Christian Conservative Christian "Independent"

I'm an evangelical Christian, member of the CPC, but presently & unjustly exiled to wander the political wilderness.
All opinions expressed here are solely my own.

Wednesday, November 01, 2006

Trust and such

My two cents on yesterday's Income Trusts announcement.

To be honest, I didn't notice the promise not to tax income trusts during the last election. However, in my opinion, was a dumb promise to make. Things have changed since the last election, and more and more companies have announced they will convert to Trusts. Any responsible government would act, and that's what they've done.

But the fact that a promise was made during the election sure makes this decision difficult. There will be a price to pay, to be sure, but I think it was the right decision to make.

The problem with how Mr. Goodale dealt with this last year was how he openly mused about it, and then left the market hanging. It was a fiasco.

Contrast with Mr. Flaherty. Total surprise to everyone... no leaks, no mess. And when the announcement was made, he had a clear, comprehensive plan, covering all the bases. In an effort to help protect the investments of seniors, incoming splitting. To help companies make the transition, 4 years before any changes are implemented. Steps taken to slow the number of companies making the switch by making tax penalties immediate. And as Warren pointed out, everyone treated equally... no insider info. (Even Stephen Harper thought it was a good point... he quoted Warren today in Question Period... to the massive number of catcalls from the Liberal benches, no less)

I've never been a fan of Income Trusts. I think that companies should pay their fair share. I don't agree, however, with the NDP, who support chasing business away with high taxes. I think this is a more moderated and fair means of dealing with the issues at hand.

12 Comments:

  • At Thu. Nov. 02, 02:41:00 a.m. EST, Blogger Dirk said…

    Harper mentioned "Warren" explicitly because he's on the outs with the federal libs, and relating it to last year's income trust scandal was a nice way of rubbing a lot of stuff in their faces. I can't stand Kinsella. To me, he's an embodiment of the side of politics that's all about personal advancement and image over substance.

    Unpleasantness aside, I agree Goodale's handling of income trusts last year was bad -- and the leaks even worse. But Flaherty's sudden announcement, after the Conservatives campaigned on maintaining the status quo for income trusts, hurt a lot of people. The government did have a good alternative... in Garth Turner's words:
    "I think the minister of finance could have declared a moratorium on new conversions, struck a blue ribbon panel to study the industry and eased in regs over the past few months making it crystal what direction the feds were going in. That would have allowed for a more orderly, less panicked correction, and kept from scaring the crap out of a few million seniors. It would have been a kinder blow. But if you’re a prime minister planning an election in a few months, and want nasty things done now so people will forget about them, well, you pick another route."

     
  • At Thu. Nov. 02, 07:56:00 a.m. EST, Anonymous mth said…

    Stretching out the changes such as in Turner's proposal would have done . . .what?

    Once the moratorium was set and the review process commenced, do you think that people would have taken a different approach to yesterday's market? With the CPC reaching the same conclusion as the Liberals and the NDP and PQ good socialist that would need no convincing to impose taxes, do you have any doubt what the outcome of the "blue ribbon" committee would have been?

    It had to be like ripping off the band-aid.

    That said, I'll miss the trusts since I made some good money off of them, by owning shares in the companies for which the trusts overpaid in order to keep their treadmills running, not from the trusts themselves, they were for the most part little better than a pyramid scheme.

     
  • At Thu. Nov. 02, 08:17:00 a.m. EST, Blogger RightWingNutWM said…

    The government could have solved this by grandfathering existing trusts and place a moratorium on new ones.

    The $25B raid on pensions was a hate crime.

    The concept of 'Corporations fair share of taxes' is socialist drivel. Corporations do not pay taxes! Their shareholders (-$25,000,000,000 yesterday) pay those taxes.

    For a corporation to pay taxes, it would have to have a large hoard of cash to draw down. In the absence of this hoard, they pay taxes out of their gross revenues leaving less for their employees, clients, shareholders, and suppliers.

    The money corporations earn is either invested, or distributed. If it is invested the taxes are deferred to allow future growth. If it is paid to others (employees, shareholders, suppliers), it is later taxed in their hands.

    If the corporations distributions are to foreign interests, there should be a witholding tax.

     
  • At Thu. Nov. 02, 09:50:00 a.m. EST, Anonymous Anonymous said…

    • A Conservative government will: Stop the Liberal attack on retirement savings and preserve income trusts by not imposing any new taxes on them…The Liberal track record for Canadian seniors is a sad story of unfair taxation, poor government services, and now an inexcusable policy blunder that threatens the retirement savings of Canadians. Only the Conservatives will give seniors security by pledging to levy no new taxes on income trusts. (CPC Issue Backgrounder, Security for Seniors, 9 December 2005)
    • Un gouvernement conservateur : Stoppera l’attaque des Libéraux envers les économies de retraite et protégera les fiducies de revenu en n’imposant aucune nouvelle taxe…Le bilan des Libéraux en ce qui a trait aux personnes âgées est une triste histoire d’imposition injuste, de mauvais services gouvernementaux et, maintenant, d’une bourde politique inexcusable qui menace les économies de retraite des Canadiens. Seuls les Conservateurs assureront la sécurité des personnes âgées en s’engageant à n’imposer aucune nouvelle taxe sur les fiducies de revenu. Seul le Parti conservateur augmentera le revenu de retraite que les personnes âgées peuvent gagner sans payer d’impôt. (CPC Document d’information, La sécurité des personnes âgées, 09 décembre 2005
    • “Mr. Speaker, the government has tried to claim that it has support for its actions against income trusts, but here is what the Canadian Association of Retired Persons said today: “—based on the surge of e-mails, faxes, letters and telephone calls...seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for essentials of daily living. Will the Prime Minister finally admit he bungled, backed down and reversed his position on income trusts?” (Stephen Harper, October 8, 2005)
    • “Mary Louise in Ontario says, “This whole thing would be a joke... but none of us are laughing as our RRSP accounts evaporate due to thoughtless, ill-informed remarks and threats to destroy income trusts”. When will the Prime Minister admit that he simply blundered, back down and assure Canadians that income trusts are here to stay?” (Stephen Harper, October 3, 2005)
    • "...remember it was the Liberals who threatened to tax income trusts. This was a direct attack on the retirement income of millions of Canadians. And when the government changed its mind, it appears that it was again privileged insiders, not ordinary seniors, who benefited. You know where the Liberals stand on raiding seniors nest eggs. Whether it is death taxes, or taxing income trusts, a new Conservative government will never let this happen." (Stephen Harper Speech, "Harper will ensure security for seniors," December 9, 2005)
    • “…[W]e will preserve the public pensions programs that sustain so many of our parents, grandparents, and senior citizens, as well as help them benefit from their own savings and not monkey around with their income trusts. (Stephen Harper, 13 January 2006, Conservative.ca)
    • “It is why we will preserve the public pensions programs that sustain so many of our parents, grandparents, and senior citizens, as well as help them benefit from their own savings and not monkey around with their income trusts.” (Stephen Harper, Campaign Speech in Oakville, January 13, 2006)
    • Quand les attaques des libéraux commenceront, quand ils commenceront à mentir au sujet de nos engagements envers les pensions, rappelez-vous que ce sont les libéraux qui ont menacé de taxer les fiducies de revenu. C'était une attaque directe envers les revenus de retraite de millions de Canadiens. " (Stephen Harper, La Presse, 10 décembre 2005)
    • “Mr. Speaker, while the minister is doing his navel gazing, seniors are taking a beating in the market. That is the problem. It is all very interesting following along where the minister's mind leads him today, but investors need some certainty. Yesterday he said he wanted to give investors some certainty, so here is his big chance. Income trust investors everywhere want to know, will the minister commit to levelling the playing field between income trusts and other investment vehicles without raising taxes on income trusts?” (Monte Solberg, Hansard, November 23, 2005)
    • “Mr. Speaker, if the finance minister is really so concerned, then why does he not do something about it? Why does he not stand in his place right now and say without equivocation that income trusts are here to stay and he will not implement taxes on them?” (Monte Solberg, Hansard, September 29, 2005)
    • “When will the government quit making political calculations and give their unequivocal commitment to maintaining income trusts?” (Monte Solberg, Hansard, September 28, 2005)
    • “Mr. Speaker, we are glad to see that the Minister of Finance has finally accepted the Conservative Party position that we need to cut the taxes on dividends to level the field on income trusts.” (Monte Solberg, Hansard, November 24, 2005)
    • “Mr. Speaker, by cancelling advanced tax rulings on income trusts, the finance minister is endangering the financial security of millions of Canadians, especially seniors. With this minister's announcement, Canadian businesses lost billions of dollars in market cap in one day and thousands of dollars were shaved off personal nest eggs of Canadians, Mr. Speaker. My question is why is the minister attacking all Canadians and especially seniors with his reckless behaviour on income trusts?” (Monte Solberg, Hansard, September 29, 2005)
    • “Mr. Speaker, not only is the finance minister attacking investors with his erratic behaviour on trusts, but now he is re-breaking his promise to reduce the tax load on Canada's largest employers. Today the finance minister confirmed that he is being called to heel by the leader of the NDP. He has announced he is re-breaking his commitment to cut taxes for large employers. How can he do that when he claims that raising productivity is one of his many number one priorities?” (Monte Solberg, Hansard, September 26, 2005)
    • Quant aux fiducies de revenu, très populaires en raison d'un traitement fiscal favorable, «nous nous opposons à des mesures qui auraient pour effet d'augmenter les impôts sur ces titres boursiers», a dit M. Solberg. (Le Devoir, 21 janvier 2006)
    • "Nous sommes favorables aux fiducies de revenu et nous nous opposons à toute mesure fiscale qui aurait pour effet d'accroître l'impôt pour les fiducies de revenu", a dit M. Solberg. (CP Jan 14, 2006)
    • "This has become a very topical issue recently with the Minister of Finance, quite frankly in my view, making an absolutely unprecedented interference in the marketplace, in our investment community. This is disrupting the retirement nest eggs of thousands and thousands of Canadians. It is affecting the investment climate in perhaps the most negative way in recent years. I just cannot believe a finance minister would act so imprudently. It is an absolute disgrace." (James Rajotte, Hansard, September 29, 2005)
    • "If double taxation of dividends were not done in Canada, then we would not need income trusts. Income trusts allow the company to pass on the profits to their investors. People say that is evading taxes. What it does is pass on profits to the investors and thereby companies do not pay the double taxation to the government." (James Rajotte, Hansard, September 29, 2005)
    • "Well, look, income trust is an issue that Monte Solberg has been on for some time. We have clearly stated that we're committed to giving people more of their own money. That's always been the Conservative approach." (Peter MacKay, CTV Question Period, September 25, 2005)
    • "This big spending is not the way to do it, it's not the way to generate faith in the economy, faith in the government's got a vision when you bring in one budget, then you replace it a number of weeks later, and you bring in a third budget the same year. What they've done on income trusts has been a disaster to many seniors who were trying to save for their retirement. People want a steady hand on the wheel and they're not getting it from the government." (John Baird, CTV NewsNet Countdown, December 1, 2005)
    • "And so orders went out to every department, every ministry, to try to jam out every possible announcement they could, and now it's going to be a dollar short and a day late on all of these things, including for income trust investors who lost $30 billion of market capitalization, including a lot of very humble, modest seniors who lost a big chunk of their investment savings because of Ralph Goodale's reckless approach to income trusts." (Jason Kenney, CTV Newsnet Mike Duffy Live, November 23, 2005)
    • The feds are bent on raiding the nest eggs of seniors who worked so hard all their lives to build up their income trusts. Changing the tax rules late in the game is mean, mean, mean. Our plans propose leaving seniors' savings alone and helping those on fixed incomes." (Stockwell Day, Penticton Herald, October 3, 2005)
    • "Why has Finance Minister Goodale gone public with his musings about eliminating the popular trusts (so far, this has caused the collective value of the trusts to fall $25 billion dollars), and secondly, what will the thousands of seniors who have bought income trusts for their retirement do if the rules are changed midstream and the value of their investments has cratered? These are good questions and ones that will likely be raised during the upcoming campaign." (Chuck Strahl, Metrovalley Newspaper Group, November 6, 2005)
    • “We continually see the Liberal government making every attempt to extract every last nickel from Canadian taxpayers. A perfect example is the attempt to freeze income trusts and the resulting uncertainty for investors. This uncertainty has cost seniors money that they are dependent upon. These responsible seniors have invested in money for their retirement years and the government cannot stand not having its hands in their pocket. Liberals feel they are entitled to a portion of the pie. They are not and they should be ashamed of itself.” (Betty Hinton, Hansard, November 18, 2005)
    • Le candidat conservateur du comté de Bourassa, Lino Martelli, entend défendre le programme politique du Parti conservateur en matière de sécurité des personnes âgées…"Le parti conservateur est le seul parti à défendre les personnes âgées. Notre plan offrira une sécurité financière aux personnes âgées. Seuls les conservateurs assureront la sécurité des personnes âgées en s'engageant à n'imposer aucune nouvelle taxe sur les fiducies de revenu » (Guide de Montréal-Nord 21 décembre 2005)

     
  • At Thu. Nov. 02, 09:51:00 a.m. EST, Anonymous Anonymous said…

    Questioning income trusts puts seniors at risk
    Byline: Stephen Harper
    Source: National Post
    Wednesday, October 26, 2005
    Page: A20

    On September 19, the Prime Minister acted recklessly when he ordered his Finance Minister, Ralph Goodale, to wade into the income-trust market like a proverbial bull in a china shop. On that day, investors were put on notice that their popular income trusts were going to be targeted by a Liberal government seeking higher tax revenues from companies and investors.

    Martin's reckless action has caused uncertainty over the future of income trusts, and so has wiped out billions of dollars in market capitalization from Canadian companies and tens of thousands of dollars from the retirement nest eggs of individual investors. Most notable was the damage done to Canadian seniors who may not have the time to recoup their losses.

    One couple e-mailed my party to complain that the uncertainty around income trusts caused by the Liberals' announcement trimmed $30,000 from their retirement portfolio in a single day. Another man wrote to tell us that he had lost 15% from his his portfolio.

    Many seniors feel the government is putting their retirement at risk and have let Ottawa know. In a letter to the Finance Minister, the Canadian Association of Retired Persons said, "Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living."

    Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine. They also provide tax relief from a government that is addicted to taking too much money from their pockets and spending it without care, and very often without meaningful results.

    So one must ask, why is the government clamping down on the retirement savings of seniors and investors?

    But it gets worse. Instead of immediately moving to assure markets that income trusts are here to stay, the Liberals are justifying their actions in the coldest political terms. As one government member was quoted in the media as saying about income trust investors, "They have no constituency. They don't count politically."

    That kind of arrogance cannot go unanswered. There is just no justification for what amounts to a Liberal government attack on investors, and especially on seniors.

    The government continues to overtax Canadians and run multi-billion dollar surpluses, yet their first instinct is to attack an investment vehicle that can make the difference between bare survival and a dignified retirement for millions of Canadians.

    The government claims that income trusts enjoy an unfair tax advantage over corporate dividends. If they believe this, then the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short, level the playing field and let the market decide between income trusts and dividend-paying companies.

    As my party's finance critic, Monte Solberg, says, the success of income trusts represents a rare triumph for investors over the tax man. Let's not be so naive as to assume that the Liberals will do the right thing to protect taxpayers. We'll need to fight hard to keep what we have, and even harder to gain ground.

    It's time to stand up to Paul Martin and stop his attack on seniors and investors.

     
  • At Thu. Nov. 02, 01:04:00 p.m. EST, Blogger Christian Conservative said…

    Hey Troll, nice to meet you...

    Did you even read what I said? Making that promise was a foolish one, and I for one am glad that they backtracked on it.

    What would you prefer... a government who "sticks to their guns" on an issue where they are in the wrong, or one that recognizes an error, and makes the right decision, regardless of the political costs?

    On January 23rd, I marked my ballot for responsible government... and I got it.

     
  • At Thu. Nov. 02, 08:18:00 p.m. EST, Blogger Dirk said…

    I don't see why anonymous should be called a troll. Well, he/she should have at least left a handle, but anyway.
    How is what anonymous said any less troll-like than statements like "I don't agree, however, with the NDP, who support chasing business away with high taxes."?


    As for your final comment, responsible governments don't make stupid promises without considering the consequences. A responsible government, especially one who purports to be market and business friendly, does not flip-flop on major tax policies.

     
  • At Thu. Nov. 02, 10:09:00 p.m. EST, Blogger Christian Conservative said…

    Called him a troll because all he/she did was cut and paste, instead of sharing their own original thoughts. That's all.

    And you're quite correct about the stupid promise point.

    Consider though, how things have changed since last year... with the BCE and Telus conversions, the Government stood to lose one billion in tax revenue... do you honestly think that the Government should have stood by their previous stand since the game had changed?

     
  • At Fri. Nov. 03, 12:39:00 a.m. EST, Blogger Dirk said…

    Re the troll thing... makes sense.

    Re. BCE and Telus, I completely agree that the gov't had no choice but to introduce this tax. I'm glad they broke this promise -- and not so I could say "naah naah, Harper broke a promise!", but because this is the right thing to do. Timing, and implementation details notwithstanding, I imagine most informed, fair minded people would agree.

    What bugs me is the cavalier approach of our politicians as they assume positions for immediate political benefit, as opposed to what makes sense. With income trusts, the writing was on the wall ages ago, as to the direction many companies were considering. Last year, RBC execs openly mulled over converting themselves into an income trust. At the end of the day, noone can honestly say that the reality on the ground changed, or that new trends emerged. That's what makes situations like this frustrating. At least it's fixed, though.

     
  • At Fri. Nov. 03, 01:01:00 p.m. EST, Anonymous Anonymous said…

    If I was a card-carrying Liberal (which I'm not), I'd be concerned about this issue. If the Liberals even mention Income Trust at all in any way, shape or form, all the Conservatives have to do is to refer the investigation launched by the RCMP during the last election campaign.

    I agree, dirk, about the approach too many politicians (of all political stripes) make with respect to positions and promises. I'm reminded about how (then Finance Minister) Paul Martin apoligized on TV for not killing the GST. I think his exact words were "I sincerely thought we could do it, I was wrong, I'm sorry." One could have quibbled about whether he actually thought they could do it (I know I wondered), but he had the class to apoligize. I don't think Chretien ever did.

    I'm also reminded of a phrase coined by the late David Lewis (then federal NDP leader, and father of former Ambassador to the UN Stephen Lewis) during the 1972 election campaign: "Corporate Welfare Bums."

     
  • At Wed. Nov. 22, 02:00:00 a.m. EST, Blogger Geoffrey said…

    The only thing that taxing income trust distributions does is to double tax them in senior's retirement accounts who can least afford to lose another 31.5% of their income as well as pay income tax on withdrawals. (see http://www.td.com/economics/special/dd1106_income_trust.pdf) When you tax income trust distributions, this is who the government is taxing not the company. The company will still pay out the same amount in 2011, it is the senior who will get less now. How does this make sense?

    Words of wisdom, or words to haunt Stephen Harper:

    Questioning income trusts puts seniors at risk

    Byline: Stephen Harper

    Source: National Post

    Wednesday, October 26, 2005

    Page: A20

    On September 19, the Prime Minister acted recklessly when he ordered his Finance Minister, Ralph Goodale, to wade into the income-trust market like a proverbial bull in a china shop. On that day, investors were put on notice that their popular income trusts were going to be targeted by a Liberal government seeking higher tax revenues from companies and investors.

    Martin's reckless action has caused uncertainty over the future of income trusts, and so has wiped out billions of dollars in market capitalization from Canadian companies and tens of thousands of dollars from the retirement nest eggs of individual investors. Most notable was the damage done to Canadian seniors who may not have the time to recoup their losses.

    One couple e-mailed my party to complain that the uncertainty around income trusts caused by the Liberals' announcement trimmed $30,000 from their retirement portfolio in a single day. Another man wrote to tell us that he had lost 15% from his his portfolio.

    Many seniors feel the government is putting their retirement at risk and have let Ottawa know. In a letter to the Finance Minister, the Canadian Association of Retired Persons said, "Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living."

    Income trusts are popular with seniors because they provide regular payments that are used by many to cover the costs of groceries, heating bills and medicine. They also provide tax relief from a government that is addicted to taking too much money from their pockets and spending it without care, and very often without meaningful results.

    So one must ask, why is the government clamping down on the retirement savings of seniors and investors?

    But it gets worse. Instead of immediately moving to assure markets that income trusts are here to stay, the Liberals are justifying their actions in the coldest political terms. As one government member was quoted in the media as saying about income trust investors, "They have no constituency. They don't count politically."

    That kind of arrogance cannot go unanswered. There is just no justification for what amounts to a Liberal government attack on investors, and especially on seniors.

    The government continues to overtax Canadians and run multi-billion dollar surpluses, yet their first instinct is to attack an investment vehicle that can make the difference between bare survival and a dignified retirement for millions of Canadians.

    The government claims that income trusts enjoy an unfair tax advantage over corporate dividends. If they believe this, then the answer is not to shut down a valuable investment vehicle, but to cut the double taxation of dividends. In short, level the playing field and let the market decide between income trusts and dividend-paying companies.

    As my party's finance critic, Monte Solberg, says, the success of income trusts represents a rare triumph for investors over the tax man. Let's not be so naive as to assume that the Liberals will do the right thing to protect taxpayers. We'll need to fight hard to keep what we have, and even harder to gain ground.

    It's time to stand up to Paul Martin and stop his attack on seniors and investors.

     
  • At Wed. Nov. 22, 02:04:00 a.m. EST, Blogger Geoffrey said…

    Here is something else to consider before people pass judgement about income trust taxation:

    "Betrayal of Trust
    Only 19 days have passed since Flaherty stunned the income trust market with the tax bombshell. The Federal officials are justifying their actions with a number of reasons. The need to prevent losing tax revenues that apparently occurs when corporations convert to income trusts. Others reasons given are trusts deplete the capital, another is investors need protection from the allure of high yields and the inevitable scam artists that find their way into any fast growing sector of the securities markets. By our calculations the loss of wealth resulting from the new tax rules has been $54B. As of the Friday November 17 market closing prices of the 250 trusts we cover were valued at $191B, down from $245B as of October 31. The loss of wealth has been massive and will impact even future generations. If 70% of trusts were held by Canadians either directly or in RRSPs the $35B of wealth would have been in a position to grow and eventually be taxed by the government. This wealth would also have been available for inter generational transfers. The compounding effect of income trust growth when based on the pre collapse value of $254B of which $175B is held by Canadians, results in losses in the $100B range 10 years from today. A large portion of trusts were held by seniors and eventually the wealth will pass to the next generation, so more than just the seniors need to pay attention to the new tax rules. The education fund for the grandchildren is taking a hit along with the retirement income of grandma and grandpa.

    And when grandchild is on grandpa’s knee he can also talk about the importance of honesty. The government can justify the tax changes however they like, but the plain truth is they lied to get elected. Income trusts do have their risks and investors need to be aware of these, but none of the risks were nearly so great as the risk resulting from a government that lied. The government justifies their actions by saying they are protecting investors and securing the wealth of the nation for current and future generations, but they are really just politicians who lied to get into power. Their motives are highly questionable and made even more as we have not yet seen the numbers to justify their actions."

     

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