Monday, September 24, 2007

Ralph Goodale rebuts Edmonton Journal editorial

The Edmonton Journal published an editorial earlier this month which said among other things:

The fact is that Conservative Finance Minister Jim Flaherty was right to level the tax field by changing the rules on income trusts, whatever you might think of his violating a Harper promise not to.


Business is better served by tax policy that creates a level playing field, is broadly applied and is predictable. This, Flaherty delivered. The opposition should look for another way of causing the Harper Conservatives grief.
Source: Edmonton Journal

The writer's opinion is based on what? The Harper Conservatives have released 18 pages of blacked out documents to back up their claims of tax leakage.

Here is real world research that doesn't support the Conservatives arguments.

Independent economists discredit govt tax leakage claims

The Inconvenient Truth About Trusts - Gordon Tait

Ralph Goodale thinks the Harper Conservatives have it wrong on Income Trusts and responds:


Dear editor:

Some commentators question why the Liberal Official Opposition is proposing an alternative to the policy on Income Trusts imposed by Stephen Harper’s Conservatives.

It wasn’t pretty, those commentators say, but let sleeping dogs lie.

But there are two strong reasons why this is not good advice.

First, the trouble surrounding this file resulted from deliberate Conservative deceitfulness which should not be rewarded with benign indifference.

In January of 2006, to buy votes during an election campaign, Mr. Harper solemnly promised never to impose a tax of any kind on Income Trusts. As the inevitable consequence of such a promise, there was a flurry of new investment activity.

Thousands of ordinary Canadians put millions of dollars into Income Trusts to provide responsibly for their retirements. Their only mistake was taking the Conservatives at their word.

As Stephen Harper likes to tell anyone who will listen, he is an economist – and always the smartest guy in any room – so he knew full well what the consequences of his profligate promise would be. The investment frenzy and the ensuing untenable situation did not take him by surprise. He set people up and then slapped them down. It was a cold political calculation.

His axe fell on Hallowe’en night, 2006, and billions of dollars in hard-earned savings evaporated.

Secondly, the massive new tax the Conservatives imposed was the policy equivalent of a badly designed nuclear attack. It was excessive and clumsy, not recommended by any experts in the field.

By contrast, our Liberal alternative is endorsed by a wide range of tax policy professionals.

We would lower the tax rate on trust entities from Mr. Harper’s punitive 31.5%, down to 10%. That tax would be refundable to all trust unitholders who are Canadian residents. And the remaining proceeds would be fairly shared with the provinces.

This Liberal plan would be quite sufficient to stop any “tax leakage” from federal or provincial Treasuries, which the Conservatives claim was their prime policy objective.

But our more measured approach is smarter because it would also foster a recovery in trust values up to two-thirds of what was lost because of Conservative opportunism, manipulation and overkill.

And we would minimize the sell-off of otherwise doomed Canadian trusts to foreign buyers which, as a result of Mr. Harper’s policy, is only worsening the hollowing-out of Canadian enterprise and shifting tax revenues to the
United States.

These are worthy policy objectives.

Yours sincerely,

Ralph Goodale, M.P. (Wascana)

Goodale is a former Liberal Minister of Finance (2003 – 2006). He is currently House Leader for the Official Opposition in the House of Commons.