Thursday, April 9, 2009

Jack Mintz, starring in Horsefeathers


Don’t get me started on Mintz.

You should have heard him try to explain to me how he calculates tax leakage....it’s no wonder he got it wrong, if he can’t even explain it cogently.

He calculates what the taxes would be if people invested in the their RRSP, the way the government assumes they SHOULD and as prescribed by the government's “edict”. Then he calculates the tax revenue from what people actually CHOSE to invest in. Then he takes the difference and calls that tax leakage?

I think he studied under Karl Marx.... or was it the Marx brothers?

Here was Mintz’s nonsensical way of calculating tax leakage as explained by him to me. I think this was from his first movie. The one called Animal Crackers....or was it Horsefeathers?

At least we agree on one thing.....”Finance was wrong”....although I prefer to say ”Finance was fraudulent”.

Mintz can say that Finance is wrong all day long if he wishes, although it would have been nicer if he told that public rather than me in a private email, however Mintz's acknowledging that Finance was wrong, DOES NOT MEAN, by extension, that Mintz is anywhere near to being right.....and he is most certainly not independent..

Here are Jack's Mintzings:

I do want to point out that there is a serious flaw in some analyses especially on the taxation of pension and RRSP accounts. Finance was not right to treat the impact as zero

The proper calculation can be considered in two ways. The first is to recognize someone buying an asset, they get an upfront tax savings by contributing to the registered plan. The tax paid on income and principal in later years is the same in present value terms as the tax savings if there is no change in marginal tax rates. Thus, the only additional tax picked up on income trust investment put into an RRSP or pension plan compared to another similar risky investment is the personal tax on additional withdrawals from better returns. What is one source of those returns? -- it is the savings in corporate tax with the trust structure since pension and RRSP accounts do not pay other tax on the investment income within the plan.

Another way of looking at is is thinking of substituting an income trust investment for a corporate security within the plan. The only additional tax picked up is only if the income trust investment yields a better return than corporate securities. The tax picked up by the government is the time value of additional personal taxes on pension and RRSP payouts due to conversion. If the excess returns is due to corporate savings (at the most), then the annualized personal tax on the excess returns is equal to the personal tax rate on pension withdrawals times corporate tax savings. It is the latter that I included in my estimates.

12 comments:

Anonymous said...

Brent let me speculate !  The argument goes

In my RRSP 

Bond interest is deductible by the issuer, so there is no tax revenue to CRA
Stock dividends are paid in after tax revenue by  the issuer, so CRA has tax revenue
Income trusts are treated like bonds,.. no tax revenue to CRA

In my RRIF 

Everything is the same except for the tax revenue on the annual withdrawal

Therefor all good Canadians should buy only stocks in their tax deferred accounts so CRA has revenue ?

By that line of thought, CRA should disallow income trusts and bonds in these accounts 

Problem is that the RRSP were designed as a tax shelter in the first place 

I think the problem is we do not make politics sufficiently legally lucrative to attract the finest minds !

Don

CAITI said...

Don...you got that right!!.....as well as the part about not attracting the finest minds......alas.

Brent

Dr Mike said...

What bugs me everything is done to maximize taxes while forgetting about the individual who is attempting to get on with life day to day or for people planning their retirement or those folks retired trying to stay off the gov`t dole.

Why does everything have to be about taxes---why should it not be about maximizing life in general for the citizens of Canada.

I am sick & tired of the shafting of the little guy just to boost gov`t revenue.

Maybe these Ottawa base clowns need to step back from the Revenue Canada based public wallet fleecing & see that we need to live a life with some quality to it.

Maybe for once they need to think about the people for a change.

Dr Mike

Kephalos said...

In the Canadian replay of ancient mythology, Jack Mintz is in the role of Janus: he is two-faced.

His hand was on the 2005 Consultation paper to Finance that floated the idea "RSPs and RIFs are tax-exempt". And in the fall of 2006, he co-authored a paper in the Canadian Tax Journal that said "Tax revenue loss caused by income trusts is $1 billion". You may recall that some time after Oct 31/06, Flaherty said "We now believe that the tax revenue loss is even higher, about $1 billion."

But in November 2006, Mintz told Fullard that Finance was wrong in how they calculate the tax revenue loss. So, he wants it both ways; he is two-faced.

Why? If you look under the hood of his 2006 paper in the Canadian Tax Journal, you find a result that makes no sense. But what that paper does is give Flaherty an academically anointed number. And the calculation put Mintz at risk of an academic investigation; so by my guess he "fessed to Fullard" as putative penance (def of penance = "confession of sin, made with sorrow...")

Let's not forget that even an academic can fudge research data and publish a lie as scientific truth; e.g. http://www.redorbit.com/news/international/353296/seoul_university_apologizes_for_science_fraud/index.html.

Jack Mintz is a director of a multi-national oil company in Calgary. He is an advisor to the Alberta government, which government has gone against its own staff in favour of industry and against the public interest. Jack Mintz is Canadian and now lives in Alberta.

In the history of Ancient Athens, the Persians had massed an army of 25,000 soldiers against a local Athenian army of 8,000. The Athenians won but while the Persians were marching against Athens, someone in Athens was signalling Persians with a mirror.

CAITI said...

I think Mintz's analytical framework in one part behavioral psychology, one part grade two math, and three parts the state attempting to tell me what I can and can't do with the meager amounts of money that I have to invest in my RRSP, given the god damned parsimonious levels at which that same government tells me I can save for my retirement.

Brent Fullard

Anonymous said...

No one, not even Jack Mintz knew how to substantiate the leakage numbers. Recall that he refused to explain his tax loss calculations for two companies (BCE and Telus) that were not even paying any material amount of corporate income taxes to being with.

G

Anonymous said...

So what he is saying is that anyone who makes a bone head investment and looses money, or even someone who looses their job is causing tax leakage?
Why haven't they added a 31.5% bone head investor tax or a 31.5% pink slip tax? Seem like the logical thing to do according to Mintz does it not?

Robert

Anonymous said...

Say, if you guys are into ancient myth and horses, what about Pegasus?

"In Greek mythology, Pegasus (Greek: Πήγασος, Pégasos, 'strong') was a winged horse sired by Poseidon, in his role as horse-god, and foaled by the Gorgon Medusa." Wikipedia

Check it at: http://en.wikipedia.org/wiki/Pegasus

So Pegasus was a horse that helped Zeus screwed people around. Did you hear the one about how Zeus seduced Leda? Ya he got close to her heart with a promise...

Ah... go read it for yourself

http://en.wikipedia.org/wiki/Leda_and_the_Swan

CAITI said...

Kephalos:

Re:“so by my guess he "fessed to Fullard" as putative penance (def of penance = "confession of sin, made with sorrow...")”

Mintz’s faux apology

Kephalos you are exactly correct. Mintz begins his correspondence with me with a form of apology, immediately followed by an absolution of both himself and Flaherty for not consulting Canadians. Huh? Sort of like, "I'm sorry I shot you in back. but I had to, since taking a shot from any other angle, might have meant you would have survived."

Below is how my email from Mintz began, followed by the opening portion of my response to him. As you can see, I wasn’t prepared to let this two faced Janus off too lightly over his academically corrupt conduct of holding two positions simultaneously, one for public consumption that was false and one for private pleading that was true, or his pleadings of self-absolution.

You may have to wait until the book is published, before you see the rest of my response to this Janus academic

Mintz to me:

Thanks very much for contacting me. It is probably right that a fuller discussion is useful although I suppose the government would have had rocked the markets even if they just said they were looking at the issue. Consultation would have been very difficult for this reason.

Me to Mintz:

Thank you for e-mail reply of yesterday. I indicated that I would be getting back to you soon with my additional comments. I wanted to first reflect on all that you were saying. Below are your comments with my responses highlighted in blue.

Thanks very much for contacting me. It is probably right that a fuller discussion is useful although I suppose the government would have had rocked the markets even if they just said they were looking at the issue. Consultation would have been very difficult for this reason.

I wish to thank you as well. You have been widely referred to in the press on this matter. It is important to me and the many people I am talking with that we know your present views. This is a very far reaching economic policy matter that needs to be properly understood. The question of tax leakage is central to the issue. The "notion" of tax leakage is something that no doubt easily resonates with the average Canadian. You and I know that it isn't quite that simple.

The Minister's argument that consultation was not possible because it would have rocked the market is not valid. The only consultation that should have occured would have been public consultation, not private consultation. Such an announcement would have had essentially the same effect as was witnessed under the actual circumstances. Mr Flaherty is actually using last year's circumstances to his advantage. As you know, last year there clearly were circumstances of asymetrical information dissemination.This "tipping", rather than the act of consultation per se was what was at fault in the "Goodale round". However, now that the market has been rocked, there is absolutely no "downside" associated with public consultation. As an economist you know that at this point the "incremental cost" of consultation is not negative, nor is it zero. The "incremental cost " of consultation at this point is positive.This is why I am calling for a formal process for fact based public input.

As I said in the opinion editorial, "Important and far reaching economic policy should not be born out of a process of political expediency"

Anonymous said...

Poor "professor" Mintz. In his infamous paper published in October 2006, and highlighted in the Globe and Mail without verification, Mintz argued that the conversion of BCE to a trust would cause hundreds of millions of dollars of tax leakage. The "professor" did not even bother checking how much income tax BCE was paying. It turned out that BCE does not pay any material amount of tax. They said so themselves in a press release in December 2006. If BCE had converted to a trust the unit holders would have paid hundreds of millions of dollars in income tax every year. Some "leakage"! Some "professor"!

Richard the Vitriolic said...

Professor Mintz is the goof recruited by the University of Calgary Haskayne School Business to be their new resident genius. This was after his colossal f-up on the income trust advice he provided Harpass and Flatulence. It's too bad all the torpedo'd Energy Trusts didn't run his ass out of town. What’s next for the UofC? Dick Cheney for advanced studies in democracy subversion, torture and assassination? Or how about inviting war criminal Bush Junior to town for a little motivational talk? I wonder what all those con fascist asses learned from the $450 they coughed up to hear the ex president pontificate on his legacy. Yes, the air sure is different in Calgary. The colour of the sky as well.

CAITI said...

How can Mintz hold two opposing views that are inherently contradictory on the same quantifiable matter at the same time? Why is he out making statements far and wide, that corroborate the government’s wild and wacky claims about tax leakage, if not to give the semblance of providing supposed “third party” validation of this essential policy premise? Meanwhile he is writing to me in private with the revelation of “Finance was wrong”, if not to demonstrate that he is a total hypocrite and academic sham? Finance is right, when in public, but Finance is wrong, when in private? Especially a matter of analytical methodology on which the entire premise of this tax policy turns?

Jack Mintz reminds me of that 70’s commercial for CERTS:

Jack is a breath mint. Jack is a flavour mint......No, Jack is two Mintz in one!

Brent Fullard