Conservatives Plans News Tax on Trusts

[geoffrey]

Some Bay Street lawyers came out to Calgary, said "Income Trusts are the latest deal to avoid taxes" and then charged hefty commissions to set them up for you.

Be happy that an honest Torontonian son of a tax accountant put a stop to the scam before you lost more.

Don't get me wrong. Corporate tax is increasingly uncollectible and will soon be non-existent. But Income Trusts are not the way to cut corporate taxes, and anyone who believed otherwise was naive, greedy or probably both.

Albertans are among the maddest about this change because so many of the oil companies were income trusts. They feel that they are a lot poorer today than they were yesterday. Last time they felt this betrayed, they started a new right wing party.

I'll address you both in one swoop.

August: What's your point? You want to eliminate corporate taxation. Me too. Why not encourage the Income trusts model? What do you have against it? Perhaps because oil companies were successful with it? Along with your carbon tax, this will pay dividends (no pun intended) back to ol' Quebec. And that's essientially what this is about. Take away any part of the Alberta advantage. Nothing was preventing Quebec or Ontario companies from conversion.

jdobbin: And rightfully so. Income trusts were fueling a large part of the exploration outside of the oilsands.

There is a reason why companies can't add unrealized gains in share valuation to their asset base. The losses were gains in share value more than anything else.

That has nothing to do with anything at hand.

Those Alberta execs are going to accept it. How are they going to give the Conservatives 'what they have coming'?

Like they did when they supported the Reform movement and the Alliance.

People forgot that income trusts was always considered a risky option. If you wanted safe and secure take your T-bill rates and be happy. You go chasing the higher returns you take on higher risk.

If the CPC didn't outright lie to us, maybe we would have had more a chance.

Kennedy-lead Liberals winning a couple of seats in Edmonton? Hmmm, there are only two seats in the Province that the Conservatives won by less than 15 points in January. But that would swing because of Gerrard Kennedy???

And how much money Albertans lost.

Don't kid yourself about the effect this will have on the Conservatives in Alberta. The Conseratives have tons of cash. They are still running far ahead of the Liberals in fundraising. There is only one seat in the entire province that they aren't guaranteed to win by at least 10 points in the spring.

Mulroney was in a similar state...

[blueblood]

All i can say about these income trusts is welcome to hell with the farmers and logging outfits, yes it sucks here but if you can tighten up your purse strings and make wiser investments, you can make the best of it too.

[Riverwind]

All you Albertans who are so convinced that the move to tax trusts screws Albertans should look at this:

http://www.theglobeandmail.com/servlet/sto...Story/Business/

Alberta minister pushes a trust tax

Calgary and Ottawa — Alberta is considering its own levy on income trusts -- as soon as next year -- to stanch the outflow of tax dollars from the oil patch, a senior cabinet minister says.

Greg Melchin, Alberta's Energy Minister and its former revenue minister, says the provincial government is concerned about the gap between the taxation of corporations and trusts, including the effect on the province's tax base.

IOW - Alberta's _Conservative_ finance minster believed that income trusts put Alberta at a disadvantage because the trusts were in Alberta but the unit holders were in Ontario. This meant that Ontario got to collect all of the provincial income tax on trust distributions.

[geoffrey]

All i can say about these income trusts is welcome to hell with the farmers and logging outfits, yes it sucks here but if you can tighten up your purse strings and make wiser investments, you can make the best of it too.

It was a wise investment. The government had guarnteed they wouldn't touch them. Harper's bald-faced lie cost me money, that's a massive issue with me.

I was lucky, I only lost about 5% of my investments yesterday... out of a year of about 22% return (yes, it's been a solidly amazing year). I can't imagine how those seniors relying on those payments are feeling now.

Some may have to go back to work.

[geoffrey]

All you Albertans who are so convinced that the move to tax trusts screws Albertans should look at this:

http://www.theglobeandmail.com/servlet/sto...Story/Business/

Alberta minister pushes a trust tax

Calgary and Ottawa — Alberta is considering its own levy on income trusts -- as soon as next year -- to stanch the outflow of tax dollars from the oil patch, a senior cabinet minister says.

Greg Melchin, Alberta's Energy Minister and its former revenue minister, says the provincial government is concerned about the gap between the taxation of corporations and trusts, including the effect on the province's tax base.

IOW - Alberta's _Conservative_ finance minster believed that income trusts put Alberta at a disadvantage because the trusts were in Alberta but the unit holders were in Ontario. This meant that Ontario got to collect all of the provincial income tax on trust distributions.

Thanks for the post River, it's informative.

My whole point is that income trusts were the beginning of the end of corporate taxation... which would be an amazing thing for Canadians and our lagging productivity. The CPC pushed that concept back and we're back to our outdated tax system. The reason Canada was the world leader in income trusts is because our tax regime is so oppressive to investment.

I'm worried about all the investment that fled Alberta and Canada because of this decision... and it was alot. Harper didn't consider that, or, if he did, he's not competent to make such choices. Jim should have known better.

Alberta won, we got more investment. Ontario won, their seniors could eat.

[Ricki Bobbi]

There is a reason why companies can't add unrealized gains in share valuation to their asset base. The losses were gains in share value more than anything else.

That has nothing to do with anything at hand.

Why not? The only people who lost 'real' money in this were the greedy buggers who took out loans to try and take advantage of the income trust loophole. Losing unrecognized gains in share valuation is a matter of personal choice. Those people gambled the value of their income trust units wouldn't go down. The value went down.

Those Alberta execs are going to accept it. How are they going to give the Conservatives 'what they have coming'?

Like they did when they supported the Reform movement and the Alliance.

Under the old financing laws when Francis Winspear alone gave millions of dollars to the Reform Party the power of a small group of wealthy backers was much stronger. Tougher to have as much of an effect now.

People forgot that income trusts was always considered a risky option. If you wanted safe and secure take your T-bill rates and be happy. You go chasing the higher returns you take on higher risk.

If the CPC didn't outright lie to us, maybe we would have had more a chance.

When Harper made that promise did you honestly foresee that stampede to converting to income trusts? BCE? Telus? The situation changed. A good leader deals with the hand he is dealt. It didn't make sense for Canada to keep the promise.

Kennedy-lead Liberals winning a couple of seats in Edmonton? Hmmm, there are only two seats in the Province that the Conservatives won by less than 15 points in January. But that would swing because of Gerrard Kennedy???

And how much money Albertans lost.

Your going to have to provide more support than that. As someone who has supported the Conservatives in the past, but won't because of this one decision, who will you support now? Even in the two close edmonton ridings you would have to see one out of every five Conservative supporters all decide to back the second place party in that riding to punish the Conservatives for income trust. Everywhere else in the province it jumpst to one in four or one in three.

Don't kid yourself about the effect this will have on the Conservatives in Alberta. The Conseratives have tons of cash. They are still running far ahead of the Liberals in fundraising. There is only one seat in the entire province that they aren't guaranteed to win by at least 10 points in the spring.

Mulroney was in a similar state...

Don't kid yourself. The CF-18 maintenance contract was a far different deal. A western company lost out on the contract, despite a more technically sound and cost effective bid to a Quebec company. Pure politics and favouritism. Tapped into a lot of deep-seated resentment of Quebec here in Alberta.

Who were the Conservatives favouring with this decision? What is the deep-seated resentment they are going to tap into? There isn't even a further right wing party for people to vote for. Say what you will but there will be no dire consequences for the Conservatives.

[August1991]

Albertans are among the maddest about this change because so many of the oil companies were income trusts. They feel that they are a lot poorer today than they were yesterday. Last time they felt this betrayed, they started a new right wing party.

Dobbin, as a Liberal, don't confuse hope and practice, symbol and reality.

The Tories are not about to divide.

IMHO, Albertans don't create new political parties because of a potential future tax (2011) on obscure saving instruments (income trusts). Albertans create a federal political party when Quebec/Ontario tries to get a better deal (Meech Lake/Charter).

"new right wing party"? You don't understand Canadian politics. It's not ideological. It's regional. What kind of Liberal are you Dobbin?

[Riverwind]

I was lucky, I only lost about 5% of my investments yesterday... out of a year of about 22% return (yes, it's been a solidly amazing year). I can't imagine how those seniors relying on those payments are feeling now.

The gov't should bring in something like the dividend tax credit for trust income. This will mean that seniors living on trust income will see their after tax income stay the same even if the trust distributions are lower. The only people who really lose money from this change are people that bought trusts for captital appreciation (a really dumb investment decision at the best of times) and people who hold trust units in RRSPs which means they cannot benefit from the tax credits.

[Ricki Bobbi]

Completely agreed August.

Or Albertans created a new party when Quebec gets preferential treatment. (Cough cough CF-18 contract.)

The ideology/regional question is a little tougher. Albeerta's are more conservative than most of the rest of the country. That's a fact. So is the CPC being strongest out here due to regionalism or ideology? Remember the CPC isn't as strong to the West of us ***OR*** to the East of us.

[geoffrey]

Why not? The only people who lost 'real' money in this were the greedy buggers who took out loans to try and take advantage of the income trust loophole. Losing unrecognized gains in share valuation is a matter of personal choice. Those people gambled the value of their income trust units wouldn't go down. The value went down.

I see what your saying. But your a little wrong. I will have a definite loss upon any sale of my trust units (I've only sold a couple, waiting for things to balance). If you can lose with a loan, you can lose with your own moola too.

You don't think Harpers assurance that he wouldn't move on Trusts should have been believed? Destroying investor confidence in a government's policy is a very very dangerous path to go down. Investors like certainty, they like a government that does what it says, not a 180 degree about face and a kick in the pants.

Under the old financing laws when Francis Winspear alone gave millions of dollars to the Reform Party the power of a small group of wealthy backers was much stronger. Tougher to have as much of an effect now.

You've got a point. Maybe that was the plan all along with the Accountability Act. It does destroy the Liberals greatly, but it also prevents Reform II. Smart move.

When Harper made that promise did you honestly foresee that stampede to converting to income trusts? BCE? Telus? The situation changed. A good leader deals with the hand he is dealt. It didn't make sense for Canada to keep the promise.

Then block those deals. Make it impossible for new Trusts. Don't tank the market and RRSP/Pension savings from some extremely suprising announcement.

Your going to have to provide more support than that. As someone who has supported the Conservatives in the past, but won't because of this one decision, who will you support now? Even in the two close edmonton ridings you would have to see one out of every five Conservative supporters all decide to back the second place party in that riding to punish the Conservatives for income trust. Everywhere else in the province it jumpst to one in four or one in three.

I'd vote for Reform II... one out of five? What candidate do you want to give me for the Liberals? I feel like this might be a Rhino party year for me.

Any reasonable semi-conservative alternative looks real good right now.

Don't kid yourself. The CF-18 maintenance contract was a far different deal. A western company lost out on the contract, despite a more technically sound and cost effective bid to a Quebec company. Pure politics and favouritism. Tapped into a lot of deep-seated resentment of Quebec here in Alberta.

And this deal isn't?!!? This is about hundreds of western companies getting the boot, unexpectedly.

Who were the Conservatives favouring with this decision? What is the deep-seated resentment they are going to tap into? There isn't even a further right wing party for people to vote for. Say what you will but there will be no dire consequences for the Conservatives.

Eastern companies that haven't been so interested in income trusts and were losing investors to the much more greener pastures out west.

[B. Max]

This isn't going to hurt the Conservatives that badly.

Yeah if they can pick up about 28 seats in Quebec. To live in this country you have to be able to carry six knifes. One in each hand and four in the back.

[geoffrey]

The gov't should bring in something like the dividend tax credit for trust income. This will mean that seniors living on trust income will see their after tax income stay the same even if the trust distributions are lower.

That'd be nice. But this is a tax grab, not a solution. We'd be getting more money if this was a real tax fairness plan. Instead the government is the big winner here, meaning we all lost huge.

The only people who really lose money from this change are people that bought trusts for captital appreciation (a really dumb investment decision at the best of times)

Umm... yes and no. Holding trust units for capital appreciation is dumb I agree. But if I bought, say Penn West Energy Trust a few months back at $40/unit, and now I can't dump it for $35. That's going to be a loss when I sell. And I didn't buy it for capital appreciation, just the disbursments, which are now going to be considerably lower. That sucks. I invested heavy into income trusts upon the CPC winning... Harper was the man to protect my investments, or so he lied.

and people who hold trust units in RRSPs which means they cannot benefit from the tax credits.

Which is many people, myself included. Have a pension?

[August1991]

Yeah if they can pick up about 28 seats in Quebec. To live in this country you have to be able to carry six knifes. One in each hand and four in the back.

B. Max, brilliant.

I'm going to copy that on my Quebec forum.

I'm still laughing.

[Riverwind]

Which is many people, myself included. Have a pension?

I used to have a bunch of trusts in my RRSP but I got rid of them in 2003 because I thought they were a fad that was going to get clobbered eventually. I did not expect that the gov't would be the one doing the clobbering I just looked at the returns of 12-15% and figured they were too good to last forever. That said, I have friends and family whose portfolios dropped 20% this week.

[geoffrey]

Which is many people, myself included. Have a pension?

I used to have a bunch of trusts in my RRSP but I got rid of them in 2003 because I thought they were a fad that was going to get clobbered eventually. I did not expect the gov't to the one that would do the clobbering I just looked at the returns of 12-15% and figured they were too good to last forever. That said, I have friends and family whose portfolios dropped 20% this week.

It's a big deal... it wasn't supposed to be a gamble though River, that's the issue. Income trusts weren't supposed to be touched.

If this were some ultra-high risk venture, ok, too bad you lost. But when a party promises not to touch income trusts (a considerble promise) and 8 months later costs millions of Canadians millions of dollars by breaking it?

Please. I couldn't vote CPC with a clear conscience of all the seniors suffering because of this let alone my own losses.

[Ricki Bobbi]

Please. I couldn't vote CPC with a clear conscience of all the seniors suffering because of this let alone my own losses.

The income-splitting change will help a lot of seniors.

So who are you going to support now?

[geoffrey]

Please. I couldn't vote CPC with a clear conscience of all the seniors suffering because of this let alone my own losses.

The income-splitting change will help a lot of seniors.

So who are you going to support now?

That's a decision I'll have to make. But it won't be the CPC. Which is really unfortunate, so much potential squandered. A PM from my riding, let alone Alberta is alot. But ya, can't support someone who's lies cost me considerable money.

[Riverwind]

That's a decision I'll have to make. But it won't be the CPC. Which is really unfortunate, so much potential squandered. A PM from my riding, let alone Alberta is alot. But ya, can't support someone who's lies cost me considerable money.

This reminds me of the 1993 election. The Liberals went around the country telling people that they would 'replace' the GST. I voted for them fully expecting that they would do the responsible thing and break that promise. I would not have voted for them if I believed they would have actually tried to keep the GST promise. I realize that sounds ridiculous but that is the reality - anyone expecting politicians to keep all of their promises is going to be disappointed. At the end of the day you have to judge a gov't based on its overall performance - not a single issue or a broken promise. On the whole, I think Harper and his team have done a pretty good job and they are currently the only crew that can hope to keep the Rae and Iggy show out of Sussex Dr.

[gc1765]

That's a decision I'll have to make. But it won't be the CPC. Which is really unfortunate, so much potential squandered. A PM from my riding, let alone Alberta is alot. But ya, can't support someone who's lies cost me considerable money.

If the liberals are smart and elect Kennedy as their leader, maybe you could join the dark side

[Ricki Bobbi]

That's a decision I'll have to make. But it won't be the CPC. Which is really unfortunate, so much potential squandered. A PM from my riding, let alone Alberta is alot. But ya, can't support someone who's lies cost me considerable money.

And unless you vote Conservative you can't support someone who will make you better off financially.

Did you really base your vote on this one promise?

*If* the Liberals had won do you honestly think they wouldn't have changed course on income trusts?

I understand you are upset by the situation, but you are really overstating things.

You also didn't ignored the point on seniors. The changes to the income splitting rules will help far more seniors than were hurt by income trusts. It will also relieve a lot of the income trust pain.

Is your conscience really being effected by the effect on seniors?

[geoffrey]

At the end of the day you have to judge a gov't based on its overall performance - not a single issue or a broken promise. On the whole, I think Harper and his team have done a pretty good job and they are currently the only crew that can hope to keep the Rae and Iggy show out of Sussex Dr.

That's a pretty big ideological shift too though. The government is collecting more tax as of 2011 (and now because BCE and Telus won't convert). More tax isn't a conservative value. Complication and special deductions aren't things conservatives add to the tax system.

I can promise I will never cast a ballot in favour of either Rae or Iggy. My vote is rather worthless in Harper's riding, but may be a better indicator of people in my boat, the strong fiscal conservatives, that can't accept a party that raises taxes.

Did you really base your vote on this one promise?

Nope, but I did base it on an ideology that is no longer being followed. Tax hikes aren't something I'll touch, ever.

*If* the Liberals had won do you honestly think they wouldn't have changed course on income trusts?

I'm not supporting the Liberals.

I understand you are upset by the situation, but you are really overstating things.

It's not an emotional upset type situation. I didn't vote for the CPC based on income trusts. I didn't even own many before their election. When they were elected, they did so promising trusts wouldn't be touched. I, and many people, again, especially seniors, dumped some money into them based on this promise.

This isn't a tax hike that will slow the economy and cost ya 2% across the board. This is 15%!!!! This is the destruction of portfolios. Do you have any idea what 15% means to someone about to retire? It means another 5 years of work, at least.

If the CPC did this, it would draw my protest but not my abandonment of the party. The fact that they made a commitment to vunerable people and then drew back on that to raise revenues is incomprehendable. That's why I'm unsatisfied with this party and it's direction. Harper should have had the ethics to handle the situation better.

You also didn't ignored the point on seniors. The changes to the income splitting rules will help far more seniors than were hurt by income trusts. It will also relieve a lot of the income trust pain.

Is your conscience really being effected by the effect on seniors?

No, but I wouldn't vote for a party that so recklessly endangered people's life savings. I'm a young guy, what do I care about retirement right now? Nothing. But I see alot of people working into their later years, driving school buses or delivering papers, to pay the bills. The message we should be sending them isn't we're going to screw you out of whatever savings you've got... that's just ridiculous.

It's not about helping people, I'm not a happy helper Liberal. I'm a let people keep the damned money they've earned. These seniors made an investment choice based upon a clear promise. It was broken, they lost because their government can't be trusted to keep fiscal promises. Now the government gets to take a big bite, and the mysterious domain of lost unrecognized gains takes a chunk too.

[Ricki Bobbi]

No, but I wouldn't vote for a party that so recklessly endangered people's life savings. I'm a young guy, what do I care about retirement right now? Nothing. But I see alot of people working into their later years, driving school buses or delivering papers, to pay the bills. The message we should be sending them isn't we're going to screw you out of whatever savings you've got... that's just ridiculous.

You really are overstating the case. Take a look at the case of people forced to drive school buses or deliver news papers as a result of the changes to the tax code. Those people would definitely be among the lowest quartile of seniors in terms of savings and income.

The increase in the age credit and tax splitting will have a lot more positive effects on those people than their loss of income from income trusts.

[geoffrey]

No, but I wouldn't vote for a party that so recklessly endangered people's life savings. I'm a young guy, what do I care about retirement right now? Nothing. But I see alot of people working into their later years, driving school buses or delivering papers, to pay the bills. The message we should be sending them isn't we're going to screw you out of whatever savings you've got... that's just ridiculous.

You really are overstating the case. Take a look at the case of people forced to drive school buses or deliver news papers as a result of the changes to the tax code. Those people would definitely be among the lowest quartile of seniors in terms of savings and income.

The increase in the age credit and tax splitting will have a lot more positive effects on those people than their loss of income from income trusts.

I disagree unfortunately RB. The portfolio losses were too great, if your making less money, that tax break is less as well.

The big sad part though again is this ideological shift away from the fiscal conservativism towards a tax hike. Ouch. Even a little tax hike is a horrible thing, taxes should only be cut.

$13b in surplus? The Tories could have let this slide.

[Riverwind]

$13b in surplus? The Tories could have let this slide.

Geoffry - they couldn' let it slide because virtually every profitable corporation in the country was thinking of converting. The only other option would have eliminated all corporate taxes in Canada which sounds like a good idea except if you eliminate corporate taxes you have to eliminate the dividend tax credit which would result in a large tax hike for many seniors that went the dividend route instead of the trust route for their pensions. IOW - they had to piss someone off because the status quo was unacceptable.

[geoffrey]

$13b in surplus? The Tories could have let this slide.

Geoffry - they couldn' let it slide because virtually every profitable corporation in the country was thinking of converting. The only other option would have eliminated all corporate taxes in Canada which sounds like a good idea except if you eliminate corporate taxes you have to eliminate the dividend tax credit which would result in a large tax hike for many seniors that went the dividend route instead of the trust route for their pensions. IOW - they had to piss someone off because the status quo was unacceptable.

Hmm... why not just cut the corporate taxes completely... how much does that cost? I don't know. $13b? Likely more. So cut a nice juicy chunk out of corporate taxes and match them to income trusts. 31.5% is a pretty ridiculous tax rate when all is said and done. Cut it to like 25... 22% and Harper may have my vote back. He'd need to slay alot of tax dragons to win it now. He already owes us $13b from this year.