Friday, January 30, 2009

Did Harper make undervalued Canadian Oil Sands a target of Exxon?


$5 billion Prime West Energy Trust was acquired by Abu Dhabi in 2007, because Harper's income trust tax left it undervalued and vulnerable. The net effect of which was a loss of significant tax revenue to Ottawa, and the further loss of sovereignty over Canada's energy sector.

Now Canada's largest income trust, Canadian Oil Sands, appears to be in the sights of Exxon (parent company of Imperial Oil), who are gushing with cash..

Way to go Harper, you economist know nothing, and Jack Layton, foreign takeover proponent. By the way, where is your proof of tax leakage from income trusts?


Canadian Oil Sands Trust a buy target?

Reuters  Published: Friday, January 30, 2009
Chris Schwarz/Canwest News Service

CALGARY, Alberta -- Shares of Canadian Oil Sands Trust. (T.COS.UN), the biggest shareholder in Syncrude Canada Ltd, rose as much as 5.7% on Friday, on rumors that the company could become an acquisition target.
Units of the trust, which holds a 37% stake in Syncrude, the world's biggest oil sands producer, rose 75 cents to $19.25 at 1 p.m. on the Toronto Stock Exchange. Earlier they touched $19.55.
The units have fallen 47% over the past 12 months.
Rumors have begun circulating that the company may be an acquisition target, with Imperial Oil Ltd, Syncrude's No. 2 shareholder, seen as a potential buyer for the trust, though analysts said the possibilities of such a deal for the $9.3-billion (US$7.5-billion) trust were remote.
"It would be stretch," said William Lacey, an analyst at FirstEnergy Capital. "Imperial is pushing ahead with Kearl, and they are pretty debt adverse."
Kearl is the company's $8-billion oil sands project
Gordon Wong, a spokesman for Imperial, Canada's biggest oil explorer and refiner, declined to comment on the speculation.
Analysts say investors may be looking for the next takeover target in Canada's oil sands following the unsolicited $617-million bid for UTS Energy Corp that French oil major Total SA launched earlier this week to grab a 20% stake in the Fort Hills oil sands project.
"UTS started the whole expectation of 'who's next?'," said Phil Skolnick, an analyst at Genuity Capital Markets.
The rise in Canadian Oil Sands units also came despite a big cut in the trust's quarterly payout to investors announced earlier this week. The trust cut its distribution to 15 cents from 75 cents because of falling oil prices.
© Thomson Reuters 2009

© 2008 The National Post Company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.

In lieu of flowers, please send a cheque payable to the Conservative Party of Canada


Never one to let an opportunity pass, this will, no doubt, prompt yet another letter from Doug Finlay of CON headquarters for another donation to this fruitless cause, called Conservatism.

THE END OF CANADIAN CONSERVATISM
Jan 29, 2009 by Andrew Coyne
MacLeans

Say what you like about the Tories: they don’t do things by halves. When they spend, they spend. When they go into debt, they do it $100 billion at a time. And when they decide to finish off what remains of conservatism in Canada—as a movement, as a philosophy—they go out with a bang.

We can safely say that the strategy of “incrementalism,” at least, is a thing of the past. With this week’s historic budget, the Conservatives’ already headlong retreat from principle has become a rout—a great final leap into the void. Understand: there will be no going back from this, for the party or for the country. Whatever the budget’s soothing talk of “temporary” this and “extraordinary” that, and for all its well-mannered charts showing spending obediently returning to its pen, deficits meekly subsiding, multi-billion-dollar “investments” repaid in full, we are in fact headed somewhere we have never been before. We are on course toward a massive and permanent increase in the size and scope of government: record spending, sky-high borrowing, and—ultimately, inevitably—higher taxes. And all this before the first of the baby boomers have had a chance to retire.

Whether it will prove the country’s undoing, and not just conservatives’, will depend upon events. In its simplest terms, the budget is a “stimulus package” that spills money every which way: $12 billion over two years for infrastructure; almost $8 billion meant to kick-start housing and construction; billions more in forestry, auto and manufacturing aid. The much feared broad-based income tax cuts amounted to lifting the income threshold for the middle and lower brackets. If everything the budget foretells comes to pass, we might not come out of it too badly. A $34-billion deficit next year, after all, is barely two per cent of GDP, and even four years and $85 billion worth of deficits, if the budget’s projections hold, would barely budge our debt-to-GDP ratio. But if they do not—if the economy fails to recover on cue; if inflation spikes when it does, and interest rates soon after; if all those billions in new spending, once in place, do not prove so easy to trim back; if the assets the government acquires with all of its borrowed money do not turn out to be worth what they cost—then we will head into the approaching demographic storm loaded down to the gunwales. It’s a monumental, even reckless gamble.

And whatever its likely consequences for the debt, its effect has already been to ratchet up expectations, to tilt the political landscape toward greater and greater interventionism, to change the very language in which we discuss these things. Again, this is unlikely to be easily reversed. Among the consequences of the end of conservatism will be to make it difficult, if not impossible, to muster a constituency even for restraining the growth of government, let alone rolling it back. When the “right” is defined as $34-billion deficits, record spending, and bailouts for everything in sight—when every other party is to the left of that—people lose the ability to think in any other way. They forget there was ever a contrary view.
Conservatives, then, should think hard about whether they can afford to support this government any longer. Its sole contribution at this point is to limit debate, to rule out of bounds any serious discussion of alternatives, since “even” a Conservative government now believes in an all-pervasive, ever-expanding state. The Conservative experiment—the whole enterprise of “uniting the right” in which conservatives have invested much of the past decade—has reached a dead end. They have not succeeded in replacing the Liberals. They have only succeeded in becoming them. Perhaps, some conservatives will conclude, it would be better if this government were defeated—if the party were to lose power, that it might find itself.

Start with matters that require no prediction, with the fiscal facts on the ground. The coming fiscal year, according to the budget’s own numbers, will see the largest annual increase in spending (with one arguable exception) since at least the Second World War. The $22 billion the Harper government will pile on top of program spending this year, adjusted for inflation and population growth, amounts to an increase of more than 10.1 per cent. That’s a larger rise, in real dollars per citizen, than anything the Trudeau governments ever mustered, even in the heady days of the early 1970s, when they were putting in place the institutions of the modern welfare state. (Its only possible rival is 2005, when spending increased by a similar amount—though its abrupt decline the following year suggests this was as much an accounting achievement as anything else.) For the record, it’s more even than in the infamous first budget of Bob Rae’s Ontario government.

No government in our history has spent this much, this fast. Before this budget, no government had spent more than about $6,000 per citizen, in 2008 dollars—no, not even in the depths of the 1982 recession. This budget blasts through that ceiling, all the way to $6,500, and stays there: four years from now, after the recession is presumably a memory, the government will still be spending nearly $6,400 per capita. At the start of this decade, it was spending just $4,800. Somehow the federal government is now finding ways to spend a third more inflation-adjusted dollars on each of its citizens.
Two points are worth noting about this latest explosion in what was already a supernova of spending. One is the sheer aimlessness of it. Supposedly the government’s dilemma was how to balance short-term “stimulus” with the need to improve the economy’s productive capacity in the long run—a contradiction to begin with, since the kind of spending that can be shovelled out the door in time to claim credit for the recovery is unlikely to be subject to especially searching scrutiny, such as would ensure these funds were put to their highest and best use. But the laundry list of spending in this budget shows scant evidence of any thinking at all.

Absolutely everything, it appears, now counts as “stimulus” (as earlier “public works,” a phrase that had acquired a certain odour in this country, was rechristened “infrastructure”). On and on it goes, for dozens and dozens of pages: an extra five weeks of EI benefits for everybody (try taking that away in a couple of years), a 100 per cent tax writeoff on business purchases of computers (apparently, Canadian business has yet to hear of these miraculous devices, or at least must be led by the hand to buy them), $12 million a year “to promote international cruise ship tourism along the St. Lawrence and Saguenay Rivers.”

In pursuit of its declared aim of ensuring “all regions prosper,” the budget adds new regional development agencies for those few remaining parts of the country not already blanketed in federal cash, including—yes, it’s come to this—southern Ontario. Another section commits the government to provide “short-term” support for “key” sectors. These temporary hardship cases turn out to include such perennial wards of the state as farming, forestry, mining, and . . . shipbuilding. “In recent years,” the budget notes laconically, “the industry has experienced declining demand,” the remedy for which is apparently to increase supply (“Budget 2009 provides a catalyst to increase activity in the sector”). Then it’s off to automotive bailouts, support for the cultural industries, permanent increases in equalization (inequality among the provinces may go down, but equalization always goes up), tax credits for home renovations (you thought it was hard to get a contractor on the phone now?), “an improved rail system,” slaughterhouses, hockey rinks, broadband, the Manege Militaire drill hall in Quebec City . . . The government will be everywhere, and everything.
And why not? When there is no longer any budget constraint, when deficits are not evidence of incontinence, but “stimulus,” why should any project, any sector, any region be denied? More to the point, when there is no political constraint—when no party is pulling to the right, while four pull left—spending can only go in one direction. And for the foreseeable future, that’s where the action is going to be: sucking money from the gushing spigot of the state. Starting a business? Only a chump would spend his time worrying about pleasing the consumer. It’s the politicians you want to keep happy, mate.

The other point to make about all this is that the budgeted numbers are only the start. The $34-billion official deficit is barely a third of the more than $100 billion in new debt issues the government will bring to market, this year and next. Billions more will be borrowed and lent out off-budget, through a flotilla of Crown corporations—the Export Development Corporation, the Business Development Bank, and so on—while the existing program to airlift mortgages off the balance sheets of the nation’s banks will be bumped up from $75 billion to $125 billion. The need for this is not in dispute—this is at its roots a problem in the credit markets, remember, and should be addressed there—and it is true that much if not most of these funds will be recovered, or never drawn upon. But at a time when the government is already taking on tens of billions in new debt to stabilize the financial sector, it hardly seems wise to be piling $34-billion deficits on top.

Is it all bad? Of course not. The cuts in tariffs on imported machinery are a real boost to the competitiveness of Canadian industry, the very opposite of a subsidy. The bumped-up Working Income Tax Benefit will help lower the “welfare wall” that prevents the long-term unemployed from taking work (for fear of being cut off welfare). Freezing EI premiums, likewise, at a time of rising unemployment, seems only sensible, rather than allow them to rise and price more people out of work. Raising income-tax thresholds can’t hurt, and might help—if it weren’t paid for with borrowed funds. It can hardly serve as a pretext for the Liberals to defeat the budget, however: tax cuts account for just one dollar in 10 of the alleged “stimulus”—one in five, if you count the foregone increase in EI premiums.

More broadly, how in good conscience could the Liberals, or the NDP for that matter, vote against a budget they might have written? Every line of it seems to have been composed in a kind of haze of Keynesian nostalgia. We are back to the bad old days of the 1960s and ’70s, when savings were a dirty word and consumption was thought to “drive” the economy, when economies were “pumps” to be “primed” by wise and far-seeing policy-makers pulling levers on the wall. And in another 20 years or so, when we are drowning in debt and the new-old wisdom has been discredited again, perhaps a new political philosophy will arise, and a new party to give voice to it. We might call it conservatism.

Eureka, I found the solution!



Newfoundland Liberal MP vows to vote against budget

Hmmm? That gives me an idea!

Maybe the answer to our dilemma of utter non-representation in Ottawa would be for the 2.5 million income trust investors to all move to one province and then get the premier of that province to champion our cause in Ottawa and get the MPs in Ottawa for that province to get off their butts and do something for their new found constituents. Failure to do so would result in prompt removal from office.

The Premier of our chosen province would also be faced with an enormous potential loss of tax revenue, if these new found citizens of his province were about to lose their retirement income, owing to Flaherty's pending rapacious tax on trusts.

With $6 billion in tax revenue associated with this collective of income trust holders, half of which would go to the province of our choice, we could start negotiating with Provincial Premiers, before making our final selection, as to which province to bestow upon, our vast tax revenue stream. We have the power to return Ontario to a “have” province again. But what did Dalton McGuinty ever do for us, or seniors for that matter?

While we’re at it, maybe we can get a break on property taxes, in the same way that foreign automakers are able to extract such concessions from salivating Premiers.

How about PEI? We could overwhelm that province with a new influx of trust investors. It would be sweet justice to get that Provincial Treasurer from PEI who gave testimony against trusts at the Finance Committee hearings to recant his nonsense BS.

Meanwhile, we could get newly minted PEI Senator Mike Duffy to actually perform a useful task, for the first time in his life? Harper will come to loathe the day that he appointed that clown to the Senate.

We'll make Duffy beg for his next meal, like the trained seal that he is. Harper too, now that he's learned to beg from Liberals.

One final thought: Do you suppose we should put a fence around PEI? After all, trust investors living there will own 20% of Alberta’s energy sector and 80% of its energy infrastructure. In PEI, we’ll also start taxing Life Insurance companies at an additional 31.5%, just for revenge. Only newspapers that report the truth will be allowed, which will preclude the distribution of most national papers.

What a shame that there isn't one MP who feels as passionately about seniors losing their life savings to Harper's fraud.




I guess MPs only champion the cause of those seeking money from government, as opposed to those who wish to pay billions in income taxes to their government via income trusts. Who said Parliament is no longer dysfunctional? Any wonder that we're about to generate $85 billion in deficits?

Two N.L. Liberals say they'll break party ranks, oppose budget if necessary


2 hours ago

ST. JOHN'S, N.L. — A Newfoundland Liberal MP says he will break party ranks and vote against the federal budget if necessary, the second party member to do so.

Scott Andrews, who represents the riding of Avalon, told a radio station today he is prepared to go against his party and oppose the budget if it doesn't protect $1.5 billion that the province is entitled to. Andrews says his colleagues in the rest of the country don't understand how important the issue is to Newfoundland and Labrador.

Premier Danny Williams has called on the six Liberal MPs from his province to vote against the budget, saying it will sap $1.5 billion away from the province in funds from the 1985 Atlantic Accord.

While the province no longer receives equalization, it continues to receive money in that offshore energy agreement with Ottawa.

Judy Foote, member for Random-Burin-St. George's, has also said she will vote against the budget if it doesn't protect the Atlantic Accord money.

A budget amendment that even Monte Solberg would vote for


Even duty bound Monte Solberg is critical of Harper's budget.

Mind you, one can never be certain where Monte Solberg stands on any position, or from one minute to the next. It all depends on which way the lobbyist winds are blowing. and just how desperate the Neo-Conservatives are for seniors’ votes, at any given moment in time.


In any event, here’s my amendment that will further stimulate the economy, protect the vulnerable AND cut the budget deficit in half. Surely that would appeal to all Canadians, across the entire political spectrum. From Solberg, on through to Layton.



Harper’s budget is being panned by Canadians across the political spectrum, and for good reason. It is a hodge-podge of superficial measures that will lead our country recklessly in debt. Canadians need this budget like they need a hole in the head. Here is the amendment that I would make to this budget that would serve to further stimulate the economy, protect the vulnerable and reduce Harper’s reckless deficiy in half:

(1) Stimulate consumer activity over the next two year period by implementing a phased increase the GST, to 6% effective the start of 2010 and 7% effective the start of 2011. This will reduces Harper’s $85 billion budget deficit by $47 billion (or 44%) to $45 billion. Out children and grandchildren will thank us profusely, as we will be living within our means, in the same manner as we expect of them.

(2) Protect Canadian seniors by eliminating Harper’s income trust tax that has resulted in $108 billion of trust tax related takeover activity over the last two years, resulting in over 2500 job losses and the loss of $1.2 billion in ANNUAL tax revenue. This measure would restore $35 billion in lost retirement savings by 2.5 million Canadians (including losses by CPP, Caisse, OMERs, Teachers’ and others), and would serve to protect the remaining tax stream paid to Ottawa of $6 billion a year, that along with jobs, is very much at risk. Restoring this income stream to Canadian taxpayers and Canadian seniors would provide an immediate fiscal stimulus to the economy, as these people would resume their former consumption patterns and standard of living. Cat food sales would experience a significant decline, however sales of Canadian made automobiles and Alberta beef would improve by a significantly greater amount. Meanwhile pressures on Canada’s social security system by otherwise impoverished pensioners and seniors would abate.

The only downside to this budget is that it would be free from criticism from anyone across the entire political spectrum, except for those who deny empirical evidence (as it pertains to income trusts or the stimulate effects of consumption taxes) and those who deny that Canadians should ever be asked to live within their means.

Harper’s jobs of tomorrow: Home Depot cashiers. Not genome scientists


Do you suppose Harper’s cutting off funding to Genome Canada in this budget has anything to do with his creationist religious views? Or is it that the jobs of tomorrow in the mind of Stephen Harper are the Cashiers at Home Depot whose ongoing employment has been assure by the CEO of Home Depot’s involvement as an advisor to Jim Flaherty and his implementation of that Home Depot friendly 15% Home renovation tax credit?

Did it not occur to Mindless Hapless Harper that cutting off funding to Genome Canada and the leading edge scientific work that is being conducted there, might lead to a brain drain. Canada is curtailing funding to Genome Canada at just the time that Barack Obama has lifted George Bush’s ban on stem cell research in the US, a policy that was clearly borne from the bible belt.

Suppose you were a world class geneticist working in Canada as part of the ground breaking genome research program, and like all Canadian, were concerned about your job security and professional career. Would you stick around in Canada in the hopes that this dysfunctional Parliament would see its way to providing ongoing funding to Genome Canada, or would you take one of those myriad of job offers from Stanford or MIT, as the US races to reassert itself in this scientific field, now that the dark days of George Bush have been replaced by the dark days of Stephen Harper, albeit in a completely different country.


Nation's credibility on the line, scientists warn

Projects uncertain after budget snub
Globe and Mail
January 30, 2009

The uncertainty over research funding in Canada left scientists across the country fretting over the future of crucial projects yesterday, and a few wondering if they would relocate their work.

Government Approves Study Using Human Embryonic Stem Cells

Washington Post Staff Writer
January 24, 2009

A California biotechnology company plans to launch the first government-approved clinical trial testing human embryonic stem cells on people by next summer after receiving federal approval yesterday.
"This is obviously an extraordinarily exciting event," Geron chief executive Thomas B. Okarma said. "It marks the dawn of a new era in medical therapeutics. This approach is one that reaches beyond pills and scalpels to achieve a new level of healing."

President Obama is expected to lift restrictions on federal funding for such research imposed by his predecessor.

Okay. Here’s my amendment that will further stimulate the economy, protect the vulnerable AND cut the budget deficit in half


Photo: Harper implementing budget amendment to increase GST to 7% over two years.

Harper’s budget is being panned by Canadians across the political spectrum, and for good reason. It's a hodge-podge of superficial measures that will lead our country recklessly into debt. Canadians need this budget like they need a hole in the head.

Here is the amendment that I would make to this budget that would serve to further stimulate the economy, protect the vulnerable and reduce Harper’s reckless deficit by HALF:

(1) Stimulate consumer activity over the next two year period by implementing a phased increase the GST, to 6% effective the start of 2010 and 7% effective the start of 2011. This will reduces Harper’s $85 billion budget deficit by $47 billion (or 44%) to $45 billion. Out children and grandchildren will thank us profusely, as we will be living within our means, in the same manner as we expect of them.

(2) Protect Canadian seniors by eliminating Harper’s income trust tax that has resulted in $108 billion of trust tax related takeover activity over the last two years, resulting in over 2,500 job losses and the loss of $1.2 billion in ANNUAL tax revenue.

This measure would restore $35 billion in lost retirement savings by 2.5 million Canadians (including losses by CPP, Caisse, OMERs, Teachers’ and others), and would serve to protect the remaining tax stream paid to Ottawa of $6 billion a year, that along with jobs is, otherwise, very much at risk. Restoring this income stream to Canadian taxpayers and Canadian seniors would provide an immediate fiscal stimulus to the economy, as these people would resume their former consumption patterns and standard of living. Cat food sales would experience a significant decline, however sales of Canadian made automobiles and Alberta beef would improve by a significantly greater amount. Meanwhile pressures on Canada’s social security system by otherwise impoverished pensioners and seniors would abate.

The only downside to this budget is that it would be free of criticism from anyone across the entire political spectrum, except for those who deny empirical evidence (as it pertains to income trusts or the stimulate effects of consumption taxes) and those who deny that Canadians should ever be asked to live within their means.

Bottom line: This amendment would reduce the budget deficit by half, stimulate the economy, and protect the vulnerable. Meanwhile all the other superficial measures of Harper's hole in the head budget, would remain in place, pending his removal from office.

Thursday, January 29, 2009

Facebook invitation: “Barack Obama needs to address Canada's Parliament”




Please join the Facebook group “Barack Obama needs to address Canada's Parliament” during his upcoming visit on February 19th, at which point Parliament is not otherwise in session, by Clicking Here

Prove the case or drop the tax




Prove the case or drop the tax

Finance Minister Flaherty hasn't done his research on income trusts

Diane Francis,
Financial Post
January 24, 2007

The only fair resolution to the Tory income-trust mess is to compensate every investor who held onto, or bought, income trusts after Stephen Harper uncategorically promised they would remain untouched eight months ago.

That, or they must abandon their proposed tax on existing trusts.

The stupidity of this trust tax is why the issue hasn't and won't go away. It's why Opposition parties have correctly forced a hearing for next month at the finance committee in the House of Commons.

Personally, I am offended by the actions and attitude of rookie Finance Minister Jim Flaherty.

He was twice a rookie for: (a) not crafting an income-trust reform that would respect his Prime Minister's promise to leave existing income trusts alone; and (b) for not doing his homework in an area that he obviously doesn't understand - - thus the fact that he has parroted a number of obvious inaccuracies.

On the first gaffe, Mr. Flaherty should have known there were dozens of alternatives that would have stopped the proliferation of income trusts and, at the same time, surgically reformed existing ones without damaging investors. This is what the Americans and Australians did when they embarked on reforms.

But Mr. Flaherty did not do his research. He could not have because he said publicly that the Americans and Australians had shut down all their trusts except for real-estate ones. That's totally wrong.

The U.S. energy/infrastructure trust sector is now equivalent in size to 20% of the entire Toronto Stock Exchange, or more than US$480-billion. Whoops.

Then there's the tax leakage myth.

Department of Finance officials convinced, and gave Mr. Flaherty, the false information that registered retirement savings plans (RRSPs) and pension payments were tax-exempt. Too bad they aren't.

So the question that begs an answer is, why didn't this Finance Minister know this was untrue? Is it because he is not an investor and won't rely on his RRSP like 70% of Canadians must? Instead, he and his spouse are professional politicians with defined-benefit pension plans.

Another piece of "work" cited by government officials that tax leakage was an issue was done by Toronto academic Jack Mintz, who has been going around ever since distancing himself to paying customers on Bay Street from this research.

So there you have it: an academic allegedly unwilling to publicly come out defending or recanting as well as civil servants and a minister who apparently don't even understand how RRSPs or the tax system operates.

It's little wonder we have this mess -- which comes to my last, and possibly most important, point for the House of Commons committee members to consider and pursue.

About the only excuse I can think of to account for this $30- billion mistake is that securities laws prevented Flaherty from talking with knowledgeable industry sources ahead of time. There were leaks when the Liberals looked at income trusts and the Tories made an unholy fuss about that.

But that doesn't matter. Mr. Flaherty had plenty of experts to consult outside the Department of Finance, which has been gunning for this tax for ages.

If he wanted to understand the nature of RRSP and pension tax treatments, he could have called former finance minister Michael Wilson, who invented RRSPs in the 1980s

He is now on the government payroll as U.S. Ambassador and, therefore, securities law safe.

More important, Flaherty could have, and should have, picked up the phone and called the most knowledgeable man in the country -- Bank of Canada governor David Dodge.

If he did not do that, it's recklessness. If he did, and didn't listen, he was irresponsible. If he listened and rejected, then he had better tell the committee why the man who really runs the economy was wrong last summer when he defended income trusts after a bank study.

Here is what Dodge said in 2006:

"The work we have done in terms of capital markets, per se, is that probably, on balance, income trusts make capital markets somewhat more complete and somewhat more efficient," Dodge told a news conference held as part of the bank's quarterly economic outlook. The bank studied trusts.

"Limited evidence suggests that income trusts may enhance market completeness by providing diversification benefits to investors and a source of financing to firms that might not otherwise have had access to markets," the bank's study said.

That's why it is no wonder people who understand capital markets are furious.

Now, firms like PriceWaterhouseCoopers and various prestigious money-management firms are joined in the Canadian Association of Income Trust Investors.

And their bottom line is the same as mine. This Finance Minister must prove his case or drop the tax.

"If the government's actions cannot be fully substantiated by independent experts with proven expertise in the workings of the Canadian capital markets, then our Association will be calling for the repudiation of the Tax Fairness Plan in the name of fairness and good governance."

It all proves that being Finance Minister of Canada requires a lot more sophistication and a lot more experience than just paying bills, cutting costs and tinkering with local taxes as a provincial treasurer.

dfrancis@nationalpost.com

© 2008 The National Post Company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.

Stimulus or fiscal madness? $85 billion only buys 189,000 jobs?.....plus Harper's


“Tucked away on page 242 of Jim Flaherty's Tuesday budget is a description of how Ottawa's $51.5-billion "stimulus" action plan will multiply through the economy and create 189,000 jobs by 2010. That works out to $273,000 per job.” Terence Corcoran

Taking the entire budget deficit of $85 billion, this translates into $449,000 per job, assuming this job target number is ever reached?

Question for Liberals from concerned, and increasingly disillusioned, Senior Citizen


Dear Gentlemen & info@liberal.ca,

Please reply to me regarding the most disturbing information below. I'm really serious about receiving a reply please!

$7.5 Billion in lost annual tax revenue ($1.2 billion already lost), and we see nothing being done about this?

Just when do you suppose the Liberal Government is going to do something meaningful on this?

Do you remember the $13 Billion extra revenues that suddenly appeared in the Conservative Government's coffers, and that Flaherty/Finance Dept.
in his/its own words. "had no idea where it came from"

I suggest it came from Tax paid by income Trust owners.

Simply put, Owners of Income trusts earned income from disciplined companies that was then either spent or saved!
either way, Taxes had to be paid and the economy was stimulated.
i.e. If spent: GST, Provincial tax and Income tax had to be paid, not only by the Income Trust owner, but also by the companies or individuals
from whom the goods/services were purchased, and who profited from these purchases. Income taxes would also have to be paid by the "employees"
who were employed by these benefiting companies. This is a lot of tax revenue and a huge stimulus for the Economy as a whole!
If saved: a.) other than in an RRSP: Tax would still have to be paid by the recipient, and The Institutions with whom the income (now after-tax savings), was deposited, would have to pay tax on profits earned from the loan or use of these funds; Plus the loans would then also stimulate the economy by being in circulation.
If saved: b.) in an RRSP: The savings institution would pay taxes on the profits made by either holding/investing or deploying the "saved/invested monies" and
eventually the Saver would have to pay taxes once the funds were withdrawn anyway.
any event, the saved money would be in circulation in some form as it simply does not sit unused in an RRSP account. Even in a worst- case scenario,
the Saved funds act as a Pension fund for the Saver, further relieving the Canadian Government of having to pay a pension.

In Conclusion: Income Trusts were a massive boon to all Canadians, whether they owned them or not.

In addition, whether the tax revenue is paid by the individuals or the Corporations, who on earth in their right mind cares, as long as all of Canada prospers ? (Of course I realize there were individuals that cared, like the Head of Power Corp., who as an unregistered lobbyist, urged Harper to kill those Income trusts, because his own financial interests were being harmed by his low paying competing products. Then there was Manulife who's executives also benefitted from the Income trust Massacre, by launching a mere 6 days later, an "Income Plus" product "Guaranteed never to lose your money", and recently, had to be bailed out by their crony Flaherty with taxpayer money... or the other objectors, the directors of Bell/BCE who stood to lose millions in compensation, because if they were to allow their companies to become Income Trusts, the discipline imposed by the structure would severely inhibit their profligate lifestyle.)

Please be kind enough to explain to my why the Liberal Party and it's elected officials like yourselves, refuse to expose Harper/Flaherty's lies regarding the reasons for
imposing a devastating & punitive tax on income trusts, and why you especially Mr Ignatief, have missed this great opportunity to demand that the Income Trust fraud
be reversed as part of Harper's (and now your), new budget?

PM
Concerned, and increasingly disillusioned, Senior Citizen
Oakville, Ontario.

A budget fit for a King....Byng

On line poll:

The Liberals decided to support the Conservative budget with 'accountability' amendments. I think:

1. The 'accountability amendment' is not an adequate way to measure the effectiveness of the Conservative budget. The Liberals should not have supported this budget.

2. The 'accountability amendment' is an adequate way of measuring the effectiveness of the Conservative budget. The Liberals were correct to support this budget.

To register your opinion, Click here

All of Ottawa: Short of capital ideas



Short of capital ideas

Calgary Herald
Published: Thursday, January 29, 2009
Re: "Ottawa opens tap," Jan. 28.

The budget proves Stephen Harper and Jim Flaherty are out of touch with Main Street Canada. A 15 per cent renovation tax credit will do nothing to clean out the inventory of unsold and foreclosed homes in Canada.

These homes are dragging our economy down. Does Flaherty think I can't already negotiate a 15 per cent discount from a home renovator in this market? The Canadian economy is driven by its natural resources. Dropping the elimination of the income trusts would have driven exploration, it would have helped retirees' RRSPs and would have made money flow in the capital markets. Extending employment insurance does nothing to create jobs.


Job retraining is great, but if nobody is hiring, it does not accomplish anything meaningful. Building community recreational centres does not provide long-term economic benefit, and it will take a year or two to start these projects. Tax savings of an average $300 per year that we won't get until we file our 2009 tax return in 2010 will not encourage Canadians to spend.

Last, there is nothing to encourage corporations to invest in capital goods. Purchases of capital goods drive job creation.

Get capital flowing, let businesses create jobs, assist Canadians in buying homes, give the natural resource sector a reason to drill and invest in capital. It's just common sense.

Darrin Hopkins,

Calgary

Flaherty's income trust tax was for Power Corp and Manulife, what this renovation tax credit is for Home Depot



Budget measures raise conflict questions over Flaherty's expert panel

By Joanne Chianello, Ottawa CitizenJanuary 28, 2009 8:01 PM

See also: Stephen Harper leveled the playing field......in Paul Desmarais Jr's/Power Financial's favour

OTTAWA — One of the most popular spending initiatives in this week's federal budget could benefit the company run by one of the members of Finance Minister Jim Flaherty's 11-member advisory panel.

The Home Renovation Tax Credit will provide a 15-per-cent tax credit to homeowners who undertake home improvement projects by Feb. 1, 2010. The government expects the program to cost $3 billion over the next two years, and 4.6 million families to take advantage of the measure.

But one of the members of Flaherty's 11-member panel is Annette Verschuren, the president of Home Depot Canada and Asia.

Under the HRTC, costs associated with a renovation are eligible for up to $1,350 in tax credits, including new carpeting or hardwood floors, paint, kitchen cabinets, cedar decking — even new sod for the lawn.

The plan is expected to accelerate spending on home renovation goods and services.

The budget also provides $50 million to build a new research facility for the Institute for Quantum Computing, a research centre based at the University of Waterloo. Mike Lazaridis, the president and co-CEO of Research in Motion, helped found the institute, sits on its board of directors and has donated his own money to it. Lazaridis is also on Flaherty's economic panel.

When asked about the appearance of a possible conflict of interest between these two panel members and measures in this week's budget, a spokesman for Flaherty said that "everything's above board."

Chisholm Pothier said that the finance minister consulted the ethics commissioner about the advisory panel and "there were no problems identified.

"The key thing is the minister asked them, they did not ask the minister. They did not lobby the minister."

The ethics commissioner, Verschuren, and Lazaridis could not be reached Wednesday for comment.

Last month, Flaherty announced the creation of an 11-member advisory panel — mostly prominent business leaders — who were to advise him on the federal budget and the economy on an ongoing basis. He said the members would be paid $1 a year each for their insight.

The panel is chaired by Carole Taylor, former finance minister for British Columbia, and members include Paul Desmarais Jr., the co-CEO of Power Corp., James Irving of J.D. Irving Ltd. and Jack Mintz, former CEO of the C.D. Howe Institute.

The panel met four times — three times in person and once by conference call.

Mintz said Wednesday that although some panel members had very specific ideas for the minister, "the actual discussion around the table was much more on broad strategies."

He also acknowledged that some members of the panel may have talked to the finance minister "by themselves on specific ideas." Mintz said he himself had a one-on-one chat with Flaherty at the minister's request.

Of the short-term stimulus announced in this week's budget, the HRTC is "one of the bigger tax cuts."

The February 2010 deadline for the program is intended to prod those who might have been putting off home improvements to act quickly, in order to take advantage of the tax credits.

Projects totalling between $1,000 to a maximum of $10,000 qualify for the credits.

On Monday, Home Depot — which bills itself as the world's largest home renovation retailer — announced it is eliminating 7,000 jobs and closing specialty stores.

While acknowledging that Canadian retailers face serious challenges this year, Verschuren told reporters earlier this week that the cuts would not affect operations in Canada, where the retailer employs 35,000 people in 176 stores.
© Copyright (c) Canwest News Service

Harper promotes tax credits....and unsafe work conditions


Here we have a photo of Harper issued under the title of "Prime Minister Stephen Harper uses a nail gun while touring a home undergoing renovations in Ottawa yesterday".

Presumably this photo was intended to promote Harper's 15% tax credit for up to $10,000 worth of home renovations. Too bad, the people who were undertaking these renos won't benefit from this tax credit, since it only applies to expenditure incurred after Jan. 28, 2009. Or perhaps Harper was charging the homeowner for this work?

A more appropriate photo op would have been for Harper to go shopping at Home Depot, since those purchases would be sure to qualify.

Furthermore, Harper is probably a better shopper than he is a carpenter. This photo demonstrates that Harper has never held a nail gun in his life. A nail gun is not designed to be held by both hands. A nail gun in held by one hand, while the other hand is used to hold the work piece in place. Furthermore, why is Harper promoting the use of a nail gum without using protective eye wear. The Canadians Standards Association and Canadian work rules governing constriuction job sites require that protective eye wear be worn at all time when using a nail gun

No, it's the Liberals who are now on probation


I, for one, am completely bewildered by the actions of the Liberal party on this budget matter. What became of the the three bases upon which the Liberals said they were going to evaluate this budget? I guess they got replaced by what the Liberals believe are three opportunities to bring down the Harper government at a time more to the Liberal’s liking. If that’s the case, then the Liberal’s actions of yesterday were more about them, than it was about us?

Meanwhile, the Liberals are claiming that the events of the last two months demonstrate that Parliament works. Huh? If that’s the conclusion that the Liberals have come to, then they have a very low standard of what constitutes “Parliament working”.

No one can tell me that “Parliament works” when we have tax legislation enacted based on complete and utter falsehoods. Tax legislation that see 75% of Canadians saving for retirement taxed at 31.5% and the other 25% taxed at zero. Tax legislation that allows the 25% who are taxed at zero to split their retirement income with their spouses to dramatically reduce their tax burden, while the 75% who are taxed at 31.5% are denied this income splitting benefit. Tax legislation that, in effect, provides a tax subsidy to foreign investors to takeover Canadian companies and load them up with excessive amounts of debt, in order to not pay taxes. Taxes that were otherwise collected by Ottawa from the former Canadian owners.

The income trust tax is the biggest fraud perpetrated by the Canadian Government on the taxpayers of Canada. It has destroyed peoples lives and grossly diminished their standard of living after years of working in this country. It has seen $35 billion of their wealth destroyed at the behest of some of the most powerful (and totally self-serving) business people in this country.

The actions of the Liberals on the income trust file are deserving of a C for effort and an E for accomplishment. One has to wonder whether the income trust issue is only trotted out by the Liberals when they are seeking an opportunity to describe how much of a bold faced liar that Stephen Harper is, or when the Liberals want to pander to a certain constituency of oil and gas executives in Calgary? The Liberals have been given two great occasions upon which to bring about real changes to this egregious policy. One was when the 2007 Budget was before the Senate and the other was yesterday. In both occasions the Liberals failed to act and extracted nothing of tangible significance. Therefore, to borrow a concept from them, I am placing the Liberal Party on probation. So too should all Canadians who believe in the type of government that Barack Obama is bringing to the US, namely one whose policies are based on facts and not fiction. The income trust tax is based on complete fiction. Fiction that the Liberals seem willing to perpetuate, and to the detriment of all Canadians, especially the 75% who, unlike the politicians in Ottawa, do not have pensions.

I will share with you the following email that is typical of the reaction I am receiving from people who prior to yesterday were willing to consider the Liberals as an alternative to the Conservatives:

Brent,

Whereas I am completely on-side (as you know) with you on this issue, I am surprised that you’re surprised that your Liberal friends are not responding any more or better than the Tories. For some reason, you seemed to have thought (throughout) that they were in some way ‘better’ than the Tories or, the Non-Democrats or, the Bloc-heads but, they’re not.

You met with John McCallum and other senior Liberals if I recall correctly and they listened to you politely – after all you ran for the party – and we see now (when the rubber hits the road) that they don’t give a shit about honesty, integrity, transparency or accountability either! You handed them the PERFECT chance to bludgeon the Tories over an issue that is incredibly real and they just sleep-walked through it or, perhaps they too are looking for ‘contributions’ from Dominic D’Alassandro and the likes of Bell Canada in order to rebuild their battered party finances.

No one has done more than you to endeavour to seek something as simple as the TRUTH on a material matter that was so poorly handled and all that we have to show for it is that ‘they are all the same’ – no one in politics gives a shit about the truth or what’s right. It’s all about power and the obtaining thereof. The Liberals are no better than the Tories or Layton’s Non – Democrats or Gilles Deceipt’s Bloc….they’re all the same. It took me a long time to realize this but I’m finally there.

Hugh

Wednesday, January 28, 2009

Harper's Home Depot Budget


Budget measures raise conflict questions over Flaherty's expert panel

By Joanne Chianello, Ottawa CitizenJanuary 28, 2009 8:01 PM

OTTAWA — One of the most popular spending initiatives in this week's federal budget could benefit the company run by one of the members of Finance Minister Jim Flaherty's 11-member advisory panel.

The Home Renovation Tax Credit will provide a 15-per-cent tax credit to homeowners who undertake home improvement projects by Feb. 1, 2010. The government expects the program to cost $3 billion over the next two years, and 4.6 million families to take advantage of the measure.

But one of the members of Flaherty's 11-member panel is Annette Verschuren, the president of Home Depot Canada and Asia.

Under the HRTC, costs associated with a renovation are eligible for up to $1,350 in tax credits, including new carpeting or hardwood floors, paint, kitchen cabinets, cedar decking — even new sod for the lawn.

The plan is expected to accelerate spending on home renovation goods and services.

The budget also provides $50 million to build a new research facility for the Institute for Quantum Computing, a research centre based at the University of Waterloo. Mike Lazaridis, the president and co-CEO of Research in Motion, helped found the institute, sits on its board of directors and has donated his own money to it. Lazaridis is also on Flaherty's economic panel.

When asked about the appearance of a possible conflict of interest between these two panel members and measures in this week's budget, a spokesman for Flaherty said that "everything's above board."

Chisholm Pothier said that the finance minister consulted the ethics commissioner about the advisory panel and "there were no problems identified.

"The key thing is the minister asked them, they did not ask the minister. They did not lobby the minister."

The ethics commissioner, Verschuren, and Lazaridis could not be reached Wednesday for comment.

Last month, Flaherty announced the creation of an 11-member advisory panel — mostly prominent business leaders — who were to advise him on the federal budget and the economy on an ongoing basis. He said the members would be paid $1 a year each for their insight.

The panel is chaired by Carole Taylor, former finance minister for British Columbia, and members include Paul Desmarais Jr., the co-CEO of Power Corp., James Irving of J.D. Irving Ltd. and Jack Mintz, former CEO of the C.D. Howe Institute.

The panel met four times — three times in person and once by conference call.

Mintz said Wednesday that although some panel members had very specific ideas for the minister, "the actual discussion around the table was much more on broad strategies."

He also acknowledged that some members of the panel may have talked to the finance minister "by themselves on specific ideas." Mintz said he himself had a one-on-one chat with Flaherty at the minister's request.

Of the short-term stimulus announced in this week's budget, the HRTC is "one of the bigger tax cuts."

The February 2010 deadline for the program is intended to prod those who might have been putting off home improvements to act quickly, in order to take advantage of the tax credits.

Projects totalling between $1,000 to a maximum of $10,000 qualify for the credits.

On Monday, Home Depot — which bills itself as the world's largest home renovation retailer — announced it is eliminating 7,000 jobs and closing specialty stores.

While acknowledging that Canadian retailers face serious challenges this year, Verschuren told reporters earlier this week that the cuts would not affect operations in Canada, where the retailer employs 35,000 people in 176 stores.
© Copyright (c) Canwest News Service

When, if ever, will the Liberals hold Harper to account for his income trust fraud?


The Liberals are claiming victory today over Harper by introducing a budget amendment that will make Harper accountable for his budget measures. Some victory? Meanwhile the budget proceeds otherwise, as is, warts and all.

Meanwhile, what are the Liberals doing to make Harper accountable for his major budget transgressions of the past? Why the selective application of the standards of accountability? Are we to surmise from today’s Liberal actions that there is a statute of limitations that applies to Harper’s complete unaccountability for his income trust fraud?

We have been calling for true accountability on this matter for over two years, and have received none. Not from Harper. Not from the Auditor General. Not from the media. Not from the opposition parties. Notice that we haven’t been arguing for policy changes like an oil and gas carve out or a ten year extension, but rather the proof of Harper’s central policy rationale. i.e. alleged tax leakage.

The issue of income trusts is foremost, an issue about accountability, and tax fairness. When will the Liberals do something tangible about this policy that has seen Canadians lose $35 billion of their lifetime savings and seem many Canadians retirements’ destroyed by having to live on 50% of their former income? Rhetoric without action, is meaningless, and does nothing to comfort those who have been deeply adversely affected.

Meanwhile, all taxpayers are bearing the cost of this most self-destructive policy, since over $1.2 billion in annual tax revenue is being lost from the takeover of income trusts via non taxable entities and through non taxable acquisition structures. Real tax leakage has become the substitute for phantom tax leakage. That number will soon rise to $7.5 billion. If the Liberals do not act when the opportunity presents itself, then they become complicit in the outcome.

A plausible update required from Mark (Pollyanna) Carney


Mark Carney made statements in advance of Harper’s budget that Canada’s recovery would be quick. This was before the budget details were known. As such, we need an update from Bank of Canada Governor Mark Carney that:

(1) Outlines the incremental effect of Harper’s stimulus measures on Carney’s forecast, if any, in light of Harper’s $83 billion deficit budget

(2) Takes into account the contrary view taken today by the IMF:

IMF darkens outlook for Canadian economy


Updated Wed. Jan. 28 2009 12:13 PM ET

The Canadian Press

OTTAWA -- The International Monetary Fund is darkening its outlook for the Canadian and world economies, throwing into question some of the projections made by the Harper government in its budget Tuesday.

The new global outlook, released Wednesday, sees the world falling much deeper into recession than previous forecasts, but also projects a more feeble recovery than either the Bank of Canada or the budget assumes.

Budget plays to unenthusiastic reception in Whitby-Oshawa



CBC just played a news segment on the Budget based on the opinions of the residents of Whitby-Oshawa. All four of the people interviewed were either negative or decidedly unenthusiastic about Flaherty’s budget. No surprise there.

Which still leaves open one question. Why did the residents of Whitby-Oshawa vote for Flaherty in the last election?

Like the man himself, Flaherty’s deficit projections are not credible




Flaherty’s fiscal projections are completely lacking in any credibility. How can we expect Flaherty to estimate the deficit forecast for the next four years, if he has proven himself unable to accurately project the surplus/deficit for 2008? Flaherty was projecting a budget surplus for 2008 during the election of some $800 million. The real number is a DEFICIT of $1.1 billion, representing a swing factor of 2.4 times. How are we to place any faith in Flaherty’s ability to project our budget four years out, if he is unable to accurately project our fiscal situation a mere four months out?

The other concern that I have with Flaherty’s deficit budget is there is nothing in this budget that will reverse the tide of deficits apart form a whole lot of wishful thinking and finger crossing. Flaherty promised his budget would have provisions specifically designed to get us out of a deficit situation. Where are they? Meanwhile how long will it take to recover the $86 billion in deficits to be incurred over the next four years? 10 years? 12 years? Ten years would mean the year 2019. Tweleve years would mean the year 2021? If so, what became of Flaherty’s promise that Canada would have a net debt position of zero by the year 2021? What has that promise now morphed into? 2031? 2035? Never?
------ End of Forwarded Message

The Budget should play itself out in Parliament, and not in the press


The Liberals should have learned their lesson, when they pre-announced the formation of the Coalition, thereby giving Harper a chance to strategize and ultimately prorogue. Why play this thing out in the press? This whole thing should play itself out in Parliament. That might result in more people paying attention to Parliament and less attention to the press. It would also bring more power and meaning to Parliament.



Budget fundamentals 'will not change,' says Finance Minister Flaherty

2 hours ago
WHITBY, Ont. — As the federal Liberals consider whether to support the federal budget, Finance Minister Jim Flaherty says the basics will not be changed.
Speaking today from a Tim Horton's in his riding in Whitby, Ont., Flaherty said his spending plan reflects what Canadians want and need now. Liberal Leader Michael Ignatieff is to announce his decision late this morning on whether or not he supports the spending plan.
A senior party member says the party leader is unlikely to support the budget without requesting some changes.
Asked if there was wiggle room to address Liberal concerns, Flaherty said he would look at whatever the Liberals might propose, but added that the budget "fundamentals will not change."
Following Tuesday's budget speech, Ignatieff said the budget contains some positives, but also includes what he called "negative aspects."
Flaherty will also discuss his budget later today in a speech to the local chamber of commerce in Whitby.

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?

Tuesday, January 27, 2009

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

Monday, January 26, 2009

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.

Sunday, January 25, 2009

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

Saturday, January 24, 2009

A self-funded budget proposal, creating immediate stimulus to Canada's economy


I would institute the following four broad measures to provide immediate stimulus to Canada’s economy:

(1) Reverse the income trust tax, to restore the collection of taxes on corporate earnings, in amounts greater than is otherwise collected from these companies, while at the same time providing a means of retirement income for seniors and those saving for retirement. Such a measure would stimulate direct investment in the Canadian economy and provide Canadian companies with immediate access to much needed investment capital, and a low cost of capital competitive advantage.

(2) Institute personal tax reductions of $15 billion a year, targeted at low income and middle income Canadians

(3) Institute an increase in the GST rate from 5% to 7% effective, January 1, 2011, which represents $15 billion in additional annual tax revenue for the government, sufficient to fully fund the tax cut in (2) above. The effect of (2) will also be to put more money into the hands of consumers, and the effect of the two year holiday on the GST increase will mean that more of that increase in after tax income will be devoted to consumer expenditures, than would otherwise be the case, since the “ GST tax window” would accelerate large ticket purchases by consumers on items like cars, home renovation, appliances etc. The other obvious effect of these two measures is they would, in combination, avoid creating any ongoing structural deficit whatsoever.

(4) The remaining portion of any budget initiative that I would institute would be devoted to expenditures in infrastructure, with an emphasis on green infrastructure, such as investment in wind and solar and creating high speed rail links in places like the Windsor-Quebec City corridor. These projects would be done on a basis that allows for investment participation by Canadians through their personal savings and RRSPs, to the extent possible, rather than the type of Private-Public-Partnerships that Flaherty is contemplating, that (no doubt) will favour offshore investors like MacQuarrie Infrastructure Group (part owner of Flaherty’s 407 give-away). To the extent to which these infrastructure projects can be funded with investment by average Canadians, they will not create deficit spending by the government and again provide a means for average Canadians to invest in Canada, rather than simply offshore investors and those 25% of Canadians who belong to pensions.

Flaherty's about face


Flaherty's about face

How the finance minister went from $100-million surplus to $34-billion deficit in less than 60 days


By James Bagnall, The Ottawa CitizenJanuary 24, 2009

Finance Minister Jim Flaherty's sudden conversion to deficit financing is pure pragmatism. If the Conservatives spend too little, they could very well lose the next vote in Parliament -- and with it, the government. The change in tack has been made easier by the country's enviable financial strengths.

Jim Flaherty's epiphany came within days, perhaps hours, of his Nov. 27 economic statement. The finance minister had predicted five years of budgetary surpluses on the strength of continuing economic growth.

"The days of chronic deficits are behind us," he told Parliament. He was dead wrong, and by early December, he knew it.

Even as Mr. Flaherty was speaking, Canada's job and housing markets had slipped into reverse, energy exports were plummeting and the auto sector was a wreck.

More than 250,000 Canadians -- 1.5 per cent of the workforce -- are now expected to lose their jobs in 2009, according to economists at the TD Bank.

Which is why, on Tuesday, Mr. Flaherty will publish a budget that just two months ago he could not have imagined writing.

He is expected to show a spending shortfall of $34 billion for the fiscal year ending March 31, 2010, and another $30-billion gap the year after that -- the federal government's biggest deficits since the mid-1990s.

How did Mr. Flaherty and his fellow Conservatives not see the writing on the wall sooner? Hubris, optimism, disbelief? Maybe a little of each. There was also the influence of economists, the majority of whom did not begin forecasting economic recession until December.

Nevertheless, there were plenty of portents that something was profoundly amiss. The stock markets had collapsed in September, and the Bank of Canada had been intervening to support Canada's financial system since Aug. 9, 2007 -- when the closure of three subprime mortgage investment funds managed by BNP Paribas, a French bank, signalled the onset of the credit crunch.

Within hours of BNP's action, Canada had its own credit crisis as $32 billion worth of corporate notes, many of them created by Coventree, failed to find buyers. These and other asset-backed securities were converted to bonds only last week.

In 2007 and much of 2008, the consensus view among central bankers and politicians was that the credit contagion had been confined to the financial sector. But last fall the infection spread to the real economy.

Had the Conservatives moved to stimulate earlier, there's little question they could have helped to soften the downturn that began in the last months of 2008.

Mr. Flaherty is trying to make up for lost time. Up to $15 billion of the projected spending deficit for the current fiscal year reflects lower-than-expected tax revenues, according to calculations by Dale Orr, an economist with IHS Global Insight Inc. The rest represents the costs of Mr. Flaherty's stimulus programs.

The amount earmarked by Mr. Flaherty for extra spending will depend on its use. A massive program to refurbish bridges, highways and other infrastructure will take time to organize and implement, and will likely have to be spread over several years.

If the Tories decide the emphasis should be tax cuts or capital infusions to shore up the country's banks and federal lending institutions --such as the Export Development Corp. and Canada Mortgage and Housing Corp. -- then huge amounts can be allocated almost immediately.

Mr. Flaherty's sudden conversion to deficit financing is pure pragmatism. If the Conservatives spend too little, they could very well lose the next vote in Parliament -- and with it, the government.

The Tories' change in tack has also been made easier by the country's enviable financial strengths.

Until this year, Canada was the only major industrialized country with a government that spent less money than it took in. Not only that, government debt last year was slightly less than 30 per cent of the country's annual economic output -- down from nearly 70 per cent in the mid-1990s. This makes Canada the least indebted of the G-7 nations by a fair margin.

Even if Mr. Flaherty racks up more than $100 billion worth of cumulative deficits over the next five years, as he conceded this week is likely, Canada should readily be able to manage the extra debt load.

Of course, all of this pre-supposes that Canada's economy will grow again in the second half of 2009, as predicted Thursday by the Bank of Canada.

Is this realistic? One of the most unsettling parts of the global credit crisis has been its violent and unpredictable swings. Even now, more than two years after the United States' subprime mortgage lenders began filing for bankruptcy protection, no one

can say with any certainty whether we are most of the way through this mess, or just beginning to sort things through.

Independent economists have been frantically revising their forecasts as new pieces of intelligence emerge, each more depressing than the last.

A Bloomberg survey of 10 economists last October suggested Canada's economy would grow at an annual rate of 0.3 per cent during the fourth quarter of 2008.

Earlier this month, the consensus forecast had shifted dramatically. The same group predicted the economy had contracted 2.1 per cent in the fourth quarter, a performance that would now be followed by at least two more quarters of reduced economic output.

While mainstream economists often miss the turn into a recession, this one has been particularly difficult to chart accurately.

That's because the credit crisis is different. The recessions in the early 1980s and early 1990s were induced by central bankers keen to keep the economy from overheating. The Bank of Canada pushed interest rates so high that eventually consumers and corporations reined in their borrowing, and the economy slipped into reverse for several quarters.

In earlier recessions, re-igniting growth was relatively simple. The central banks cut interest rates, prompting a new round of borrowing by consumers and homeowners.

The Bank of Canada and its counterparts are applying the same fix, but to far lesser effect. That's because, in this case, the financial system itself is broken, and this is much more difficult to fix than the economy.

The root of the problem is that the financial industry created immensely complicated investment products -- securities based on mortgages and other assets -- that no one really understood, and which could not be properly priced.

When the housing markets weakened in 2007, there were few takers for these exotic investments. Since many of the latter were funded with short-term money (notes that matured in months, rather than years), the financial system very quickly froze.

That wasn't the only problem. Many of the finance industry's assets were on the books of a new class of quasi-banks, also known as the shadow banking system. Its members included hedge funds, investment banks, private-equity providers and non-bank mortgage lenders shared two common features. They were aggressive, and they aren't covered by deposit insurance.

At its peak, in 2007, New York investment bank Bear Stearns had $33 in loans for every $1 in bank capital -- three times the ratio maintained by the more conservative Canadian banks.

Once Bear Stearns acknowledged the weakness of its loan portfolio, investors began to doubt the firm's staying power. Bear Stearns was acquired for a pittance last March by Bank of America -- a regular, deposit-taking institution.

The unwinding of the shadow banking system has occurred with astonishing speed in the U.S. But investors, businesses and employees alike are still bracing for ugly surprises in the quarters to come -- all of it related to the ability of corporations to keep solvent.

When employers and lenders are busy preserving capital, they are not creating jobs or stimulating economic growth.

Mr. Flaherty and his advisers have no clear idea how long this dangerous phase of the economic cycle will last.

Should they have acted sooner to head it off?

Certainly there were many who warned that financial calamity was on the way. Robert Shiller, an economics professor at Yale University, warned in 2004 that a housing bubble was forming.

Raghuram Rajan, a professor at the University of Chicago's Booth Graduate School of Business, presented a paper in 2005 that concluded the world's financial systems were developing in a manner that exaggerated risk.

And Nouriel Roubini, an economics professor at New York University's Stern School of Business, has published a well-read blog for more than a decade, warning about the implosion of the financial services industry.

But their analyses failed to offer insight into how or when it might unfold, and indeed, their misgivings continued against the backdrop of ever-rising home prices, which peaked in 2006.

Mr. Roubini and Mr. Shiller were dumbfounded at the equanimity of investors in 2007, when the illiquidity of the shadow banking system first became apparent.

Perhaps it was central bankers' quickness in pumping liquidity into the system, or maybe it had to do with the fact no one really understood the makeup of the complicated securities that lie at the heart of the new financial universe.

"The financial system is so complex, non-linear and chaotic," wrote Niall Ferguson in The Ascent of Money, "it's hugely difficult to forecast the timing of financial crises."

Alan Greenspan, the former chairman of the U.S. Federal Reserve Bank, noted in his recently published biography that great improvements in technology, financial software and banking infrastructure had made it possible for the industry to tolerate significantly more leverage (debt).

"A surge above what newer technology can support, invites crises," he noted, "I am not sure where the tipping point lies."

What shocked Mr. Greenspan in the end was the puzzling refusal of the financial heavyweights to protect themselves against a worst-case outcome. Why didn't they keep enough liquidity on hand to safeguard the institution?

This is where Mr. Rajan could have helped Mr. Greenspan -- who happened to be in the room when the Chicago academic delivered his paper. Mr. Rajan warned the new world of finance was incorporating pay incentives that offered huge benefits to financial services executives in a rising market, but imposed a small penalty for making bad calls. Risks were being discounted, greed celebrated.

The stewards of national economies -- Canada's included -- were also infected by hubris.

The Western World's central bankers had steered the economy through a massive tech bubble, and had avoided a serious recession for nearly a generation. There was a widespread belief -- supported by blind hope -- that everyone would muddle through.

Canada's Conservatives, starting with their Finance Minister Jim Flaherty, now understand that's not the way it's going to be.

E-mail jbagnall@thecitizen.

canwest.com