Thursday, April 23, 2009

Ralph Goodale's question in today's QP

Liberal MP Carolyn Bennett was kind enough to send me the question that Ralph Goodale asked today in QP that incorporated a reference to income trusts (see below), for which I thank her.

With the best interests of the Liberal party and all Canadians in mind, allow me to use this as an example of what I and many others feel is lacking in the manner by which the income trust issue is being raised and used by the Liberal Party.

First of all, the reference to income trusts is in the context of a list of past grievances that the question suggests can be “bartered” to gain better EI benefits. The implicit message to 2.5 million aggrieved income trust investors is that they are water under the bridge. Not a comforting thought.

Second of all, the question makes reference to the fact that the Conservatives raised income taxes. If this is in regards to moving the lowest personal tax rate from 15% to 15.5% in Budget 2006, then this is somewhat disingenuous, as the Conservatives subsequently reversed that move, so the net effect was that the Conservatives DID NOT raise taxes. Therefore that issue, truly is water under the bridge. If the Liberals wish to paint the Conservatives with the brush that they have raised taxes in a way that affects ALL CANADIANS, then the better and more valid argument would be to PLEASE make the point that I have been asking the Liberals to make, which draws from my article in this weeks’ Hill Times, that states:

“Meanwhile, all the remaining trusts are vulnerable to the same outcome, which would multiply by seven-fold Flaherty’s incompetence and his already $1 billion loss of ANNUAL taxes. He shoots, he scores.”

As such, the trust tax has caused a massive wave of foreign takeovers of trusts made vulnerable by Harper’s policy. This wave of takeovers has only temporarily abated and will resume with a vengeance once credit is restored to the financial markets to enable more LBOs of devalued trusts. This will lead to the loss of $7.5 billion in ANNUAL TAX REVENUE, borne by ALL CANADIANS, which is the equivalent of a 1.5% GST increase......and unless the Liberals are prepared to tell Canadians, then Harper will get away with it.

All taxpayers are losing $7.5 billion in ANNUAL TAX revenue for the privilege (???) of having Canadian investors displaced by new foreign owners. Huh? This is dynamite and it is real, in the way in which attempting to portray Harper as a tax raiser on personal income taxes, is not. This is how the trust tax needs to be “prosecuted”. That is all that we ask. Please do so, for the benefit of all, especially Canadian taxpayers and the Liberal Party.

Third. You will notice in Harper’s answer that he cites “pension income splitting for seniors” as an offset to his income trust tax. What utter nonsense, since the people who have pensions are the ones least in need of income trusts. Plus pension income splitting for seniors ONLY BENEFITS 13% of seniors. Woopdeedo! This is Harper’s idea of tax fairness? Again read my article on page 17 of the Hill Times. As for the calculation of the 13% who benefit from pension income splitting, please see:

Hon. Ralph Goodale (Wascana, Lib.): Mr. Speaker, Canadians will remember this Prime Minister's egregious record. First, these Conservatives increased personal income taxes by nearly a billion dollars. Then they slapped a 31.5% Conservative tax on retirement savings and income trusts. Then they sunk the nation into deficit during boom times so that there was nothing left when the recession hit and killed 300,000 full time jobs.
Could the Conservatives at least agree to fix the EI system to be a little more generous to its victims or would that make the system too lucrative?

And the PM’s response...

Right Hon. Stephen Harper (Prime Minister, CPC): First, Mr. Speaker, to be clear, this government has cut personal income taxes in every single budget it has brought forward.
In spite of the opposition of the Liberal Party, this government has cut taxes for our retirees, including income splitting for our pensioners, and in spite of the fact that the Liberal party opposed it.
This government was running surpluses when times were good so we can afford to intervene in times like these.
Let me tell the House this. No matter how many distortions of fact the Liberal Party tries, no one is going to buy their plan to raise taxes.


Dr Mike said...

The Cons are about to run a very effective attack add campaign which will highlight Mr Ignatieff`s statement on possible tax increase to offset a rising deficit---he will be framed as the American wannabe tax increaser from hell & Canadians will lap it up like no tomorrow.

Here`s just a thought for the Liberal party--attack now with your own add highlighting Harper`s treatment of income trust investors--it would be very easy to have a couple of us old farts talk about the effect on us while playing Harper`s speech during the election of 2006 promising to not tax trusts.

Put a face on the investor , because right now the public sees us only as a bunch of nameless rich bastards who had too much $$ & deserved to lose some of it--they don`t see us as ordinary Canadians at all.

Setting up the add would be snap--the video is free & the trust investors have nothing better to do because they can`t afford to do anything anyway.

This is but the tip of the iceberg as this issue can be used to show the gov`ts unwillingness to compromise , lack of accountability , their desire to placate the CEOs more than the regular citizen & their general disregard for good financial planning.

This is a prime chance for the Liberals to shine & do the right thing at the same time.

The big question becomes , will they.

Dr Mike

Anonymous said...

Dr Mike makes a very strong point -- personally, I have thought that income trust investors are likely rich guys who are whining about paying tax, oh boo hoo to the rich. You need to inform me that I should care about the issue. No one else but you is going to, because the liberals dont have clean hands on the issue.

Dr Mike said...

The list of people owning trusts runs from granny needing a few extra bucks for bingo to Joe Blow who needs cash to feed his family.

Actually that is a gross oversimplification.

People are & will plan for their futures based upon income , both present & future.

The trick is to generate a sufficient amount as the low rate of return on dividends , bonds , & GICs do not adequately supply what is needed.

The large return payed to the owners of the trusts , that is you & me or whoever have the obligation to pay all of the tax on this money , not the trust itself but us the owners.

None of us complained as we had to pay a high rate of tax as we were just happy for the returns--it must be remembered that our rate of taxation on average is nearly 4 times the average corporate level paid & still no complaints.

Does it make sense from public standpoint to be happy with the corporate tax rate of 6.9% on average or would you rather have a return of well over 30% paid by us---the country wins as more tax revenue flows--we are happy as we make a higher return.

So who loses--the corporations as they cannot compete as they will not pay out decent returns--they waste their money on half-assed money losing schemes & make the stock holder suffer--a half-assed money losing scheme means a major tax write-off.

I am happy to pay the tax so should you in receiving it.

Dr Mike

PS---I don`t give a flying fig as to who does the dirt , which party or whoever , get to the bottom of poor policy & make the little guy the priority here.