are VLTs. Slot machines can separate a player and his money as surely as VLTs to the tune of -- and these are Minister Hodgson's numbers -- $840 million a year. That's about $200 dollars per household in the province, or about $63,000 per machine, and still no economic or social impact studies by the government. Again, the introduction of slot machines in communities across Ontario contradicts this assurance by the government made during the Bill 75 hearings, the promise by the Minister of Consumer and Commercial Relations, Mr Sterling, that we will not have slot machines.

What happened? The demise of this assurance also, I'm afraid, casts doubt on other assurances by the government, which brings us to the issue of other promises and another section of Bill 15.

On April 9 the government promised that 100% of the net proceeds from table revenues in the new casinos would go to Ontario charities, either through allocation by the local municipality, or through the Trillium fund. However, Bill 15 appears to leave charities on much shakier ground then they have been led to believe.

Section 8.3 states that only one half of the net revenue from table gaming activities shall be for the benefit of charitable organizations and non-profit corporations, no mention of municipal control, and seemingly no assurance that the rest of the money will flow to charities as promised. In fact it appears that, under 9(1), the remaining revenue will simply be paid into the consolidated revenue fund and may eventually find its way to a vague list of uses, including "the protection of the environment" and "the funding of community activities and programs."

Somewhat surprisingly, the bill also allows ministerial discretion -- or it appears to -- with respect to prescribing both the activities that constitute table gaming and the classes of persons or entities whose table gaming activities are to be considered in calculating the charity's share of the take. This would appear to allow the future limitation of revenues paid to charities to moneys generated by only certain table game activities at certain times by certain players, hardly a guarantee of 100% of the take.

Some conclusions: In looking closely at Bill 15, the obvious question that arises in our minds is: Does the government really intend to respect its assurances? Is this initiative really solely for the benefit of charities as suggested? Or is it for the benefit of the provincial treasury or, perhaps ultimately, for the benefit of the gambling interests?

We seem to be getting slot machines in spite of ministerial promises. Charities may have reason to be sceptical about the promised windfall revenues.

Will the gambling take find its way to charities as promised? Or do the casino operators and the government have other priorities? Are charities being used as the wheels on the Trojan horse to usher in a huge gambling expansion initiative which we are told, ironically, will help "build sustainable communities," but in reality seems to be a big cash cow for the province and casino operators, aimed at separating local communities and their citizens from over $1 billion dollars a year?

What assurances does Bill 15 provide that a future government or minister won't use his discretion to delist some kinds of table game activities or some classes of persons or entities whose table game activities are to be considered? What assurance does this bill provide that casino operators won't want a bigger piece of the pie than we have been led to believe? What assurances does this bill provide that the promised charity funding under this initiative won't be squeezed over time as social service funding has been squeezed over the last few years? What assurances does this bill provide that the new gambling revenues to charities and non-profits won't be used as an excuse to cut funding from government sources in the future?

Our belief is that Bill 15 does not reassure Ontarians. Our belief is that Bill 15 does not reassure charities.

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Mr Crozier: Mr Olson, I think you've stated very well the case that I would want to present. In fact, I asked a question earlier today about the disbursement of funds that I think you've explained more clearly than I asked and more clearly than the answer was given. I appreciate that.

One question: Notwithstanding the fact that roving casinos may have been less controllable and all of that argument about whether there should be 44 more or less permanent casinos, we didn't have slot machines in roving casinos. Wouldn't you say this is a significant increase in gaming in Ontario under the guise of charitable casinos?

Mr Olson: As I understand it, the roving casino system was a $100-million-a-year operation in terms of how much gamblers lost. What we're looking at now is somewhere between $1 billion and $1.5 billion a year in anticipated gambling losses. Slot machines make up a large chunk of that. So yes, I would agree.

Mr Crozier: Thank you, sir.

Mr Pouliot: Welcome, Mr Olson. You're obviously most concerned about the proliferation, the expansion of gambling activities in Ontario. On page 5, the last page of your excellent presentation, in your attempt to sum it up you get, if I may, rather bold and adhere to a policy of action directe. I'll follow the same tone. In the last budget we've heard: "A promise made, a promise kept. This government has listened to people."

You mentioned earlier on in your presentation, Mr Olson, the many municipalities that voiced by way of plebiscite, by referendum, against the expansion, against the proliferation of gambling and especially with a focus on the crack cocaine, the worst form, that of VLTs. Do you feel the government has kept its promise?

Mr Olson: The promise I would go back to was during the last election campaign when the Premier, and I think everyone's heard this, promised that there would be no new casinos in Ontario without plebiscites. I take it that he was referring to commercial-type casinos. I think that's a promise not kept, because both legally we're looking at commercial-type casinos and, in terms of scale, Brantford will have, as proposed, more tables than Windsor. That's by any measure a casino operation. So it depends how far back you go, which promise you want to talk about. I would say no.

Mr Bob Wood (London South): I'd like to ask a question that's general rather than specific. Suppose you were to advise the government on how you think they should reduce the scope of the gambling initiative. Can you give me some indication of what you would look at? Would you reduce the number of charitable gaming houses? Would you reduce what's being done in them? Can you give me some ideas as to how you'd go about reducing that if you were the government?

Mr Olson: If I could talk personally rather than for the group, because I would say there is not a consensus on this, my personal view would be that the issue is gambling expansion and primarily community-based gambling expansion, that if one looked at the existing roving casino system, it's a $100-million-a-year industry and it needed to be fixed, and that there would be ways of fixing it without increasing the amount of gambling exponentially. I think that would be the starting point, to go back to the old system, look at what was wrong with it, look at why it wasn't serving charities, look at the security issues, look at the operation of those facilities and try to find a way of making them work.

The Chair: Thank you, Mr Wood. There's 15 seconds left.

Mr Young: I just want to add, Mr Olson, that's exactly what the government did. They looked at the existing system of roving casinos and determined that the best way to get control and make sure the charities did get a fair share of the money and that there was proper security provided was to replace them with permanent sites based on the wishes of the local community.

The Chair: Thank you very much for your presentation. We appreciate your taking the time to come forward.

COALITION FOR A PUBLIC INQUIRY INTO THE DEATH OF DUDLEY GEORGE

The Chair: I call upon the next presentation, if you could come forward, the Coalition for a Public Inquiry into the Death of Dudley George. If you could identify yourself for Hansard, we would appreciate it. You have 15 minutes for presentation time. At the end of your presentation, if there's any time, it's divided equally between the three caucuses.

Mr Young: Mr Chairman, on a point of order: Our presenter is from the Coalition for a Public Inquiry into the Death of Dudley George. I just wanted to ensure that the delegation was aware that we're referring to Bill 15 and matters related to Bill 15 only in this committee.

The Chair: I'm sure the presenters know that we're dealing with Bill 15, and that's where our topics will remain.

Mr Bud Wildman (Algoma): On a point of order, Chair: I don't want to take away the time from the presenter, but I think the presenter is here and is clearly aware that this government has intentionally referred this bill to this committee to prevent the inquiry that was referred to this committee under rule 124, the inquiry into the Ipperwash situation.

The Chair: Thank you, Mr Wildman, but I'm sure you're also aware that the only thing I have specifically, according to the motion brought forward, to deal with is Bill 15.

We'll begin your time now, just so you realize that your time wasn't cut into.

Ms Ann Pohl: I start my time right now? From now I get 15 minutes. Great.

First of all, I'd like to introduce myself. You've heard my name; my name is Ann Pohl. I am, among other things, a spokesperson for the Coalition for a Public Inquiry into the Death of Dudley George. I'm also coordinator of a group called Turtle Island Support Group. Both of these positions are unpaid. I'm a civic-minded citizen of Canada and have been a resident of Ontario for 30 years.

I do have gainful employment, although I think you'd probably call me an itinerant member of the labour force, due to the scarcity of jobs and also due to my lifelong vocation to children. I have four of my own and I have had countless, both official and unofficial, foster children. My youngest birth child, Daniel, is here with me today. We don't believe in lying, so he'll be my witness that everything I say today is meant sincerely and is the truth as I know it.

It is said that politics makes strange bedfellows. In this case we also see it makes strange beds, which calls to mind the metaphor, "You've made your bed; now lie in it."

Why is a spokesperson for the Coalition for a Public Inquiry into the Death of Dudley George making a presentation on Bill 15, the tax breaks bill? The coalition for a public inquiry is a group which pulls together aboriginal and first nations community members, labour, student and anti-racism groups, faith communities and many other individuals who are united in our search for answers about what led to the death of Dudley George on the night of September 6, 1995.

What interest do we have in the tax breaks bill? I believe the question could be asked, by those who haven't thought deeply about it, of course: What interest does the standing committee on administration of justice have in the tax breaks bill, or, for that matter, what interest does this committee have in the new workfare bill, which will be coming to this committee for four days beginning next week during the time that the subcommittee of this committee, which sets its agenda, had agreed to hear the rule 124 request by MPP Peter Kormos to consider matters related to Ipperwash? This is what I mean about strange beds.

You may be aware that our coalition was formed on the date of the 49th anniversary of the United Nations Universal Declaration of Human Rights. We chose that date because of the international significance of the death of Dudley George. It is a subject of ongoing interest to the United Nations rapporteur on human rights.

Mr Young: Mr Chair, with all due respect to the presenter --

Ms Pohl: I'm coming to the point. This is related to the tax breaks bill, sir.

Mr Young: We're supposed to be talking about Bill 15.

Ms Pohl: This is related to the tax breaks bill, sir, I promise you.

Mr Wildman: Surely any presenter who comes before a committee has the right to use his or her time as they wish.

Ms Pohl: The subject of Dudley George has been an ongoing subject of interest to the United Nations rapporteur on human rights and has been investigated by the international secretariat of Amnesty International, which is based in London, England, who found that the circumstances of Dudley's death were suspicious enough that it may have been "extra-judicial execution." Amnesty International has called for a "full and impartial public investigation" in order to clear the air.

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The Chair: You are coming to the point?

Ms Pohl: Yes, I am. I have 15 minutes and I promise I'll get there.

Mr Young: On a point of order, Mr Chair: I'd like to ask --

Ms Pohl: Excuse me. I'm a taxpayer. I have 15 minutes to present to this committee. Please be patient. I am coming to the bill.

Mr Young: I'd like to ask the Chairman to rule --

Ms Pohl: Since our founding meeting --

Mr Young: -- on if the presenter is talking about matters related to Bill 15 or not.

Mr Wildman: Surely the committee has the courtesy, once they've recognized a presenter, to let the presenter make her case as she sees fit. She says she's going to deal with Bill 15.

Ms Pohl: I'm getting to it.

The Chair: The motion, Mr Wildman, as stated before, is that we are to deal with Bill 15.

Ms Pohl: I'm getting to it.

Mr Wildman: Chair, surely she's allowed a preamble. If somewhere along the way --

The Chair: We have a fine line that we can define. I will define that line, as I'm the Chair, whether it's a preamble.

Mr Wildman: I hope in defining that line you don't stifle democracy --

The Chair: I certainly will not.

Mr Wildman: -- like your government tends to do.

Ms Pohl: Can I continue?

The Chair: I call the committee to order, please.

Ms Pohl: Since our founding meeting, I've had some very interesting experiences, I have to say. I've spent a lot of time around Queen's Park. I scratched my head for quite a few days when I heard that the standing committee on administration of justice was going to be looking at bills related to tax breaks and workfare rather than the justice issues contained in MPP Kormos's request. But the answer slowly came to me. This is not the only case of strange goings-on that I've had to ponder since our coalition started up. It began on December 11, when Liberal MPP Gerry Phillips brought a motion before the House for an inquiry to be called after all matters had cleared the courts, and the government, for whatever reason, decided not to support that.

The Chair: And you are coming to the --

Ms Pohl: I am definitely coming to it, yes.

When the government spokesperson responded that day, he spoke on a complete tangent, just as you may feel I'm doing right now, but I promise you that I'll be dealing with the bill as soon as I give you the rest of the background. The tangent the government addressed that day was its broader aboriginal policy. I could tell you stories that would raise the hair on your chest if you knew the inside story of the government's aboriginal policy, but there's no time for that. This is one example of the strange beds that people seem to have made for themselves at Queen's Park.

I continually have to ask myself, why is the government afraid of the Dudley George issue and why would they not allow it to be discussed in the standing committee on administration of justice? Why won't they go for an inquiry after all the related charges have cleared the courts? What was it that actually led Sergeant Deane into that park to fatally wound Dudley George? Who gave him the licence to kill unarmed Indians who were involved in a non-violent protest on land rights issues?

The government, and in particular the Premier, the Attorney General and the Solicitor General, continually maintain that they had nothing to do with the police assault which led to the death of Dudley George, so why did they refuse to commit to a public inquiry? Have they been lying? Is there something they're not saying? The media have carried stories about Debbie Hutton being at meetings and about Marcel Beaubien being in the command post, but if Messrs Harnick, Harris and Runciman are innocent, why don't they take every effort to clear their names? Perhaps they're afraid to put the onus on the OPP, but to be honest, I have run out of energy second-guessing them. I just don't get it.

I did promise to bring this deputation around to the discussion of the bill before you. Let me first say that I did not have time to call a steering committee or general meeting of our coalition to consider the tax-breaks bill, so I want to offer you first my personal opinion about the bill and then something that I know the coalition has consensus on.

My personal opinion as a member of a middle-income-earning family is that we're proud to be civic-minded and to be living in a society where the less able and the less fortunate are looked after by the community as a whole. We don't really mind paying taxes when we know that the money will go towards making a more just and equitable society, especially for all the children in need.

Sure, we know that some poor people "take advantage of the system," but then so do some rich people. But many poor people are honest and live by all the rules, just as some businessmen voluntarily contribute to society: restaurants which feed folks for free once a month, developers who provide free space to community groups, lawyers who work pro bono and artists who donate their cultural talents for community purposes.

My point? We can't go around worrying about the deviates who lie and cheat. We have to focus on being good people ourselves -- that includes the committee here -- and bringing up our children to be good people and doing the right thing for all of the rest of creation, human and other, looking after one another, because that's how we care for ourselves. To me and my family, it's as simple as that.

My faith in the rest of the human race as regards tax cuts was strengthened by this little item I found in the Globe and Mail on June 5, "Nurses Before Tax Cuts: Poll." I'll just read you bits of it.

"A public-opinion survey shows that 78% of Ontarians surveyed would give up their provincial income tax cuts if that meant more spending on nursing care." This is done by Environics and is said to be "accurate to within three percentage points, 19 times out of 20."

I know I'm not going to convince you fellows to try to kill this bill and to redesignate those tax funds that you'll be hanging on to to other, more useful purposes, such as nursing and education and other things that I might come to in a minute, but reading and rereading this little article helped me to understand why this bill on tax breaks has been sent to the justice committee. We're being invited to discuss -- and I thank those of you who spoke in favour of my being able to speak, because I feel that I was invited here to speak about this -- whether there is justice in making tax cuts the highest priority of this government. I say no.

In order to put more justice in this bill, I make the following suggestion. I can tell you that all the individuals and organizations who have called for the public inquiry into the death of Dudley George, from the B'nai Brith to Amnesty International to the Chiefs of Ontario to the Anglican Church of Canada to the Ontario Coalition Against Poverty, the Ontario section of the Canadian Federation of Students, the Mennonite Central Committee, the Aboriginal Rights Coalition in Ottawa, the Ontario Federation of Labour and so on and so forth, would be delighted if you would consider amending this bill ever so slightly to provide an ever so slightly lower level of tax breaks -- you folks would have to get your experts to work on the details about rates and percentages and how much needs to be set aside and that kind of thing -- so that the funding is available for this public inquiry.

It's time for the government to realize that the ordinary residents and voters of this province care very deeply about civil and human rights, the right to accessible good health care, to quality public education, to affordable post-secondary opportunities, to adequate nutrition for children and pregnant mothers in particular and so on; we care more deeply than we care about whether we pay $50 or $250 more in taxes. People aren't stupid forever. You can pull the wool over their eyes for a while, but they're not going to stay stupid. It isn't taking long for many Ontarians to realize that the extra few bucks in our pockets don't make up for the things we have lost.

One of the things we have lost during this government's stay at Queen's Park, and I know I have the total consensus of the Dudley George coalition on this, is the right to non-violent political protest without fear. A full and impartial public inquiry is the way to restore public confidence.

Any questions?

The Chair: That allows us in the area of about a minute per caucus, beginning with the third party.

Mr Wildman: Thank you very much for your presentation. I apologize for the attempt by the parliamentary assistant to stifle you.

If your suggestion that the government set aside funds for a full public inquiry into the events at Ipperwash that led to the --

Mr Young: On a point of order, Mr Chairman: The committee is here to discuss matters related to Bill 15. Mr Wildman's question is out of order.

Mr Wildman: Does this bill deal with taxes and tax rates or not?

Mr Young: I'm not going to argue with you. I'm asking the Chair.

Mr Wildman: Okay. Then I am fully in order, because I'm talking about whether this committee should make a recommendation to lower the amount of the tax break.

The Chair: Mr Wildman, you may continue.

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Mr Wildman: Your suggestion that the tax break be lowered in order to allow for funding for a full public inquiry into the events at Ipperwash that led to the death of Dudley George is interesting and useful to this committee, but I would say that any government that believes in justice and the truth would hold an inquiry. They don't need a lot of money to spend on it; they would just want to get at the truth. They wouldn't have to amend this bill and this committee wouldn't have to recommend such an amendment.

Mr Young: The order to send Bill 15 to the committee on administration of justice is not a precedent. It certainly was not out of order. It's not uncommon for bills to be sent to alternative committees when a particular committee is busy. The finance committee is occupied with Bill 16, the Small Business and Charities Protection Act, right now.

During the former government, in the NDP's third session as government, Municipal Affairs and Housing had four bills. They were sent to four different committees as follows:

Bill 61, The Toronto Islands Residential Community Stewardship Act, went to the general government committee;

Bill 94, the Metropolitan Toronto Reassessment Statute Law Amendment Act, went to the social development committee;

Bill 163, the Planning and Municipal Statute Amendment Act, went to the administration of justice committee;

Bill 198, the Municipal and Liquor Licensing Statute Law Amendment Act, went to the finance committee.

Mr Wildman: I agree fully with the parliamentary assistant. It is in order for the government to move this bill into this committee to stymie the inquiry into the Dudley George affair.

The Chair: Thank you, Mr Wildman.

Mr Wildman: That's quite in order. It's just unethical, that's all.

The Chair: Order, please. The official opposition has about a minute.

Mr David Ramsay (Timiskaming): Thank you very much for coming before us. I think it's important that you came today to make your point. As you've related, the need to have an inquiry into the death of Dudley George in this bill I think is very fair. What really makes a just society? Is it tax cuts for small business, personal tax cuts and many of the tax incentives outlined in this bill, or is it getting at the truth about something that happened a few years back in Ontario that had tragic consequences? I think it's getting at the truth and finding out what happened and why did the police enter the park that night? In the end, the truth will be out and we will get to it. We thank you for your support.

The Chair: That concludes your time.

Ms Pohl: I brought some information.

The Chair: Yes. The clerk will take that and provide it to the members. Thank you very much for your presentation.

Ms Pohl: Thank you for hearing us.

NESBITT BURNS

The Chair: Our last presenters today are individuals from Nesbitt Burns. If you could come forward and identify yourselves for Hansard, we would appreciate it. I understand that you have 10 minutes for presentation time. At the conclusion of your presentation, if there's any time remaining it's divided equally between the three caucuses at the table. You may begin.

Mr David Rosenberg: Good afternoon. My name is David Rosenberg. I am senior economist with Nesbitt Burns. I'll forgo the preamble and just cut to the chase. We did a two-page analysis of the Ontario budget on May 5, the day of its release, and our title was Ontario Hits a Home Run. I think that says it all. I essentially have no specific recommendations on this bill and I think it's fine as is. I'll focus my remarks instead on the need to continue tax reduction in Canada and Ontario specifically.

I'll begin by pointing out that total government revenue as a share of GDP in Canada remains well out of line with where it is in the rest of the G-7: 43% versus 37%, according to the latest OECD numbers. Overall, the tax burden is still at a record high, and for individuals in Canada it has never been greater in comparison to the United States. Households devote almost 25% of their income to the government sector in this country, compared to 19% south of the border. Curiously, there was virtually no gap at all back in 1980, the last time Canada had an unemployment rate equivalent to that of the US, at just over 7%.

I think it's reasonable to assume that the growing tax gap is at least one of the reasons for Canada's relatively poor job creation record compared to the US over the past 15 years.

Disturbingly, this tax gap is at risk of widening further as the US cuts taxes in the wake of budgetary surpluses of its own, which seem poised to top the $75-billion mark this year, and most states are also running record surpluses. Let me assure you that the bulk of this fiscal dividend is going to be going towards tax cuts, not spending increases. The pressure then is on the federal government and on the provinces as well to do likewise or risk undermining national competitiveness, a situation which already is clearly reflected in a 68-and-a-half-cent dollar.

Even after the latest move to cut personal income taxes, the top marginal rate in Ontario remains uncomfortably high, at 49.6%. With tax rates so much higher than in the United States, our brightest graduates, not to mention professors, are being lured away to the US. The latest surveys show that within two years fully one quarter of Canada's PhD grads, who were trained at taxpayer expense, have moved to the States, and mounting US labour shortages will ensure that the demand for highly skilled Canadians will remain strong.

Although the data are sketchy, the brain drain from Canada to the United States is reasonably well documented. According to the most recent numbers from Statistics Canada, we are losing 12 health professionals to the US for every one we attract. I don't claim to be an expert on health issues, but even if we spent all the money in the world on our current medical care problems, what level of quality can we maintain when so many of our best doctors move to the US? The move-out ratio for engineers is eight and for computer professionals it is two.

We ignore the growing tax gap at our peril. Canadians in growing numbers are being lured to the US with tremendous after-tax income prospects. As a recent cover story for Time magazine concluded, "A Torontonian with a non-working spouse, two kids and a mortgage who earns $100,000 a year will cut taxes almost in half by moving to Houston." And believe me, it isn't tough to get a green card these days.

As I mentioned, even with the tax cuts we are still left in Ontario with top marginal personal tax rates still very close to the 50% threshold. This compares to 40% in the US, and keep in mind that the top rate in Canada -- in Ontario -- kicks in at income levels of $60,000 compared to $350,000 in the US. No other country, not even the socialist government in France, is as punitive at such a low level of income. Moreover, long-term capital gains tax rates here peak at 40% compared to 20% south of the border, which is a massive disincentive for saving, which reduces our ability to accumulate sufficient funds for old-age security.

At any rate, I still applaud the Ontario government for adopting a strategy that at least addresses the competitive tax burden that the province continues to face. While the generation of low interest rates and the continued business expansion in the US have been important catalysts, public policy shifts have also contributed to the rebound in Ontario's economic activity. The income-supporting impact from reducing what has been an onerous tax burden has paved the way for a broad-based economic expansion in Ontario not seen in nearly a decade.

We at Nesbitt Burns are looking for 4.8% real GDP growth for this year. That follows a 4.5% pace of advance last year, and for 1999 I think 3.5% is a fairly good bet. In all three years Ontario will have outpaced the national average.

The tax cuts, in my view, seem to be working from a macroeconomic standpoint, even if they have perhaps delayed the ultimate move to fiscal balance. Retail sales in Ontario: first quarter, up 10.2% year over year, more than double the national average, even greater than Alberta's 6.4% pace. This is a huge swing from two years ago when retail sales in Ontario were actually falling in both real and nominal terms.

Employment conditions have improved dramatically. We have our May numbers for employment, as of last Friday. Ontario: net job creator of 206,000 jobs over the 12 months to May, almost a 4% increase, which accounted for 54% of all the hirings from coast to coast. This, despite the fact that Ontario represents less than 40% of Canada's workforce, is remarkable and has brought the province's unemployment rate down to an eight-year low of 7.1%, and it can and will go lower in the year ahead. Business activity, as measured by manufacturing shipments, as an example, is also very strong, running 8% growth year on year in the first quarter versus nationwide growth of 4.2%.

Clearly, the strategy of reducing the role of government in the economy and lowering the tax and regulatory burden and giving the private sector greater leeway for growth has borne considerable fruit, again at least from an macroeconomic perspective. But more needs to be done to reduce what is still a burdensome tax regime, especially compared to the US.

Consider as well that the $5 billion in tax cuts that this government would have implemented has really done little more than offset the revenue-raising measures that were brought in in the first half of the decade. The relief to date has merely arrested the multi-year slide in per capita real disposable income in this province, a decline that began in 1990. Indeed, household income in Ontario, on an after-tax inflation-adjusted basis, just managed to return to its 1989 level last year.

In sum, I believe we're on the right fiscal and economic track in this province. The government has successfully broken the tax-and-spend pattern of the past decade and I think deserves high marks for doing so. What is left, essentially, is to stay the course of deficit elimination and continue to move more forcefully to reduce the tax burden, thereby enhancing income growth and living standards for all Ontarians. Thank you very much.

The Chair: Thank you very much. There's only about 30 seconds per caucus, so a quick comment from each caucus, beginning with the government members.

Mr Rollins: Thanks for your presentation. Would you support, with the brain drain we have, keeping our graduates here for a period of time after they graduate through our system, like in some other countries? For instance, after they graduate as a doctor, which they've been educated for for three or four years in higher education, they should remain in Ontario to pay back some of the education dollars they've used? Would you support something like that?

Mr Rosenberg: Personally, I would rather attack the root cause of the problem, which I think is a tax burden that is growing relative to the US. I'd rather get to the root cause. I'm not the sort of person who would meddle in the market to that extent. A lot of highly skilled Canadians want to move to the US for a reason. My first-case scenario would be to attack that reason.

The Chair: Mr Crozier?

Mr Crozier: Yes, as long as I can have the same 30 seconds.

The Chair: The question was about 27.

Mr Crozier: Very quickly -- and some of these just take a yes or no -- did you ask to appear here today or were you invited?

Mr Rosenberg: I was invited. I'm more than happy to come.

Mr Crozier: Thank you. Is there unanimity among economists in the view that you expressed today?

Mr Rosenberg: Economists couldn't agree over a GDP growth estimate for tomorrow, let alone agree on anything else.

Mr Crozier: Thank you. One more quick question. You said there was a difference of between 25% and 19%, I think, in the tax spread between the US and Canada.

Mr Rosenberg: Depending on how it's measured.

Mr Crozier: Yes. Have you factored in the cost of health care and social measures? Is health care factored into that?

Mr Rosenberg: No. Those are strictly tax payments of the government sector.

Mr Pouliot: Welcome, Mr Rosenberg. We're used to seeing Ms Cooper paying us the compliment of her visit. I want to extend some condolences and sympathy on the passing of one chairman of the board, Mr David Walsh. I knew of his close association through Bre-X, and the very strong recommendation of Nesbitt Burns, which was one of the main promoters. We all share in the sorrow.

You've mentioned tax-and-spend policies. One has to go with the other, because if we're going to decrease taxes, we have to exercise, I would assume, from an economist's point of view, an equal decrease in spending.

The Chair: Mr Pouliot, do you have a question?

Mr Pouliot: Yes, I have one. This administration is spending more money -- that's the reality -- than any government prior to it. Your colleagues prefer the tax cut --

The Chair: Mr Pouliot, you've used a minute now.

Mr Rosenberg: I'll just answer that. It's funny that on the one hand somebody asked a question about whether health care is included and then on the other hand you're talking spending. The government does not have direct control over interest costs, which has really been the Achilles heel in terms of total spending. When you say that this government is spending more money than any other government, I'd be surprised if that were true, but when you add on interest costs, what do you expect? The interest costs are what we pay for our past sins. What more could you say?

The Chair: Thank you very much for your presentation. We appreciate your taking the time to come out today.

This concludes today's hearings. We sit adjourned until 1530 of the clock on Tuesday, June 9.

The committee adjourned at 1725.