Senate Speaker Furey strikes down attempt to rewrite tax code

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A surprise Senate push to rewrite the tax code has been struck down.

Senate Speaker George Furey ruled Tuesday that amendments made to a government money bill amount to a tax increase, which is beyond the powers of the Senate.

The Conservative-dominated national finance committee in the Senate infuriated the government representatives in the Senate last week by making major amendments to a budget-related bill.

Bill C-2 was the first piece of legislation introduced by Prime Minister Justin Trudeau's government. It outlines personal income-tax changes that were put in place as of Jan. 1, 2016, that lower taxes on middle-income Canadians while raising taxes on incomes exceeding $200,000.

Conservative Senator Larry Smith had introduced an amendment that would have delivered a larger tax break on income earned between $45,282 and $52,999 but would have reduced the tax break at higher levels.

The Parliamentary Budget Officer had previously noted that, contrary to campaign promises made by the Liberals, the government's package of income tax breaks and increases are not revenue-neutral and will in fact create a permanent annual shortfall of $1.7-billion. Mr. Smith's amendment aimed to address that issue, but such a change effectively meant the amendment would raise taxes for some people this year.

Mr. Smith had argued the change was not a tax increase when compared with 2015 tax levels, but the Senate Speaker was not convinced. Mr. Furey, who was appointed as a Liberal in 1999 but now describes himself as a "non-affiliated" senator, ruled that the Senate can amend bills to reduce taxes and spending but cannot impose increases.

"Whether an amendment is, over all, revenue-neutral, is not relevant. The question is whether it will increase taxes or not and the Senate cannot increase the amount," said Mr. Furey in his ruling.

As a result, the Speaker said the bill will be treated as if it came from the Senate committee unamended. The bill will be now debated at third reading in the Senate. If passed without amendment, it will receive Royal Assent and become law.

The Conservatives in the Senate continue to hold a majority on Senate committees even though a recent wave of new Senate appointments has diluted their power in the full 105-seat Senate. Once all the new Senators are sworn in, there will be 44 "non-affiliated" Senators, 41 Conservatives and 21 Liberals.

At some point soon, the Senate is expected to restructure the Senate committees so that they reflect the same balance of power as the Senate.