Friday, March 9, 2007

Can the Canadian Income Trust Tax be Reversed?

Up until today I had lost all hope that the Tory Trust Tax would be reversed or weakened. However, Diane Francis's column in the National Post today has given me hope that the grass roots activism may make a difference.

I personally "was" a member of the Tory party. I spoke to them about this fiasco and told them that they will not get my vote the next election. I may sit out the next election or consider voting for the Liberals.

My position is simple.

To level the playing field between income trusts and corporations, the Conservatives could have made divedends tax deductible at the corporate level and fully taxed at the individual level and get rid of the complicated dividend tax credit. Its that simple!

By the way...I noticed that the federal government is advetising on my blog. I was tempted to block these ads but then I would be censoring. I guess everyone has a right to express their position.

The following is Diane Francis's Article in todays National Post:

All is not well in the Tory heartland
Income-trust tax leading to talk of 'spoiler' candidates
Diane Francis, Financial Post
Published: Friday, March 09, 2007
There's lots of anger in Tory Land, as Calgary MP Diane Ablonczy discovered this week.

Things are getting ugly. Ablonczy's little town hall meeting in her Calgary riding this week turned into a booing session by victims of the ill-advised income-trust debacle.

No media were there, but this is from a witness: "I'm guessing there were about 400 to 500 people there split 50% invited family and friends and 50% furious investors. I was surprised at the number of protesters and how vocal they were. This issue seems to be bigger here than the party wants to admit. The party has greatly upset their foundation. I walked away with a sense that there is more trouble for the Conservatives in the heartland than I had expected."

The vast majority of investors, and successful people, in this country are Tories. So rather than holding their nose and voting for another party, there's talk of running "spoiler" candidates in key, or vulnerable ridings, simply to provide the disenchanted investors with a means of registering their protests and take away enough votes to defeat Tory candidates.

Another suggestion by a New York investment counsellor, whose clients took a bath, is for the energy-trust coalition to field candidates in key Alberta ridings against the Tories.

"I know that employees and unit holders of the energy trusts have been very active and vocal in communicating to their MPs -- via post, faxes, phone calls, and e-mails as well as in person at town meetings -- their profound distress and anger at this proposed legislation," wrote Bob Siegel of Cabot Capital Group in New York City.

"I would recommend that the coalition step up its campaign against Albertan Conservative MPs beyond mere voicing of intense opposition," he said. "Specifically, I would propose that the energy trusts, given their economic and political clout within the province of Alberta, recruit and put forth a slate of candidates who will run against any sitting Conservative MP in Alberta who follows the Party line and votes for this measure."

"The province of Alberta is the backbone of Conservative Party strength. If the Energy Trusts muster their considerable strength in Alberta to make known to Conservative MPs --in this kind of direct, immediate, 'in-your-face' electoral way -- that a vote for this measure will cost them their jobs and, thereby, cause at least some erosion in legislative support for this measure in Canada's Conservative stronghold," he concluded.

But Alberta is not the only hotbed. Plenty of ridings in Ontario -- where the Tories barely won -- could be attacked successfully by independent "income trust spoiler" candidates. Tony Clement won by 28 votes. Others are equally vulnerable. Same applies in B.C.'s retirement communities.

Another victim e-mailed me his reaction to the "dissenting opinion" posted by the Tories and written by the handful of Conservative members of the finance committee. That committee recently held hearings into the income-trust tax proposal and concluded that it was flawed and should be scrapped.

Obviously, the Tories kept to the party line.

"My family and I are lifelong conservative votes. Not any longer!!" wrote Les Parsneau in an e-mail. "Regarding Tax Leakage? The trusts don't pay taxes, the investors do. And how dare the Ministry of Finance refer to me [RRSPs and RRIFs] as 'tax exempt'. I have just taken more money out of my RRSP to live. I pay individual tax rates on that money."

Last week, another blow to the Tories was delivered by the Canadian Association of Retired Persons, which attacked the tax. It has 400,000 members.

"Seniors are actually enraged, frightened and panicked about potentially losing retirement savings that they count on for the essentials of daily living," said an association statement.

It's reminiscent of the 1980s, when Michael Wilson's proposal to tamper with the Old Age Security met with a firestorm of protest and his Prime Minister was forced to back off from the decision. And they had a majority government.

Instead, this minority government has steamrollered and stonewalled, aided and abetted by a pliant press and in the belief that Tory voters have nowhere else to vote.

But the Internet and imagination are formidable foes. And investors are smarter than politicians.

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