Conclusion: Harper’s Budget fails to meet the three criteria laid down by Ignatieff

This budget should be approved or disapproved based on its own merit (or lack thereof), and not based on its secondary effects on the political fortunes of those in Ottawa. This budget is completely lacking in a vision for Canada, and represents nothing more than a hodge-podge of measures that meet certain political aims as opposed to any clear economic aims.

This budget should be rejected by the Liberals since it fails to robustly meet any one of the three criteria laid down by Michael Ignatieff, as follows;

(1) Protecting the most vulnerable in our society: A permanent tax break for those earning less than $80,000 is not protecting the most vulnerable in our society. Since when is $80,000 the threshold upon which to define “vulnerable”? Furthermore, it is deceitful of Flaherty to portray this as a tax cut for those earning less than $80,000, since those earning more than $80,000 will fully partake in this tax cut as well. The most vulnerable in our society are seniors and the unemployed. Giving seniors another $155 per year is a meaningless measure and the benefits extended to the unemployed in this budget are parsimonious in the extreme. Relaxing the rules on RRIFs will not cost the government $200 million as Flaherty claims. This calculation of this $200 million “cost”, is based on the same grossly flawed methodology used to create Flaherty’s bogus argument that income trusts cause tax leakage. Forced conversion of RRSPs into RRIFs serves no senior’s purpose except the life insurance companies as a captive market for their life annuity product.

(2) Protecting the jobs of today. I fail to see where the jobs of today are being protected in this budget, unless perhaps you work at Home Depot, and your job has been extended by another 13 months under the 15% tax credit for home renovations and building products. I guess it pays to be the CEO of Home Depot Canada and to be appointed to Flaherty’s Economic Advisory Council just in time for the budget. How much of the $85 billion of deficit that this budget will create is being dedicated to protecting the jobs of today? Harper fails to put a number of how many jobs of today are being protected by this budget? Canadians must take it on faith, how many jobs of today are being protected. Faith is not something that should be extended to Stephen Harper, given his past record of faith breaking.

(3) Creating the jobs of tomorrow. To the extent that this budget fails to meet Ignatieff’s criteria of protecting the jobs of today, this budget fails even more miserably at creating the jobs of tomorrow. This is the portion of the budget that requires a vision of where Canada should be headed and in what sectors Canada is best able to compete in creating well paying sustainable jobs for the future. Having such a vision requires leadership, that Harper has again failed to demonstrate. This is the part of the budget where government could begin charting the course for Canada’s involvement in new areas of economic activity. I see nothing in this $85 billion budget that is devoted to creating the jobs of tomorrow. As with (2) above, Harper fails to put a number in how many jobs of tomorrow are being created by this budget?

Based on Michael Ignatieff’s own criteria for evaluating the budget, this budget should be rejected by the Liberals. Approval of this budget by the Liberals will, on the other hand, require that the Liberals answer the question that Harper has failed to do, which is am explanation to Canadians of how the Liberals feel this budget will meet their self imposed criteria?

Even though Harper has failed to set targets for what his budget will achieve, that does not absolve the Liberals from the same exercise. If the Liberals approve this budget, it must be with some expectation about what the budget will achieve. What expectations are either implicit or explicit in the Liberal’s approval of this budget, since Harper has failed to disclose his expectations, apart from the cost side of what properly should be a cost-benefit analysis. What are the benefits as defined by Harper, or by the Liberals if they approve this budget?

After all, when was the last time you spent $85 billion on a budget, without any expectation or assurances by its architects of what those expenditures would achieve?

A budget without targets, is no budget at all

This budget will see Canada with at least $85 billion of increased indebtedness in four years’ time. That much is clear. Meanwhile this budget is completely lacking in setting out any of the objectives that it hopes to accomplish. Measurable objectives. Precisely how many jobs is this budget promising to create? Without stated targets, this budget is simply an exercise in throwing money at a wall, and hoping it sticks. Without stated targets, it is impossible to hold the government to account. Without stated targets, how do Canadians know what they are investing in? $85 billion in increased indebtedness, with no tangible targets concerning employment etc. is nothing more than a very expensive “shot in the dark”.

Obama's stimulus package that's making its way through Congress has stated employment targets, why doesn't ours? Oh yeah. Obama is a leader. Stephen Harper is not.

The Liberals should not support a budget that is lacking in measurable targets. Doing so would be to leave Harper unaccountable for his actions.....and OUR money.

Reminder: Carolyn Bennett is looking for budget input

My response to my MP, Carolyn Bennett:

Required Liberal Action: The Budget MUST contain a reversal of the income trust tax. Michael Ignatieff is telling us that “Canadians deserve the truth”. I totally agree, but these are merely words without action, if the Liberal party does not ACT NOW to reverse this income trust tax that was based on ZERO PROOF of alleged tax leakage. We know that argument is false. Time for the Liberals to call Harper’s bluff. Canadians’ retirement savings have been stolen, and their retirement income is being destroyed. Meanwhile all taxpayers are paying the price, because the $108 billion of trust tax related takeovers, is causing the loss of REAL taxes, of $1.2 billion PER YEAR. Left unaddressed, this number will rise to $7.5 billion PER YEAR!

Brent Fullard
St. Paul's

Ignatieff equates income trust tax to Harper's version of the National Energy Program

Click on advertisement to enlarge

Ignatieff appeared in Peter Mansbridge’s One on One this weekend. The topic came up about the income trust tax, which Ignatieff said the energy companies in Alberta are still very much reeling from. Igantieff went on to say that the income trust vehicle is/was a CRUCIAL investment vehicle in Canada’s energy sector. He made the comparison to the NEP.

You can view the show here, where the comment appears at the mid point of the interview:

http://www.cbc.ca/mansbridge/archives.html

Well, at least the Throne Speech proved itself "shovel ready"

Stephen Harper sure knows how to shovel it, don't you think? How disingenuous can one's present words and past actions be?

Honourable Senators,
Members of the House of Commons,
Ladies and gentlemen,

In these uncertain times, when the world is threatened by a struggling economy, it is imperative that we work together, that we stand beside one another and that we strive for greater solidarity.

Today, in our democratic tradition, Canadians expect that their elected representatives will dedicate their efforts to ensure that Canada emerges stronger from this serious economic crisis.

Once again, the people's representatives have gathered to consider the priorities of another parliamentary session.

Each Throne Speech is a milestone on the remarkable 142-year Canadian journey. Your predecessors, too, were summoned to this chamber at times of great crisis: as Canada struggled to claim her independence, in the shadow of war, during the depth of the Great Depression and at moments when great policy division tugged the very bonds of this union.

Today we meet at a time of unprecedented economic uncertainty. The global credit crunch has dragged the world economy into a crisis whose pull we cannot escape. The nations of the world are grappling with challenges that Canada can address but not avoid.

Flaherty recants on " I cannot and will not fund today's programs from tomorrow's revenues"

In an attempt to justify his income trust tax, Flaherty argued he was losing taxes by saying that the taxes paid by the 38% of trusts held in RRSPs were of no value to him, because he “couldn’t fund today’s social programs with tomorrow’s tax dollars”. Now this same person is about to engage in $64 billion of deficit spending!!!!.....which is simply a case of funding today’s social programs with tomorrow’s tax dollars.....creating a debt burden for our children to bear.

Did it not occur to Flaherty (at the very least?), that not all of Canada’s budgetary expenditures are incurred today, and that things like government borrowing create streams of interest payment obligations that could be funded by these stream of ongoing tax payments from income trusts held in RRSPs?.......had Flaherty not been so foolish as to kill the golden goose? The golden goose for government tax revenues and the golden goose for people, unlike him, faced with the huge task of providing income for retirement.

This week's Hill Times article: Harper and the taxation of income trusts

For the record: Harper and the taxation of income trust
A look at PM Stephen Harper’s defence of his reversal on income trusts.
THE HILL TIMES, MONDAY, JANUARY 26, 2009 15

By W.T. STANBURY

Politics is conducted in a dynamic world.Memories are imperfect—even for policy actions that resulted in a massive “train wreck,”( see The Hill Times, Sept. 22, 2008, p.12). My purpose is to provide a documented record of the Conservative Party’s promises concerning the taxation of income trusts prior to the Jan. 23, 2006 election, the reversal of its promises less than nine months after coming to power, and Stephen Harper’s defence of his reversal in Question Period.

The Conservatives’ promises:

Sept. 29, 2005: “Why does he [Liberal finance minister Ralph Goodale ] 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, Sept. 29, 2005).

Oct. 3, 2005: “The feds are bent on raiding the nest eggs of seniors …. Changing the tax rules late in the game is mean, mean, mean. Our plans propose leaving seniors’ savings alone and helping thoseon fixed incomes.” (Stockwell Day, Penticton
Herald, Oct. 3, 2005).

Oct. 26, 2005: Opposition and Conservative Party leader Stephen Harper had an op-ed in the National Post, (p.A20). The key passages were as follows:

“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 [Liberal] 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.’...It’s time to stand up to Paul Martin and stop his attack on seniors and investors.”

Dec. 2, 2005: Less than a week into the general election campaign, and after the minister of finance had announced on Nov. 23, 2005, that he was suspending the public consultation process regarding income trusts, and had proposed an enriched tax credit for
dividends (as opposed to a tax on income trusts), Stephen Harper said the following on Global TV: “They [the Liberals] showed us about their attitudes towards raiding seniors’ hard-earned assets, and a Conservative government will never allow either of these parties [referring to the NDP which wanted to tax income trusts] to get away with that.”

Dec. 9, 2005: “Only the Conservatives will give seniors security by pledging to levy no new taxes on income trusts.” (Conservative Party of Canada, Issue Backgrounder, “Security for Seniors,” Dec. 9, 2005).

Jan.12, 2006: “A Conservative government will ... preserve income trusts by not imposing any new taxes on them,” (Conservative Party of Canada 2006 Platform: “Stand Up for Canada,” Jan 12. 2006, p. 32).Jan. 13, 2006: “… we will … help them [seniors] benefit from their own savingsand not monkey around with their income trusts,” (Stephen Harper, Campaign Speech in Oakville, Jan. 13, 2006).

The Actions:

On the evening of October 31, 2006—without any public consultation—Finance Minister Jim Flaherty announced a 31.5 per cent tax on the distributions of income trusts, effective in 2011 for existing trusts. Within a week, the market value of the income
trust index for the TSX fell by $35-billion. Harper’s justification: Prime Minister Stephen Harper’s personal defence or justification of his reversal of his promise on the taxation of income trusts in less than nine months—a promise that was said to have
contributed to his election as a minority government—had the following characteristics.

First, the PM responded to questions in the Commons on only two days, Nov. 1 and 2, 2006. Details are provided below. Thereafter, Harper left the task of responding to the opposition in Question Period to his Parliamentary secretary and the minister of finance.

Second, Harper’s defence of the new tax never mentioned the government’s assertion (later debunked) of “tax leakage” of $600-million in 2006—yet this was central in the justifications by Finance Minister Flaherty then and during the following year.

Third, Harper’s written public communications on the trust tax issue appear to have been limited to a generic email reply to persons who had emailed him criticizing his actions, and an email to all MPs in response to an email to all MPs by Brent Fullard, who later created and led the Canadian Association of Income Trust Investors. Mr. Fullard also ran unsuccessfully against Mr. Flaherty in the last election.

For the record, I quote the (edited) exchanges in Question Period involving the PM. Here are those on Nov. 1, 2006.

Liberal MP Bill Graham: “...in his election platform, the Prime Minister stated, ‘A Conservative government will preserve income trusts by not imposing any new taxes.’ Canadians who voted for the Prime Minister did so based on a deception... Why did he engage in a deception of such monumental and costly proportions to all Canadians?”

Prime Minister Harper: “… let us be absolutely clear. The commitment of this party was not that we would have no taxes for Telus. It was not that we would have no taxes for BCE. [Recall that the announcement by Telus Corp. on Sept. 11, 2006 that it planned to convert to an income trust, and a similar announcement by BCE Inc. on Oct. 11, 2006 were repeatedly said by the finance minister to be important events precipitating the trust tax.] It was not that we would have no taxes for foreign investors, or no taxes for major corporations. It was a commitment to protect the income of seniors. The minister of finance has brought in an age credit [part of the so-called “tax fairness plan” of Oct. 31, 2006, but worth only $155 per year]. He has brought in pension-splitting [benefiting only 15 per cent of seniors—also announced on Oct. 31]. He is imposing fair taxes on the corporate community. I challenge the Liberal Party to support those things.”

Mr. Graham: “Mr. Speaker, that is not what he said in the election…..He gave his word, Canadians acted on his word. He then broke his word.”

Mr. Harper: “Contrary to what the leader of the opposition says, lots has changed with income trusts in the past year, including tax holidays for major corporations. [It is not clear to what the PM was referring], which this government does not and will not support.

Mr. Graham: “…The Prime Minister said…over and over again that he would preserve income trusts and that he would never impose new taxes on them... How can he justify the losses caused by his false promises?”

Mr. Harper: “... the Leader of the Opposition and his party have a choice. They should support income splitting for pensioners, they should support higher income for seniors and they should support fair taxes for large corporations. It is up to them.”

On Nov. 2, 2006, the PM was involved in the following exchanges:

Mr. Graham:…“Will the Prime Minister apologize to Canadians for the false promises he made during the election campaign?”

Mr. Harper: “The Government of Canada has responded to market changes that would have resulted in big corporations in this country paying no tax, while individuals paid more. ... I should add that I fail to understand why the Liberal Party of Canada supports a zero taxation rate for big corporations [this is not true] and is opposed to tax cuts for seniors.

Mr. Graham: “... This is not about corporations. It is about Canadians from all walks of life who have lost their savings....It is about Canadians on main street who feel cheated... Will the Prime Minister at least admit that he misled Canadians and
offer them an apology?”

Mr. Harper: “…everyone in this country knows that in the last few months what we have seen is the beginning of the conversion of major corporations to income trusts, which would have resulted in them paying no taxes whatsoever [this is simply not true] and which would have shifted the tax burden to ordinary Canadians. [This is also not true]. That is not fair. That is not what this government promised.”

Mr. Graham: “…We hear a lot from that party about accountability, but who over there is accountable to average Canadians who lost their money because of this Conservative double-cross? ...How does the Prime Minister explain his duplicity to those Canadians
who believed in him and have seen their money go up in smoke because he is now not willing to be accountable to them?”

Mr. Harper: “…if the Liberal Party had its way and corporate Canada paid no tax whatsoever, all of the tax burden would shift to ordinary people and senior citizens. That is why this government has acted... This government has given a four year window before these changes take effect so that people can make adjustment...”

Liberal MP Lucienne Robillard: “… the current circumstances are not any different from those of a year ago. The only thing that has changed is the minority Conservative government’s promises. The Prime Minister promised free rein to income trusts, and now
he acts surprised to see that so many companies availed themselves of it. Why does the Prime Minister not have the courage to say to Canadians that he made a promise, he broke it and he is sorry? It would be so easy to say.”

Mr. Harper: “… once again, this government will not apologize for trying to protect the interests of individuals and a tax system that makes big business pay its fair share.”

Conclusions:

One, Harper and other leaders of the Conservative Party very clearly and repeatedly, orally and in writing, promised Canadians that they would not tax income trusts.

Two, Harper’s defence of the huge trust tax involved a lie when he denied that that his party had promised not to tax income trusts.

Three, the PM made no substantive response to any of the questions posed to him. Instead, he attacked the Liberal Party and made false statements about its position on the taxation of corporations.

Four, Harper’s reversal of his promise and his defence of it are exactly this type of behaviour that leads citizens have such a poor opinion of politicians and accord them such a low level of trust (below that of car salespersons).

The Hill Times