Conservatives Plans News Tax on Trusts

normanchateau · November 1, 2006

I applaud Harper for taking a chance on this and the optics, as the income tax area was starting to create a problem and needed to be done for Canada's future economic health. Even when he does the right thing, he must know there would be howls from the liberals no matter what.

I too applaud Harper for taxing the trusts. Perhaps "the howls from the liberals" reflect the fact that Harper condemned the previous government for proposing to tax the trusts. Or perhaps "the howls from the liberals" reflect the fact that he promised not to tax the trusts.

geoffrey · November 1, 2006

Wow, seniors got $200/year in tax cuts. You realise they lose $315 dollars per $1000 in income trust revenue now? Great deal hey. This was a tax hike. The government has more money now, we have less. Our taxes went up, and your ok with that.

Geoffrey, that's not how your Finance links paints the picture.

By 2011-12, the pension splitting will mean a $820 million tax cut, the increased age credit a $400 million tax cut and 0.5% corporate reduction a $725 million cut.

These are offset by $400 million in increased corporate tax collections.

On balance, it's a tax cut - but largely for seniors.

The Finance link also paints the picture as though the 'average' Canadian won't be affected by the move.

We are all seniors eventually, so that's fine that they are cutting their taxes. I'd have to look at income splitting further to see how much a difference it would really make. I honestly struggle with the concept that the government has more money and so will seniors. That means we're looking right in the face of some great income distribution or something.

MightyAC · November 1, 2006

I applaud Harper for taking a chance on this and the optics, as the income tax area was starting to create a problem and needed to be done for Canada's future economic health. Even when he does the right thing, he must know there would be howls from the liberals no matter what.

I too applaud Harper for taxing the trusts. Perhaps "the howls from the liberals" reflect the fact that Harper condemned the previous government for proposing to tax the trusts. Or perhaps "the howls from the liberals" reflect the fact that he promised not to tax the trusts.

Perhaps the howls come as a result of the great big lie.

geoffrey · November 1, 2006

I too applaud Harper for taxing the trusts. Perhaps "the howls from the liberals" reflect the fact that Harper condemned the previous government for proposing to tax the trusts. Or perhaps "the howls from the liberals" reflect the fact that he promised not to tax the trusts.

Perhaps the howls come as a result of the great big lie.

From me they are coming from losing a great deal of money overnight and having my taxes hiked after the government had a $13b surplus.

Higgly · November 1, 2006

By 2011-12, the pension splitting will mean a $820 million tax cut, the increased age credit a $400 million tax cut and 0.5% corporate reduction a $725 million cut.

Look at who's going to be retiring then. Largely the boomers, most of whom are living a double-income life. The husband works. The wife works. How does income splitting help them? I don't buy the Finance figures.

normanchateau · November 1, 2006

Perhaps the howls come as a result of the great big lie.

Which one?

August1991 · November 1, 2006

Look at who's going to be retiring then. Largely the boomers, most of whom are living a double-income life. The husband works. The wife works. How does income splitting help them? I don't buy the Finance figures.

If one spouse has a high income (and/or a generous pension) while the other working spouse does not, then income splitting is beneficial.

As to the Finance numbers, bear in mind that current income trusts are grandfathered and the new rules only kick in in four years.

But I agree Higgly, this policy is a gift to retirees and soon-to-be retirees. Everyone else is going to (relatively speaking) pick up the tab.

Topaz · November 1, 2006

I don't know how much support the Cons will get from business come election day. I've seen the list of business that have these funds and all nearly do. Canadians will be hit too on their profit incomes. I guess the war is going to cost more than they thought and the money going to have to come from somewhere!

theloniusfleabag · November 1, 2006

Dear August1991,

I don't like the tax relief accorded to senior citizens. They are already among the wealthiest group in our society. They pay less taxes, receive pension transfers and benefit enormously from our health system. But seniors also vote, and they tend to vote Tory.

I guess this answers your question of another thread "Do leftists eventually turn right?"....(and gives the reason!)

geoffrey,

It's a direct tax on the one thing left that was encouraging Canadians to save their money.

I was under the impression that both the gov't and the 'market' thought that saving money was a bad thing. If everyone saved, no one would be spending...bad for a consumer driven market. On the gov't side, saving means no spending, and that means no tax revenues...really bad for the gov't coffers.

scribblet · November 1, 2006

I don't fully understand all of this, apparantly $70 billion in new conversions, with the tipping point being trust conversion by Telus Corp. and BCE Inc.s this could have resulted in a loss of billions if big banks & large energy cos. followed suit

An analysis from Eric Reguly in today's Globe:

"Mr. Flaherty appears concerned about three things. The first is tax leakage, the second is national competitiveness (because trusts pay out almost all their profits, leaving little behind for reinvestment in the business), the third is tax balance. " don't forget the 'lost'revenues over a five-year period.

As Flaherty said "Things changed a great deal this year and we faced a situation where Canada was moving to an income trust economy. Is that a good thing for Canada?" he said at a news conference.

"The answer is no, it's a very bad thing for Canada, it's bad for the Canadian economy. We're concerned about competitiveness and productivity."

Obviously the situation changed so much in a year they had to look out for Canada's economy, and rethink the game plan, they must also realize the optics on all of this and did what they thought was best for the economy. The Liberals would howl no matter what they did anyway.

Smart move to allow income splitting of all senior's income as it gives some back to the shareholders. Personally I'm happy about that one.

normanchateau · November 1, 2006

I don't know how much support the Cons will get from business come election day.

Certainly they can write off the softwood lumber industry who continue to grumble about their betrayal by Harper to the U.S. lumber lobby.

Higgly · November 1, 2006

But I agree Higgly, this policy is a gift to retirees and soon-to-be retirees. Everyone else is going to (relatively speaking) pick up the tab.

You misunderstood me. But then given your other remarks on things financial, it is not surpising that you would. D'oh.

The only ones who will really be in a position to enjoy this gift will be the wealthy who could afford to have one spouse stay home. The average middle class family will retire on two income streams, and the benefit of splitting will be small. It is the middle class who look most to investment vehicles like this to generate income.

These are people who have carried a very heavy tax burden all their lives, have lived productive lives, raised children, what have you. You apparently would have them run with their noses to the grindstone right to the grave. Good luck with that.

Higgly · November 1, 2006

The only market where there'll be maybe a blip is in the market for Bay Street lawyers.

Well the trading day has come to an end and some $25 billion has been sliced off of the Canadian capital markets. That's some blip.

D'oh!

August1991 · November 1, 2006

The only market where there'll be maybe a blip is in the market for Bay Street lawyers.

Well the trading day has come to an end and some $25 billion has been sliced off of the Canadian capital markets. That's some blip.

D'oh!

If you're going to quote me, at least do it fully and in context.

But if that blip extends to the TSX, I'd say "who cares". A stock market should move on real changes, not regulatory changes.

The ones who are drowning their sorrows tonight are Bay Street lawyers. They've just lost some hefty - real - commissions.

----

Higgly, are you planning on becoming a journalist?

jdobbin · November 1, 2006

Tomorrow all hell is going to break loose on the stock market.
The only market where there'll be maybe a blip is in the market for Bay Street lawyers.
But if that blip extends to the TSX, I'd say "who cares". A stock market should move on real changes, not regulatory changes.

Actually, it looks like Alberta oil men are among the angriest at this change.

jdobbin · November 1, 2006

I can't find that in the platform as quoted, but I'm unimpressed by the policy none the less. I lost alot of money today, and the CPC may have lost my vote with it.

You're not the only Conservative I heard that from today. Some were absolutely livid with the Tories for breaking their electoral policy.

jdobbin · November 1, 2006

I fully expect those who reaped scorn on Goodale for causing the share valuews to evaporate will oon be taking aim at Flaherty...
.....unless of course it was really a partisan issue.......

I've been concerned about how the investment trusts made it more difficult for re-investing in the company but oil people have been saying it was important for oil investment. When Goodale made the decision not to touch the trusts, I thought he was probably afraid of alienating the west and seniors. I also thought that maybe he figured other tax money from sales tax would keep revenues from totally collapsing.

At ant rate, the Liberals got raked over the coals on this one and now the heat is fully on the CPC.

jdobbin · November 1, 2006

I applaud Harper for taking a chance on this and the optics, as the income tax area was starting to create a problem and needed to be done for Canada's future economic health. Even when he does the right thing, he must know there would be howls from the liberals no matter what.

The howls have been coming from Alberta all day as they shout betrayal.

Higgly · November 1, 2006

Higgly, are you planning on becoming a journalist?

Keep this in mind the next time you're tempted to compare me to Homer Simpson, August.

Higgly · November 1, 2006

I can't find that in the platform as quoted...

The Globe and Mail is quoting it here. See the part at the end titled "In Their Own Words."

Figleaf · November 2, 2006

The mystery here is what prompted the tories to cut their own throats. (Other than the obvious: they are tories.)

BubberMiley · November 2, 2006

The mystery here is what prompted the tories to cut their own throats. (Other than the obvious: they are tories.)

I guess, looking at the imminent Bell transfer, they decided to do what is best for the country, despite their ideology. The only cynical way I can look at is that they wanted to appear less ideological before the next election, in the hopes of securing a majority.

Ricki Bobbi · November 2, 2006

I guess, looking at the imminent Bell transfer, they decided to do what is best for the country, despite their ideology. The only cynical way I can look at is that they wanted to appear less ideological before the next election, in the hopes of securing a majority.

Best interest of the country ... sure. The income trust conversions were seriously hurting the treasury. They had to make a choice between that and no more tax cuts in other areas...

Timing is the big issue with this one. By doing it now it gives the party the chance to make it up to the voters they have alienated by the move.

Riverwind · November 2, 2006

Best interest of the country ... sure. The income trust conversions were seriously hurting the treasury. They had to make a choice between that and no more tax cuts in other areas...

The could have solved the problem another way - eliminate all taxes on corporations and eliminate the dividend tax credit and introduce all sorts of with-holding taxes to prevent income from be shifted out of the country without being taxed.

normanchateau · November 2, 2006

The mystery here is what prompted the tories to cut their own throats. (Other than the obvious: they are tories.)

I think they assumed that by throwing a couple of bones to seniors, it would defuse the outrage about the new tax on trusts. It worked for them on July 1st when they raised the income tax rate for those paying the lowest marginal rate while simultaneously reducing the GST by 1%. I doubt that they anticipated the outrage, especially from Alberta.

Not only did the TSX drop by almost 300 points, but the Canadian dollar declined by .90 points.

It makes one wonder whether Preston Manning knew something when he replaced Stephen Harper with Herb Grubel as senior finance critic. Stephen Harper was moved by Harper into the position of unity critic.

Grubel, who is now with the Fraser Institute, pointed out recently that an income tax cut would have been far more beneficial to the Canadian business community than a 1% drop in the GST.