Tuesday, May 22, 2007

The Self Benevolent Tax Policies of Jim Flaherty

Jim Flaherty flatters himself by portraying his own self as an average everyday kind of guy who frequents the Tim Horton’s in Whitby. This is part of a grander ruse to deflect Canadian’s attention from the fact that Jim Flaherty’s tax policies are designed with his own personal circumstances in the forefront of his mind. Jim Flaherty served as Ontario’s Finance Minister for 14 months back in 2001 and now as Canada’s Finance Minister for about as long. During these cumulative two and half short years, Jim Flaherty has wasted no time whatsoever feathering his own nest with a total of four Jim Flaherty specific tax breaks, one at the provincial level and three at the federal level.

(1) As Provincial Finance Minister, Jim Flaherty was the misguided person who on the one hand advocated jailing the homeless while at the same time introduced tax refunds for parents sending their children to private school. That was 2002, the year that Flaherty sent two of his boys to Trinity College School, a private boarding school in Port Hope.

(2) Jim Flaherty’s third son is developmentally challenged. This no doubt was the inspiration behind one of the select number of targeted tax breaks for individuals in Flaherty’s recent budget that helps parents save toward the long-term financial security of persons with severe disabilities under the new Registered Disability Savings Plan allowing them to set aside up to $200,000 tax-free for their children’s care. Not being one to be exposed to the whims of the provinces, Jim Flaherty also discussed the plan with provincial finance ministers in mid-December. Flaherty considers that provincial reforms are essential to ensure that family contributions are not clawed back by provincial disability income programs.

(3) Jim Flaherty has been both an MPP and an MP. When Jim Flaherty vacated his provincial seat to run federally, his wife ran successfully for his vacated provincial seat and is now an MPP. When Flaherty was in provincial politics he was active in the abolishment of pensions for MPPs. This was not an altruistic endeavour, as all sitting MPPs like himself received undisclosed lump sum cash payouts in lieu of pensions. Therefore Flaherty will have a pension as an MP, but neither he nor his wife will have one for their service as MPPs. Flaherty’s income splitting for seniors in the recent budget is again ideally suited to his own personal circumstances. Income splitting for seniors is actually only pension income splitting that applies to only 14% of seniors. Flaherty and his wife are part of that select 14% of targeted Canadians to receive this most generous of tax benefits.

(4) Jim Flaherty and his wife were partners in a law firm known as Flaherty Dow Elliott. Flaherty Dow Elliott is a private limited partnership that operates as a tax flow through entity or FTE. There are a myriad number of FTE’s including mutual funds, limited partnerships, trusts, etc. whereby earnings are not taxed at the FTE level , but rather in the hands of the individual taxpayers who own the FTE. Jim Flaherty thought that there was something particularly pernicious about certain FTEs but not others. He claimed certain FTEs but not others resulted in tax leakage and represented a tax loophole and caused great damage to the prosperity of our economy. The particular subset of FTEs that Jim Flaherty targeted for a new form of double taxation at the rate of 31.5% was public income trusts and public limited partnerships. Flaherty Dow Elliott is not a public limited partnership, but simply a private limited partnership.

What’s the distinction? Well, if Flaherty Dow Elliott were a public limited partnership then individuals who are not lawyers but rather average Canadians seeking to provide a form of stable retirement income in a protracted low interest rate environment could become fractional owners of Flaherty Dow Elliott. As with public income trusts many thought that public limited partnerships represented a new form of democratization of the Canadian capital markets. Obviously, the notion of the democratization of the Canadian capital markets represented competition for Canadian’s limited, but growing, investment capital, capital that had previously been captive to the products and securities of those who actually run Canada, namely Corporate Canada. Something had to be done. Flaherty was their man, since Jim Flaherty is the master of self benevolent tax policies and gross fiscal hypocrisy. Let’s double tax RRSPs at a rate up to 64%, and thereby tax the living existence out of income trusts for the benefit of foreign private equity, large Canadian life companies, pension plans and Corporate Canada at large. We’ll call it the Tax Fairness Plan. The fact that we promised Canadians that we would never tax income trusts won’t stop us and nor will the fact that it will actually induce the very outcome it is ostensibly meant to serve, namely tax leakage. Tax leakage that didn’t even exist in the first place. Who cares so long as it plays well at the Whitby Tim Horton’s, the epicentre of Flaherty’s political hypocrisy and self benevolent tax policies.


Kephalos said...

There is in this blog a hint of conflict of interest. In matters of everyday commerce and financial reporting, the potential for a conflict of interest may be neutralized, if the said interest is fairly and fully disclosed to the party on the other side. In matters of financial reporting of publicly traded securities, disclosure of a conflict of interest is mandatory in various ways.

Has the Finance Minister disclosed how various pieces of legislation will actually or potentially benefit the Government, or employees or officials of the Government? I don’t recall any instance of such disclosure.

Anonymous said...

Actually there is a fifth point to be added to Flaherty's self interested tax policies and that is the so called Green Levy on new vehicles where energy efficient vehicles will qualify for rebates of up to $2,000 and energy inefficient vehicles will pay levies of up to $2000. Interesting that the mid sized cars that are produced in Flaherty's Whitby-Oshawa riding at the GM Car Assembly plant qualify for the rebate, not because they are efficient per se, but simply because they can run on gas that is 15% ethanol, eventhough such gas is not even available in Canada and meanwhile his tax levy totally and arbitrarily excludes the full sized gas guzzling pick up trucks that just happen to be assembled at GM's truck assembly plant in Oshawa. Any chance Flaherty was thinking ahead to the next election?

For a self serving individual like Flaherty, votes are the equivalent of money in his pocket.

Anonymous said...

At the NDP web site, on the page for Seniors, it says "Dignity and security for seniors: Protect hard-earned pensions by ending employer underfunding of pension plans, securing pensions when employers go bankrupt, launching pension insurance and other measures."

Obviously, the NDP is only interested in protecting the retirement income of the 30% of Canadians who have employment pensions. The NDP has supported the Tory trust tax lie made against many thousands of seniors who invested in their retirement savings into income trusts. As we can see from the Thunder Energy takeover, the NDP wants the trust assets to be bought for cheap by the under-funded employer pension plans.

In my case, the NDP approved fraud against retirement savings outside of employer pension plans will cost me $12,000 a year when my income trusts units are forced off the markets, and I am forced to invest in lower yield corporate debentures.

So, Mr. Layton, I’m one of the 70% of Canadians that the NDP does not care about.

Anonymous said...

Let's not forget the "Flaherty Flyer", the Peterborough to Toronto train that was to run through Flaherty's riding. The train was such an obvious and ridiculous piece of pork for Jimbo it has been placed in the delete bin.