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The Clawbacks Bill (officially known as an Act to amend the Income Tax Act, the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act, the Old Age Security Act, the Public Utilities Income Tax Transfer Act, the War Veterans Allowance Act and a related Act)
Sponsor: Hon. Jean-Maurice Simard (NB)
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The government proposed a series of new taxes in its 1989 budget in an attempt to stem a dramatic increase in federal deficits and debt. Although surtaxes on high income individuals and capital intensive corporations were a cornerstone of the budget, so-called ‘clawbacks’ of Old Age Security pensions (and, to a lesser extent, family allowance benefits) became the focus for public outcry.
Many Senators felt that the clawbacks imposed on Old Age Security (OAS) were too severe. Income thresholds of $50,000 were only partially indexed, for example, meaning more and more OAS pensions would be clawed back as time went on, because the real value of threshold incomes would not keep pace with inflation. The Committee which reviewed the legislation therefore recommended three amendments to soften the effect of the clawbacks.
The Government Leader in the Senate resisted the amendments, claiming that, in law and by custom, the Senate could not amend a money bill. Other senators cited constitutional and historical authorities to demonstrate that the Senate has the right to pass, amend or reject money bills, but not to initiate them (see Debates, May 22).
The Speaker ruled (Debates, May 31) that one of the proposed amendments was not in order because it initiated an increase in the incidence of taxes. However, the other two amendments were allowed, and the Senate passed Bill C-28 on June 14, 1990 with these amendments:
* the OAS income threshold was fully indexed so it would rise
each year in step with annual inflation; and
* an OAS credit was created to reimburse seniors who had
contributed to the OAS Fund prior to 1972.
Four days later, on June 18, 1990, the House of Commons flatly rejected the amendments on the grounds that the Senate should not amend money bills. Parliament recessed soon thereafter for the summer.
Over the summer, Senator Buckwold (SK), chair of the Senate Committee that had recommended the amendments, continued to advocate changes to the clawback provisions but the government stood firm. On September 7, 1990, Finance Minister Michael Wilson wrote to Senator Buckwold, saying "In the interest of the country, please get this bill passed." Senator Buckwold replied: “Accept two relatively minor, but important, amendments and the Bill is yours.” (Debates, page 3093).
In the meantime, the Senate was engaged in vigorous scrutiny of various other contentious pieces of legislation, most notably a bill proposing the goods and services tax (GST). Prime Minister Brian Mulroney moved to forestall a defeat on the GST bill by appointing 24 additional senators to give the Progressive Conservatives a majority in the Senate. When it reconvened on September 25, opposition to government initiatives continued. However, three weeks later, the Senate voted 58 to 34 to pass Bill C-28 without amendment.