Saturday, March 6, 2010

Globe: Terminal cancer isn’t scary. Just follow this quack medical advice

In keeping with the government shill news organization that it is, the Globe and Mail had the audacity to print an article, on budget day no less, entitled: “Flaherty's trust tax not so scary after all” by Larry MacDonald that ends with this piece of quack medical advice: "you should consider swapping your income trusts out of your registered plans for cash held in a non-registered investment account.”

This is an absurd piece of advice as it is about as feasible as saying to a terminally ill cancer patient “"you should consider swapping yourself out of your current body for the life contained in a cloned version of yourself”.

The income trusts problem that was created by the government exists for the simple fact that 38% of income trusts reside in RRSPs and the 31.5% tax is applied to RRSPs in a way that is not for income trusts held outside RRSPs or what is often called “cash accounts”. The idea of double taxing income trusts held in RRSPs and not cash accounts has NO POLICY RATIONALE associated with it whatsoever, apart from the policy rationale of killing income trusts was best achieved by attacking the most vulnerable and largest target. Killing off the 38% of trust inside RRSPs was the way to go, as there was no way to escape this summary execution, since RRSPs are so inflexible and the money is captive in so many ways.

As for the Globe’s advice, what good is a cure if the cure isn’t even available? For the Globe to end with a piece of feel good yet totally impractical advice is irresponsible and the Globe is merely presenting virtual falsehoods to justify the title of the article on grounds that are anything but valid and do nothing to support the Globe’s false hypothesis that “Flaherty's trust tax not so scary after all”.

Ask yourself, what proportion of Canadians holding income trusts in their RRSP after a lifetime of saving for retirement using the only retirement savings vehicle available to them have the means to deal with a situation that was cast down upon them BY THE GOVERNMENT, have the cash wherewithal to move these trusts out of their RRSP and into their cash account? My guess would be between 0 to 1%, with zero being the most likely answer.

The other question is, why would the government create a set of conditions where it became more tax favorable/neutral to hold income trusts outside one’s RRSP than inside one’s RRSP when income trusts are the PERFECT retirement income savings investment vehicle and RRSPs (at the time) were the only retirement savings vehicle and remain Canada’s main retirement savings vehicle? It was as if the government was out to sabotage Canadians who were prudently saving for retirement, which WAS the governments sole goal, believe it or not The Government is punishing people for doing the sound and prudent thing, and forcing them to do what is otherwise completely irrational and at the same time virtually impossible. Meanwhile pension funds are able to avoid this dilemma and form of tax punishment, which is grossly unfair on so many fronts, especially since RRSPs were conceived of by a Liberal government in 1957 to create a level playing field, that is now being made grossly unlevel by double taxing income trusts in RRSP, but not pension funds.

The advice to move income trusts from ones RRSP to one’s cash account, in order to be left in an otherwise income trust tax neutral position was EXACTLY the foundation for my idea to create the Marshall Savings Plan, back when I first came up with the idea in a blog entitled “The Jim Flaherty Savings Plan” back on May 9, 2009 . I realized then exactly what Larry MacDonald is writing about in the Globe today, but I also realized that what Larry MacDonald is advocating in the Globe today is only valid in theory and not in practice, since its advice that 99% of those who have been screwed by the scary Jim Flaherty tax can’t use, as they ind themselves in Flaherty’s impossible BLIND TRAP and no cash with which to exit from that blind trap.

The wonder drug solution that the Globe is advocating is not available without the introduction of the Marshall Savings Plan, as it is now more properly known, since the idea of Jim Flaherty coming up with a solution to his massive income trust fiasco is as probable as his ever apologizing for it, as utterly worthless as any such apology would be.

The Marshall Savings Plan overcomes what is fundamentally flawed with the Globe’s advice since the Marshall Savings Plan provides the MEANS by which people can move their income trusts from their RRSPs into what (from the government’s perspective) is the equivalent of a “cash account”, since the tax collection from trusts within a Marshall Savings Plan will be EXACTLY the same as if those trusts were held in a cash account. Voila! Problem solved.

Therefore, had the Globe written an article entitled “Flaherty's trust tax not so scary after all” that was all about the Marshall Savings Plan, then that title would have been valid. But as things stand right now, that article is completely MISLEADING and the article was all about buying the government false cover for its massive error the article and was simply an exercise in advancing quack medical advice advocating solutions that, in effect, do not exist, for all intents and purposes.

When will the Globe start reporting the truth on income trusts and the real truth about this disastrous policy, and inform their readers about REAL solution like the “brilliant” Marshall Savings Plan that is endorsed by 79.6% of Canadians, according to Environics Research?

1 comment:

Dr Mike said...

Now let me get this straight , I need cash in my cash account to swap for my trusts in my RRSP account.

That means I will cash-in the trusts in my cash account which are making 10% (this of course has tax implications.
) , move the cash into my RRSP account in order to take-out the trusts in there that are making 10% .

I ,in return buy a interest bearing issue to avoid the double taxation -- I can find those at 1.0-5% depending on the risk.

I now am the proud owner of a 6-9% loss of return each month.

Now why didn`t I think of that.

Fracking Idiots.

Dr Mike Popovich