Taxation of Income Trusts

[Icebound]

Ah, don't you just love election promises.




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[Sulako]

I am not overjoyed at this news.

Anyone want to join with me and egg JF's house this Friday?

[Dust Devil]

Ah, don't you just love election promises.




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what election promise?

[Commonwealth]

Holy Shit,

The government just wiped out between 20 and 40 BILLION dollars worth of wealth.

Glad I'm not retiring soon.

CW

[mellow_pilot]

Ah, don't you just love election promises.




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what election promise?

The one about not F-ing with income trusts.

Love the selective memory of the party loyals.

[Icebound]

Ah, don't you just love election promises.




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what election promise?

Short memory???

From the Conservative Party Brochure:

PROTECTING INCOME TRUSTS - We know that Canadian seniors have been particularly impacted by Liberal indecision regarding the status of income trusts. In addition to providing immediate and long-term, broadbased tax relief which will ease the burden on seniors, a Conservative government will be committed to maintaining income trusts as a valuable savings and investment tool for Canadians.

http://www.vegrevillewainwright.ca/vote ... re-seniors

(I'm sure it will be disappearing soon)

And don't be parsing that particular statement... "maintaining" does not explicitly say that they won't be taxed....but every analyst in the country believed that was what they meant. For example:

http://www.betterchoice.ca/en/pensionpl ... ummary.htm

The Conservative Party would:

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Pledge to never levy any taxes against corporate income trusts, a common vehicle for pension fund investment.

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[Dust Devil]

And don't be parsing that particular statement... "maintaining" does not explicitly say that they won't be taxed....but every analyst in the country believed that was what they meant. For example:

Regardless the Liberal tax policy which they leaked and is still under investigation by the RCMP was turning into a tax loophole for companies like Telus and BCE.

Do you feel the government should just sit by and allow this to happen or would you perfer small buisness and personal taxes take up the slack?

This is a tough one for the Conservatives to deal with. The reality of the situation is it had to be done. in a few months the TSX will be back up to where it was. this is just a small blip. Actually it's probably a good time to buy while prices are low.

[BigB]

DD, cpl_atc,

Agree with you 100%. It had to be sooner than later. The Libs tested the waters while in power by cutting the dividend tax, and in theory, lessening the appeal of income trusts. That didn't work. WRT this issue, the only spin the Liberals can use is that the Conservatives "lied". Past Liberal policy showed that they themselves were very concerned about the corporate tax structure of these income trusts.

As for the Conservative election promise, I don't think it will affect the future vote to a great extent. IMO, more voters benefited from this than not. Unlike the Liberal GST promise....that impacted every consumer in Canada. The difference between these two separate events is that the Conservatives are not denying the need to break from their platform (and justifiably so), while the Liberals (or should I say our friend from Shawinigan) denied their promise altogether.

I'm not sure about you guys, but there was not one person that I talked to pre-election last year, that even brought up the topic of income trusts as being a "I'm voting them because..." issue. This is typical Liberal spin that will eventually blow away.

Have you also noticed that none of the Liberal leader candidates have commented on this issue...conspicuously quiet aren't they?


BigB,

[Icebound]

Regardless the Liberal tax policy which they leaked and is still under investigation by the RCMP was turning into a tax loophole for companies like Telus and BCE.

Do you feel the government should just sit by and allow this to happen or would you perfer small buisness and personal taxes take up the slack?

This is a tough one for the Conservatives to deal with. The reality of the situation is it had to be done. in a few months the TSX will be back up to where it was. this is just a small blip. Actually it's probably a good time to buy while prices are low.

Because I do not blindly subcribe to everything that any one political party does or proposes, I actually do not have any problem with Harper taxing income trusts, especially when it is coupled with the proposal for income splitting for seniors..

But I do have a tiny problem with the vehement holier-than-thou rhetoric about "broken Liberal promises" during the campaign.... when it is followed by his own "broken Conservative promise" to show that nothing has really changed.

In other words, as I said in a much earlier thread, I would rather have someone lie, and do the right thing for the country... rather than tell the truth and implement a detrimental policy for the country.


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[Icebound]

As for the Conservative election promise, I don't think it will affect the future vote to a great extent. IMO, more voters benefited from this than not.

,

I agree. Lower income wage earners with few investments. The "left's" typical power base.

So should we start calling Harper a "leftie" ? ? ?


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[co-joe]

Hey I have a question:

What is an income trust, and how did the gov actaully change them? Am I the only one here who doesn't read the business section of the paper?

The media just starts spouting off about how shitty this is to coorporations and how sweet it is to old fogeys, but nobody explains what the hell they are talking about.

It's like that Foley scandal in the states. Everybody keeps talking about how shitty it is, but nobody ever says what the guy did.

[Dex]

http://en.wikipedia.org/wiki/Income_trust

[goates]

What is an income trust, and how did the gov actaully change them? Am I the only one here who doesn't read the business section of the paper?

Income trusts have basically become a way for corporations to get around having to pay corporate taxes, which is why companies like Telus had announced plans to become income trusts. They send the money straight to the investors and the government doesn't see a penny of it. The government just changed this to close down this rather large loop hole in the tax system. If they hadn't, many more companies would have switched over, meaning the government would loose out on billions in corporate taxes.

An unfortunate side effect is that many people have their savings invested in these trusts because they generally have much better rates of return than a normal stocks.

[Dust Devil]

Because I do not blindly subcribe to everything that any one political party does or proposes,




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As much as you like to paint me with that brush it's simply not true. I'm quite disapointed with the Conservatives lack of movement in the area of equalization and if we want to get into that debate I'll slam the Conservatives just as hard as the rest of you. That being said sometimes governments have to make tough unpopular decisions. Unfortunatly the Liberals governed in a matter that was designed to fill their own pockets and not in a matter designed to benifit the country.

[Hedley]

I understand the gov't wiped out $28 Billion of equity in order to collect $600 million in taxes. Is that correct?

[Wilbur]

I'm somewhat surprised by a right wing party making this sort of move. During the election, they had promised to leave income trusts alone, and have clearly broken that promise. However, the tax reform package they are bringing forward seems, on the surface, to be rather "socially" driven and will significantly benefit lower income seniors.

The better off seniors who were invested in trusts just took a big hit on the equity side of their trusts, and will take a smaller hit on the income side. However, they are now allowed to split their pension income with their spouse. That will allow the higher income earner to shift some of that money to their spouse, thereby subjecting themselves to a lower tax rate.

For example, a lower income couple with a pension income of $25k per year from one source (blue collar dad and stay at home mom), would be paying about 15% income tax. They will now be able to assign $12.5k as income to each person, and thereby have incomes low enough that they pay no income tax. Higher income couples will also see some benefit, but it will decrease the higher their income.

As for wiping out equity, yes for the people holding trusts, but not for the economy overall. Stocks are only worth what someone is willing to pay for them. Now people will pay less for any given trust, and take their now remaining money and invest it in something else. It's not so much an issue of lost equity as it is a redistribution of equity.

[Driving Rain]

Wibur guote:]

will significantly benefit lower income seniors.

Not quite true Wilbur. It will ony benefit lower income married seniors, because the tax law will provide the legalization of income spliting.

Look down the road what happens when one of the spouses dies. Statiscs Canada say woman outlive men by quite a margin. There is no benefit what so ever in the new laws for widow(er)s. That's when they'll get dinged big time. This whole episode has been a major setback for the single elderly the ones in most need of relief.

I guess you could look at this in the cold light of day and say the government wants to hasten their departure from this world and take as much of their money before that happens.

[the_professor]

I understand the gov't wiped out $28 Billion of equity in order to collect $600 million in taxes. Is that correct?

That's correct, because the government can't do grade 2 math, and would risk infuriating millions of voters for that sort of gain.

$600M is the *annual* tax loss.

Check the markets in three weeks. Those losses will rebound significantly. Markets always overreact in the short term.

[the_professor]

Had Paul Martin been responsible for making the call on this, that dumb son of a bitch would have spent the next year chasing his tail and gathering 12,000 opposing opinions on the matter. At least Harper acts decisively, and stands by his actions.

[Icebound]

Because I do not blindly subcribe to everything that any one political party does or proposes,

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As much as you like to paint me with that brush it's simply not true. .

No, you misunderstood. Since I have, in the past, been "painted with that brush" in these groups, so I was only making it very clear about myself.

If I reflect long and deeply, there may be a few in this group whom I would "paint with that brush", but I haven't given any particular thought about whether you would fit or not, and for now I will take your word that you would not.

I reserve the right to change my mind, of course ....

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[Dust Devil]

I understand the gov't wiped out $28 Billion of equity in order to collect $600 million in taxes. Is that correct?

It won't take long for that equity to return. As with any change to corporate tax law there is always a knee jerk reaction to the market.

[Rubberbiscuit]

Even if it was a broken election promise the Conservatives have light years to go before even coming close to the level of lies, and corruptions the liberals sunk to. Another reason for the liberals to keep quiet on the subject.

[rd1331]

Plain and simple it needed to be done. I'm glad they boke that promise. The markets will correct back up to where they where, and then the goverment will have more income, so we the tax payers will individually have to pay less.

I also don't think that the conservatives thought the loop hole would get as bad as it was going to get when they made that promise. Imagine if everyone used the loophole. Guess what then are taxes would go up and u would be bitching that they let this loop hole go and didn't do something about it.

Don't think short term, its all about the long term.

[EI-EIO]

had to be done, or seniors would be rich and everyone else would be paying 60% tax. The Liberals hadn't the bottle to stop it when it was a much smaller problem.

[Dex]

Income trust decision not a broken promise, Harper says

http://www.canada.com/victoriatimescolo ... c8&k=45660