# tory tax changes



## MACSPECTRUM (Oct 31, 2002)

tories announced changes to tax code to tax income trusts which were ways that companies avoided paying taxes and, from what i understand, offered higher payouts for investors

also, seniors will be able to income split

the analysts don't know if this is a good or bad thing long term, but any investments holding income trusts will see immediate losses as the market reacts

on the surface i thought this was as good thing to keep corporations paying their taxes


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## SINC (Feb 16, 2001)

Senior income splitting is a wonderful benefit for those of us who are near retirement and will be on fixed incomes. Since my RRSPs will generate double what my wife's will, it will increase our disposable income. Not by a great amount I suspect, but enough to use as a possible hedge against inflation in future years.


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## Beej (Sep 10, 2005)

If the Income Trust changes finally remove the significant distortion in corporate taxation, then good. A 4-year transition sounds ok (3 or 5 would have also sounded ok). I'd rather see attention given the depreciation rates, but this was more immediate. 

The Liberals fixed, from my understanding, the Income Trust issue with regards to taxable Canadians getting normal corporate dividends vs trust payouts. Gaps still existed for foreign investors and non-taxable Canadian investments (RRSP?). I guess these gaps turned out to be more significant than previously assumed; the Bell/Telus announcements must have spooked Finance Canada.

The income-splitting thing, which I believe was advocated for by Garth Turner, may have been a good way to soften the impact on seniors, a group that is more affected by changes to dividend/trust taxation than most others.


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## bryanc (Jan 16, 2004)

I can't claim to fully understand the detail, but I'm pleased to hear of any changes that remove tax-loopholes exploited by corporations.

It sounds good to me, but, we'll have to wait and see what the implications are when the dust settles.

Cheers


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## MacDoc (Nov 3, 2001)

I think it's a needed tweak from what I understand tho I can understand the dismay of the corporations having some of their goodies clawed back. There was just too much of a rush to the exits into IncTs not to have some suspicions that it was unbalanced.

From what I understand the income trust concept is good for investors bad for gov in good times and may be horrid for investors if things go south.

The seniors move makes all sorts of sense.


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## Dr.G. (Aug 4, 2001)

The TSX is down 4% at 1PM here in St.John's, so someone does not like these changes. I have a feeling that BCE stating that it was changing into a trust was the straw that broke the camel's back.


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## RevMatt (Sep 10, 2005)

Dr.G. said:


> The TSX is down 4% at 1PM here in St.John's, so someone does not like these changes.


As a general rule, if the short term investors don't like it, I do


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## MasterBlaster (Jan 12, 2003)

.


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## RevMatt (Sep 10, 2005)

MasterBlaster said:


> Now to play investment shuffle :greedy:
> 
> I'll have to move out of my income trusts and get more dividends instead. I'll have to see what is the best thing to do with my assets. My rule is that I like my investments to all be paying me something every month. I will be seeking some advice on this for sure! I don't like to just hold onto something for 20 plus years, I like to get immediately some cashflow from everything if possible.


That kind of thinking is a big part of the problem. Corporations have to satisfy investors like you, instead of doing intelligent thinking about the future.


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## Beej (Sep 10, 2005)

RevMatt said:


> That kind of thinking is a big part of the problem. Corporations have to satisfy investors like you, instead of doing intelligent thinking about the future.


Dividend stocks play an important role (e.g. "widows and orphans"). Each company chooses to redistribute a portion of profits or invest in further growth. I'm not sure about monthly disbursements (who does that?) but a non-dividend stock is implicitly investing on behalf of its owners into itself. Nothing wrong or right about that, just a specific approach that suits some more than others.


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## martman (May 5, 2005)

It all sounded like a good idea to me but:
http://www.thestar.com/NASApp/cs/Co...200&call_pageid=968332188492&col=968793972154


> Stocks plummet, Liberals open fire
> Opposition launches attacks against income-trust policy
> Nov. 1, 2006. 05:14 PM
> CANADIAN PRESS
> ...


Economics isn't my forte, but this doesn't look like a healthy reaction. Comments?


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## Beej (Sep 10, 2005)

The money "lost" only existed through expected tax savings. While a consideration, it should not be an absolute barrier to public policy. It's messy but not as the Liberals are trying to claim (nor as Flaherty worded it in the press conference I saw). Governments should not ignore the importance of being competitive in attracting investment but, within the system, there shouldn't be major distortions that guide business structure. 

A basic recommendation is that tax policy should minimise how much it distorts behaviour unless that distortion is a policy goal.


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## MacDoc (Nov 3, 2001)

To me ( non expert ) the Liberal stance sound more political chest thumping than correct policy.

After all the Libs were tweaking as well.  

Stay on the climate.


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## adagio (Aug 23, 2002)

The Feds did the right thing. The long term health of the economy depended on their actions. 

I stand to take a very minor hit since my exposure to trusts was limited. I feel bad for those taking a huge loss but not that bad. Any financial advisor worth his salt would have developed a healthy, all round, portfolio for their client.

A certain amount of greed was involved here. Large companies such as Telus had hoped to jump on the bandwagon of paying no taxes. Investors have also been driven by greed to a point. Some of the trusts were paying out big monies compared to bonds or GIC's. However, there was always risk involved, unlike GIC's. Anyone who placed the bulk of their investments into trust funds was a fool.

BTW, those smacking their lips in glee thinking a bunch of rich folks got nailed.... think again. There are thousands of small investors such as myself who rely on the markets for income. It could be your mom/dad or your grandparents.


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## Beej (Sep 10, 2005)

McCallum, who is an expert, has been political since day one with the party. A prime example of politics over reason and the corrupting influence of greasing for votes. He used to do good work with RBC and provide interesting commentary on economic matters. Still, no worse than most (well, maybe a little  ). 

The Official Opposition opposes even, it seems, things that make sense. In a case where sense and politics align, I hope the Libs just accept that they got snookered and vote the right way. Make a stink about lack of warning, how it could have been done "better" (with a leak?), but do what makes sense.


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## Voyager (Aug 7, 2005)

The government had to do something. I think BCE and Telus were just the beginning of a flood of companies who were going to set up as trusts, diverting a lot of tax money away from the government. And yes, they did break a campaign promise but it had to be done.


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## zoziw (Jul 7, 2006)

Voyager said:


> The government had to do something. I think BCE and Telus were just the beginning of a flood of companies who were going to set up as trusts, diverting a lot of tax money away from the government. And yes, they did break a campaign promise but it had to be done.


I think you are right. There are a lot of income trusts in the energy sector, with more popping up everyday, but when BCE and Telus said they were going in that direction as well, I get the impression that the .gov decided they better cut this off now before the floodgates opened.


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## adagio (Aug 23, 2002)

Woohoo!! MY portfolio is *UP* $300.

It just proves balance is key. Anyone loosing more than a couple of thousand was either stupid or greedy.


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## bryanc (Jan 16, 2004)

I think I'm pretty well-known around here for my opposition to the Conservative agenda, but this is one that I will admit they've got right.

You can't allow corporations to avoid paying taxes. I'm pleasantly surprised that it's the Conservatives who've closed this loophole.

And I think that the Liberal's complaints are purely cheap political posturing. They should be ashamed of themselves.

The only legitimate complaint I can see being made here is about the lack of warning. If you're going to make changes in the tax system that have major implications to millions of people, you should announce it well in advance and allow the market to prepare for the shift. There are probably a significant number of people who got screwed by this, and that should've been avoided.

Cheers


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## adagio (Aug 23, 2002)

bryanc said:


> The only legitimate complaint I can see being made here is about the lack of warning. If you're going to make changes in the tax system that have major implications to millions of people, you should announce it well in advance and allow the market to prepare for the shift. There are probably a significant number of people who got screwed by this, and that should've been avoided.


Nice idea but there was no way around this. No matter what, the market would have gone into a tizzy. When dealing with stocks there is no such thing as "preparing". Any hint of what was to come would have the same result. You're dealing with an entity that deals in what ifs, not necessarily in reality.

A smart advisor or fund manager such as mine would have had alarm bells going off when Telus then BCE announced their intentions to go income trust. The clock was ticking. If it hadn't been the current government then surely one down the line would have had to step in. The loophole had to be closed.


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## Paul O'Keefe (Jun 3, 2005)

I think the Conservatives made the right decision. Is this something that has to go through the legislature. The liberals would look foolish to oppose something like this. The government just couldn't afford the major tax losses as big business was moving to switch.


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## da_jonesy (Jun 26, 2003)

bryanc said:


> I think I'm pretty well-known around here for my opposition to the Conservative agenda, but this is one that I will admit they've got right.
> 
> You can't allow corporations to avoid paying taxes. I'm pleasantly surprised that it's the Conservatives who've closed this loophole.
> 
> ...


I have to agree... This had to be done. It was the right thing to do.

Unfortunately for the Conservatives they couldn't have handled it in a worse way. They've now pretty much pissed off the central Canada business concerns, I can't see them getting much support from businesses east of Manitoba. The biggest downside is that without that support (which was an important part of their base in Ontario and Quebec) they are pretty much going to be that regional party they are so desperately trying not to be.

But again... it was the right decision and the Liberals are being petty and opportunistic in criticizing them for it.


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## Dr.G. (Aug 4, 2001)

"Federal Conservatives in Alberta are ripping up their membership cards because they feel betrayed by the Harper government's decision to tax income trusts, says a Calgary tax lawyer.

John Brussa, who created the first energy income trust in the 1980s, said he was shocked that the federal Conservatives took what he considers such drastic action. Federal Finance Minister Jim Flaherty announced Tuesday that the federal government would introduce a tax on income trust distributions." 
CBC.com

Can you imagine Harper losing his seat in Calgary as a result of this action? Stranger things have taken place in politics. We shall see.


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## RevMatt (Sep 10, 2005)

It's been an interesting reaction. And where the Liberals are right on this one is that the real problem is not that the change was made (I agree it should have been), but that there had been a campaign promise explicitly not to do this. Many of the reactions that I have heard have been along the lines of "we thought this would happen some time. But not during this administration, because of the promise we received." As I say, interesting.


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## adagio (Aug 23, 2002)

The Cons could very well have lost the election by doing this. I give them credit for putting the good of the country ahead of their own re-election because I'm sure that possibility was discussed before the announcement went ahead.

For those tearing up their Conservative party memberships I'd suggest their anger should be towards the large, greedy corporations like Telus and BCE who precipitated the move.

EDIT: Rev, unfortunately this was one promise that had to be broken. The income trust scene has changed dramatically since the promise was made. The cons know this move could be political suicide and it wasn't a promise broken lightly.


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## RevMatt (Sep 10, 2005)

adagio said:


> EDIT: Rev, unfortunately this was one promise that had to be broken. The income trust scene has changed dramatically since the promise was made. The cons know this move could be political suicide and it wasn't a promise broken lightly.


I agree. The mistake was making it in the first place, when the writing was already on the wall. Mind you, you know what they say about hindsight. But yeah, I don't mind saying that Harper has gained some support from me on this one. I'm still not going to vote for him, so it's not a very valuable support, but there you are


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## SINC (Feb 16, 2001)

Good on Harper for having the brass necessities to make a tough decision in spite of its unpopularity. I doubt it will cost him his seat and most Canadians should remember it was a Liberal policy and it took real courage to change it for the good of all Canadians. If that loses Harper votes, or doesn't gain him votes, then Canadians are a fickle bunch indeed. Continuing to vote Green or worst yet NDP is a wasted vote in today's political climate. We need a stable majority government for at least one term, be it Liberal or Conservative, the only two parties with a snowball's chance in hell of accomplishing anything.

And voting for the Bloc is voting for a provincial party and that is just plain wrong. They are not a national party and do not belong in Parliament. Elections rules need to be changed to correct that situation.


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## MacDoc (Nov 3, 2001)

Yes I agree - this shows the kind of leadership that should be there consistently.
Now if he actually carries through with a strong green plan and stops toadying to the oil patch he can gain back some lost ground tho I suspect Quebec is a write off as is Ontario - so no majority for Stevie and maybe not even a renewal.

Depends on how stupid the Liberals look - which they have done in several ways. Notably 









and the howling about the Income Trust flip flop. I admire politicians who will change course when it is correct to do so.

Less ideologue - more governance please.


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## zoziw (Jul 7, 2006)

> Can you imagine Harper losing his seat in Calgary as a result of this action? Stranger things have taken place in politics. We shall see.


Fiscal conservatives in Calgary have no place else to put their vote. Whatever the ROC thinks about the NEP, in Calgary it is still considered a direct attack on Alberta by the federal Liberals and the energy sector still hasn't forgiven them.

Yesterday, some people compared this to the NEP, it isn't and things should start to balance out again shortly, with yesterday being the big hit.

Harper's seat is as safe as it ever was.


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## guytoronto (Jun 25, 2005)

This is a Red Letter day.

Nobody in this thread wants to string up the Conservatives for this. Everyone agrees Harper and party did the right thing?

What is this world coming to?


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## MacDoc (Nov 3, 2001)

What it SHOULD have been the day Harper walked into Parliament as PM.......and hasn't.

This tax change is easy - let's see the Green plan re-invented that also needs a total makeover and reversal of strategy.
Put every city above 200,000 on a mandatory Portland Oregon green plan and the oil patch on serious notice and for cuts NOW - THEN I'll be impressed at "doing the right thing".

Blair is.....let's hope Harper takes notes.


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## zoziw (Jul 7, 2006)

> The income trust scene has changed dramatically since the promise was made. The cons know this move could be political suicide and it wasn't a promise broken lightly.


I agree. There have been several things that the Conservatives promised in the last election that haven't panned out the way they said that they would, however, in this situation, I'm not going to point any fingers at them for broken promises given what has happened with income trusts lately.

Good for them for keeping this entirely under wraps from everyone until the announcement. At least, I hope that is the case when the trading in trusts is analyzed...unlike last time.


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## PenguinBoy (Aug 16, 2005)

Dr.G. said:


> Can you imagine Harper losing his seat in Calgary as a result of this action? Stranger things have taken place in politics. We shall see.


No - I can't see this happening. IIRC, the Conservatives had something like 2/3 of the popular vote in Alberta, likely more than that in Harper's riding (should be easy enough to google the exact numbers).

It would take more than a few p*ssed off tax lawyers to change this significantly.


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## RevMatt (Sep 10, 2005)

SINC said:


> Good on Harper for having the brass necessities to make a tough decision in spite of its unpopularity. I doubt it will cost him his seat and most Canadians should remember it was a Liberal policy


Actually, it's an old law, that the Liberals had simply chosen not to change at the time. They were not the ones to promise never to change it. The explanation for his promise-breaking, has been Harper saying that things have changed. In other words, he agrees that the Liberals were right not to tax Trusts back then. And the Liberals haven't said that they wouldn't change it now, only that Harper is evil for daring to change his mind.

All of that aside, you are quite right when you say:



SINC said:


> and it took real courage to change it for the good of all Canadians.





SINC said:


> If that loses Harper votes, or doesn't gain him votes, then Canadians are a fickle bunch indeed.


When a politician wipes his butt he both gains and loses votes. Of COURSE voters are fickle. It is not entirely unjustified for our politicians to treat us like brainless lumps (which they do), because the grand we are fairly consistently shallow. As one commentator pointed out, if the timing works on this, Harper will win big time. In 6 months or so, all but the most hardcore of tax lawyers and investment brokers will have forgotten. And 6 months ish from now is when seniors will begin to see the big reductions in their taxes. It's a gamble, but one that the Con strategists obviously were willing to make.



SINC said:


> Continuing to vote Green or worst yet NDP is a wasted vote in today's political climate.


You are entitled to your opinion, and I will defend your right to have it. Even when I personally think it is dumb and borderline offensive .



SINC said:


> We need a stable majority government for at least one term, be it Liberal or Conservative, the only two parties with a snowball's chance in hell of accomplishing anything.


No, we need our politicians to pull their collective heads out of their collective *sses, and figure out how to make a minority work.



SINC said:


> And voting for the Bloc is voting for a provincial party and that is just plain wrong. They are not a national party and do not belong in Parliament. Elections rules need to be changed to correct that situation.


The same was said about Reform once.


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## MacDoc (Nov 3, 2001)

What he said :clap: sic em RevM.


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## HowEver (Jan 11, 2005)

So, when will the government (and which government will take this on) go after the rest of the vast and myriad ways in which corporations avoid paying taxes? Never?


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## RevMatt (Sep 10, 2005)

HowEver said:


> So, when will the government (and which government will take this on) go after the rest of the vast and myriad ways in which corporations avoid paying taxes? Never?


Can't we enjoy one victory for a day or two? 

There will always be ways that corporations avoid taxes. No doubt Beej would point out that allowing ways out of taxes is a part of how an economy is competitive, and how governments encourage economic prosperity and "create jobs". Even though he is Beej, he's not wholly wrong 

There is, of course, an enormous difference between allowing small companies to take risks and grow and become profitable, and pampering already profitable companies who are too greedy to live up to their societal responsibilities. Maybe now that it is much, much harder for companies to buy politicians and parties we will begin to see some real work on fairly taxing corporations.


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## Beej (Sep 10, 2005)

RevMatt said:


> Can't we enjoy one victory for a day or two?
> ..............................
> There will always be ways that corporations avoid taxes. No doubt Beej would point out that allowing ways out of taxes is a part of how an economy is competitive, and how governments encourage economic prosperity and "create jobs". Even though he is Beej, he's not wholly wrong
> ..............................
> There is, of course, an enormous difference between allowing small companies to take risks and grow and become profitable, and pampering already profitable companies who are too greedy to live up to their societal responsibilities. Maybe now that it is much, much harder for companies to buy politicians and parties we will begin to see some real work on fairly taxing corporations.


No, there hasn't been enough mindless attacking going on around here lately. 
..............................
I wouldn't put it that way. If taxes are being avoided legally, it is up to government to fix it (duty to people) and not up to companies to just ignore it (duty to shareholders). Tax and regulatory rules that are created by government: their responsibility to maintain their creation. 

If personal taxes were voluntary, low revenues would be a system design fault (idealism) while pinning it on people would be pointless finger-pointing. Mandatory tax collection from paycheques was actually an 'invention' that greatly increased the systems' effectiveness. 

Like I said, taxes shouldn't distort behaviour unless the distortion is the policy goal. Short of actually being an accounting firm, corporate taxes should be designed, as much as possible, to have companies focus on their business and not how to game the system. 

Illegal tax avoidance is another matter.
..............................
There is no reason to distinguish between small and large. Small business is plenty corrupt with the disadvantage of often not being worth suing to correct the behaviour. Silly loopholes are no better if they let small businesses get away with things.

I'm not sure many people realise the long-term and positive effect that Chretien's finance reform will have on Canada. It has set-up a stronger self-correcting system of governance that has set us on a vastly different path than the U.S. That doesn't mean the best options involve taxing corporations much, but that's another matter. beejacon

A fine opportunity to stand on this well-placed soapbox. Thanks for the intro RM.


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## SINC (Feb 16, 2001)

RevMatt said:


> You are entitled to your opinion, and I will defend your right to have it. Even when I personally think it is dumb and borderline offensive .


Anyone who even holds the thought that either the Greens or the NDP stand a remote chance of forming a federal government is dreaming. If you find that fact offensive, so be it.




RevMatt said:


> The same was said about Reform once.


No, you are wrong, it wasn't. Reform was started in the west as a party with the intention to become a national party and form a federal government. 

The Bloc on the other hand, is a separatist provincial party and should be banned from running federally. But as long as they are allowed to run federally, they will continue to elect more members than the NDP and the Greens for the foreseeable future. That too is hard to dispute.


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## Beej (Sep 10, 2005)

SINC said:


> Anyone who even holds the thought that either the Greens or the NDP stand a remote chance of forming a federal government is dreaming. If you find that fact offensive, so be it.


That isn't the only goal in voting, even aside from Canada's political funding system. The 'status quo' chance approach will generally just lock in two parties that compete over swapping the same voters over-and-over, much like beer companies compete for market share in Canada.


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## MacDoc (Nov 3, 2001)

We have many of our best pieces of legislation thanks to minority govs and the "conscience of the left".


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## SINC (Feb 16, 2001)

MacDoc said:


> We have many of our best pieces of legislation thanks to minority govs and the "conscience of the left".


Agreed.

BTW, which one of those pieces of legislation was passed by the NDP or the Greens? 

Just curious.


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## RevMatt (Sep 10, 2005)

SINC said:


> Anyone who even holds the thought that either the Greens or the NDP stand a remote chance of forming a federal government is dreaming. If you find that fact offensive, so be it.


It was the "wasted vote" sentiment that I slightly objected to, not the probability of winning. Beej has picked up on that point.



SINC said:


> No, you are wrong, it wasn't. Reform was started in the west as a party with the intention to become a national party and form a federal government.


That may have been what the Reform wanted, but that was not necessarily how they were being perceived on this end of the country. Over here, they were called a Western Separatist party, and were very directly compared to the Bloc. That continued right up until the renaming to CRAP.



SINC said:


> The Bloc on the other hand, is a separatist provincial party and should be banned from running federally. But as long as they are allowed to run federally, they will continue to elect more members than the NDP and the Greens for the foreseeable future. That too is hard to dispute.


Possibly. But if the Cons can take seats from them, then so can anyone else. And you are certainly correct that, with their similar social views, the Bloc hurts the NDP enormously. I do agree that there is something distinctly odd about having a party who's explicit desire it is to harm the nation as an active force in parliament. Banning them would, I suspect, only make things worse, however.


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## RevMatt (Sep 10, 2005)

SINC said:


> Agreed.
> 
> BTW, which one of those pieces of legislation was passed by the NDP or the Greens?
> 
> Just curious.


The gentleman quoted in my sig aptly demonstrated that it is not necessary to be in power to set the agenda. Just take a look at how many of his policies and ideas were "borrowed" by whomever was in power and implemented.


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## macmac (Oct 22, 2006)

I hope the tories eliminate the Capital Gains tax.... I hate it....

that's all for my rant and rave....


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## SINC (Feb 16, 2001)

RevMatt said:


> The gentleman quoted in my sig aptly demonstrated that it is not necessary to be in power to set the agenda. Just take a look at how many of his policies and ideas were "borrowed" by whomever was in power and implemented.


Having met the gentleman to whom you refer in person, I am well aware of his contributions to this country. My profile lists him as my favourite Canadian BTW.

But that does not change the fact that the NDP will never form a federal government in my lifetime, nor I suspect, in yours. That is the reality.


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## Beej (Sep 10, 2005)

SINC said:


> But that does not change the fact that the NDP will never form a federal government in my lifetime, nor I suspect, in yours. That is the reality.


But if no one voted for them (shivers of joy), would the policies have happened?


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## RevMatt (Sep 10, 2005)

If no one voted for the NDP we would be stuck with the piece of crap that is the Clean Air Act. If no one voted for the NDP, the Cons never would have got a chance to be the government (hrm, maybe that would have been a good thing? ). Of course their policies and plans would not have been borrowed if they had no popular support.


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## SINC (Feb 16, 2001)

Beej said:


> But if no one voted for them (shivers of joy), would the policies have happened?


I suspect they would have happened. 

Years back,I used to vote NDP in the Broadbent years, but after watching crushing defeat after defeat, I finally resolved myself to the fact that I was wasting my vote. 

When they elected that idiot Layton as leader, it forever clinched any thought of returning.


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## MacDoc (Nov 3, 2001)

Rve Matt once more has it right or errr left or err.......well Tommy and Lester B rule :clap:


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## FeXL (Jan 2, 2004)

RevMatt said:


> Over here, they were called a Western Separatist party, and were very directly compared to the Bloc.


Of course they were. Nothing like a good old fashioned FUD smear campaign, sponsored by your opponents who have no leg of their own to stand upon, to yank the carpet of credibility out from under your feet.

Welcome to contemporary politics. 

Sorry...


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## Paul O'Keefe (Jun 3, 2005)

MacDoc said:


> Put every city above 200,000 on a mandatory Portland Oregon green plan


Here! Here!


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## HowEver (Jan 11, 2005)

SINC said:


> I suspect they would have happened.
> 
> Years back,I used to vote NDP in the Broadbent years, but after watching crushing defeat after defeat, I finally resolved myself to the fact that I was wasting my vote.
> 
> When they elected that idiot Layton as leader, it forever *clinched* any thought of returning.


I expect that Layton's election *precluded* any thought of your returning to voting for the New Democatic Party.


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## SINC (Feb 16, 2001)

HowEver said:


> I expect that Layton's election *precluded* any thought of your returning to voting for the New Democatic Party.


Dead wrong. 

Clinched: “To settle definitely and conclusively; make final.”


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## HowEver (Jan 11, 2005)

SINC said:


> Dead wrong.
> 
> Clinched: “To settle definitely and conclusively; make final.”


Thoughts aren't clinched. Voting isn't clinched. Both might be precluded, but in actual usage, they aren't "clinched."


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## SINC (Feb 16, 2001)

HowEver said:


> Thoughts aren't clinched.


Mine are.


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## RevMatt (Sep 10, 2005)

FeXL said:


> Of course they were. Nothing like a good old fashioned FUD smear campaign, sponsored by your opponents who have no leg of their own to stand upon, to yank the carpet of credibility out from under your feet.
> 
> Welcome to contemporary politics.
> 
> Sorry...


This from the province that still holds a grudge about the NEP. Holy ancient history, batman.

The Reform party, at various times, did indeed threaten the separation of Alberta. They may not have meant it, and those comments were undoubtedly blown out of proportion in order to bolster the fortunes of both PC and Lib (and probably others). But it was not an entirely fabricated stance.

And what does FUD stand for?


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## FeXL (Jan 2, 2004)

RevMatt said:


> This from the province that still holds a grudge about the NEP. Holy ancient history, batman.


"The doom of man is to forget." From one of my favourite movies, applicable here. The long term fallout of the NEP, which ran into of tens of billions of dollars, is not a forgettable experience, whether last year or last century. I'm sure no other province would (rightfully) forget that, either.



RevMatt said:


> And what does FUD stand for?


Fear, Uncertainty & Doubt.


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## SINC (Feb 16, 2001)

RevMatt said:


> The Reform party, at various times, did indeed threaten the separation of Alberta. They may not have meant it, and those comments were undoubtedly blown out of proportion in order to bolster the fortunes of both PC and Lib (and probably others). But it was not an entirely fabricated stance.


Fact remains that we allow a provincial party bent on destroying the country sit in our House of Commons and that is just wrong. Dead wrong.


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## Beej (Sep 10, 2005)

SINC said:


> that is just wrong. Dead wrong.


They must be allowed to for the good of the country. Our various freedoms do not just exist, "if you agree". 

They ran using the same system and won seats. End of story unless broken laws can be demonstrated. That is the voters' choice and it must not be trampled. 

So, unless we're going to introduce intrusive "traitor" laws (we may still have some old ones on the books) their political views stand, despite being sad and misguided. Sad and misguided is the voting base for the...aw heck, I'll leave them alone for one post.


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## MacDoc (Nov 3, 2001)

:clap:
Europe shows us another route.


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## MACSPECTRUM (Oct 31, 2002)

oil and gas based income trusts going to lobby Ottawa for exemption from recent income trust changes

poor big oil

also, Harper campaigned on a promise to NOT change income trusts
does this make him the new Mr. Dithers?
I bet if the Liberal pulled this stunt, there would be many a post with the word "fiberals" in the post


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## Mugatu (Mar 31, 2005)

*Fiberals!!!*



MACSPECTRUM said:


> I bet if the Liberal pulled this stunt, there would be many a post with the word "fiberals" in the post


Ah, the classic "No GST". I giggle with glee each time I get to write that. Now I've got "No taxing Income Trusts". Oh glorious day!


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## PenguinBoy (Aug 16, 2005)

I just got back from a "town hall" hosted by Jason Kenney for his own and Stephen Harper's ridings. This event took place in a school gym, and it was pretty much a standing room only crowd.

Virtually all the discussion was around the recent changes with regards to income trusts - and there was a lot of anger in the room. This is right in the middle of the Conservative heartland, neither of these ridings has ever elected anything other than Conservative, Reform, or Alliance MPs as long as they have existed in their current form.

My sense is that the Conservative introduced this change as they really thought it was the right thing to do in light of the flood of conversions to income trusts. It took guts to go through with this, as they alienated some of their core supporters and at the same time, many of the folks who view this as a change for the better won't be voting Conservative any time soon. It probably would have been easier, and likely more politically expedient, to just leave this alone till the next Parliament. I also thought that this change was handled well as there seems to be no evidence of any sort of leaks or unusual trading patterns in trusts in the days leading up to the announcement.

Some suggested that the Conservatives should have seen this coming last year, and thus should not have campaigned on a promise not to change the tax rules for income trusts. This seems like a legitimate criticism to me, but then again, hindsight is always 20-20. There was also some suggestion that the rules could have made exceptions for existing trusts, or certain types of companies. I don't know enough about the details to know if these suggestions are good or bad, but when companies like Telus and BCE were looking to convert to trusts to avoid taxes it is pretty clear that something needed to be done.


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## Dr.G. (Aug 4, 2001)

PB, the Globe had an interesting front page article today re how Encana was going to declare itself a trust this week, which is what caused the Harper government to declare the end to new trusts last week.


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## adagio (Aug 23, 2002)

A lot of folks have been on Harper's back about breaking a promise. I had a chat with my financial advisor the other day. He said a year ago no one envisioned the degree that income trusts would take off. They've been around for years and generally most of the companies were well suited to this business format. There was some loss of federal tax but nothing to jeopardize economic well-being.

Plenty has happened since. In the last 6 months income trusts have taken off like wild fire. What has been worrisome is the type of companies going this route. Not only is the loss of revenue a problem but also the long term health of the whole Canadian economy.

Along comes Telus then BCE then EnCana. We have a huge problem. It's too bad Harper didn't have a crystal ball. Not only didn't he know but also THE top people of TD Waterhouse had NO idea one year ago that large corporations would choose to go income trust.

You may not like Harper but he just did a very brave thing. He put the economic welfare of our country ahead of his own political and party aspirations. Not only himself but the whole Conservative party will pay and pay BIG for him turning against the energy trusts in Alberta.


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## Dr.G. (Aug 4, 2001)

"You may not like Harper but he just did a very brave thing. He put the economic welfare of our country ahead of his own political and party aspirations." Good point, Adagio. 

I know that I was making $9000 per year with the income trusts that were in my RRSP. I did not actually buy them as trusts, but they converted to a trust, and I merely kept them, taking in the interest each month. Last week, I got hammered, losing about $10,000 from my RRSP. However, over the past couple of years, I have gained over $10,000 of interest, so I broke even. I know someone who lost well over 50 times what I have lost, but as a multi-millionaire, this was just a blip of this person's bottom line. This person is also a strong Harper supporter. I would be interested in hearing how this person views the announcement last week.


However, while I took a financial blow, at least on paper, I am supportive of this move. It was sudden, and there is a 4-year grace period for those companies who are currently trusts. However, if the government is not getting tax dollars from companies, who other than those of us in the middle class are most likely to be seen as a source of replacement funding for this lost revenue?


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## adagio (Aug 23, 2002)

That's the problem Dr G, the revenue has to come from somewhere.

I'm sorry you took a hit. Hopefully you didn't panic sell. You should have about 4 years to still get some revenue. I have some income trusts buried in one of my funds. Fortunately I'm very well diversified and so is that fund. My portfolio has gone up slightly.


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## Dr.G. (Aug 4, 2001)

Adagio, very true. No, I did not panic sell. I did not sell during the crash of '87, but actually bought some stock the day after, and have not regretted it since. 

I had Esprit Energy, that converted to Esprit Energy Trust. Then, it was taken over by Pengrowth Energy Trust. http://www.cbc.ca/money/story/2006/07/24/pengrowth-esprit.html

Pengrowth took a big hit, but they are committed to paying our .25 a month. So, that is nearly $8000 a year. It might not be sustainable, depending upon the price of oil, but most of my RRSP is in Fortis, Shoppers Drug Mart and Premium Canada Savings Bonds, so this is a speculation I am able to take with comfort. 

I do feel for those seniors that were dependent upon the monthly income from trusts.


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## TroutMaskReplica (Feb 28, 2003)

in my view, the issue here isn't whether income trusts are good/bad, or that harper did/did not do the right thing, it's that the harper government caused a run up in the income trust sector then pulled punch bowl away, causing billions in investor capitol to evaporate.

flaherty and co. should have made this move or signalled their intention to make this move as soon as they were elected, or not done it all.


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## bryanc (Jan 16, 2004)

TroutMaskReplica said:


> in my view, the issue here isn't whether income trusts are good/bad, or that harper did/did not do the right thing, it's that the harper government caused a run up in the income trust sector then pulled punch bowl away, causing billions in investor capitol to evaporate.
> 
> flaherty and co. should have made this move or signalled their intention to make this move as soon as they were elected, or not done it all.



I don't think you can blame the Cons on this one. The legislation that allowed the Trust situation to evolve was passed on the Liberal watch.

I'll state very clearly, as someone who has never voted conservative, that this action on the part of the Harper government, gives me pause. There's some spine there that I never would've believed. Harper is doing the right thing, even though it's likely to cost him and his party dearly. I'm truly impressed.

Unfortunately for the Cons, I still won't vote for them. But I hope that they gain the respect they deserve for this genuine leadership.

cheers


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## PenguinBoy (Aug 16, 2005)

adagio said:


> A lot of folks have been on Harper's back about breaking a promise. I had a chat with my financial advisor the other day. He said a year ago no one envisioned the degree that income trusts would take off. They've been around for years and generally most of the companies were well suited to this business format. There was some loss of federal tax but nothing to jeopardize economic well-being.
> 
> Plenty has happened since. In the last 6 months income trusts have taken off like wild fire. What has been worrisome is the type of companies going this route. Not only is the loss of revenue a problem but also the long term health of the whole Canadian economy.
> 
> ...


Excellent post Adagio!

That is my feeling exactly - the government saw that something had to be done, and so they acted quickly and decisively, even though they knew it would cost them some support from some of their most loyal supporters.

It also took some guts to hold a town hall right after this announcement, and listen to two hours of angry rants, but it was good to let people vent. I just got notice of the "town hall" a couple of days ago, so I don't know if it was in the works before the announcement or not.

It will be interesting to see if this loss of support translates into a loss of seats. The Conservatives took over 70% of the popular vote in the last election* in the two ridings represented in the "town hall", with the remainder of the vote split between several other parties. I doubt they will lose these seats, even if some former Tory supporters are still angry about this when the next election comes in a few months. A lot of the former Tory supporters in these ridings will not be able to bring themselves to vote Liberal under any circumstances, so they may either not vote, hold their nose and vote Tory, or vote for some candidate that they know can not win as a protest. If they lose any seats over this, my guess will be it will be in ridings where people might have been exposed to income trusts and where there is some, but not overwhelming, Tory support - perhaps ridings like Edmonton Centre, or maybe some ridings in the 905.
________________

*References: http://www.parl.gc.ca/information/a...r.asp?Language=E&Search=Det&Include=Y&rid=879 and http://www.parl.gc.ca/information/a...r.asp?Language=E&Search=Det&Include=Y&rid=880


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## MacDoc (Nov 3, 2001)

Bryanc has it right.

The Liberals were clearly in the tweaking mood - that was all the flap about the leaks.
The error the Cons made was in the promise not the change. Willingness to correct and error is the sign of a pragmati and mature governance instead of ideology driven.
It's one reason I admire McGuinty for the health tax. It was needed - he did it - we now a surplus ( tho that will not last long as the recession cuts in ).

As for "wealth loss"...horsepucky.....when library or a forest burns down THAT's loss of wealth.
The rest is money.


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## RevMatt (Sep 10, 2005)

MacDoc said:


> As for "wealth loss"...horsepucky.....when library or a forest burns down THAT's loss of wealth.
> The rest is money.


Don't look now, but McCarthy is coming... 

Not only was this only money, but it was pretend money. It only becomes real money when someone cashes out, at which point this move wouldn't have affected them. Those who are living on the payouts have 4 years to find an alternative. That's a long, long time. One of the commentators I heard (Royal Bank, I think) hit it right on. If the company had real value, the stock is still good. The flipside of that being that if it didn't, well, you were taking a dumb risk to begin with.


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## TroutMaskReplica (Feb 28, 2003)

edit: sorry for the mixed up order of everything - this damn reply window is so small ...



> Not only was this only money, but it was pretend money.


this is a ludicrous assertion.



> It only becomes real money when someone cashes out, at which point this move wouldn't have affected them.


why wouldn't it affect them? you buy a stock high and sell it low, you lose money.



> As for "wealth loss"...horsepucky.....when library or a forest burns down THAT's loss of wealth.
> The rest is money.


when a senior loses 5-10% of their investment capital (assuming a marginally diversified portfolio), that's loss of wealth. the investment capital is used to generate income, just as a forest can be used to generate revenue for the logging/paper companies.

... 'horsepucky'? ...



> One of the commentators I heard (Royal Bank, I think) hit it right on. If the company had real value, the stock is still good.The flipside of that being that if it didn't, well, you were taking a dumb risk to begin with.


re: dumb risk - the run up in the prices of investment trusts was caused by the cons assertion that the income trust vehicle would be left alone. this happened in a very short period of time, and if you believed the cons it would have made sense to invest in an income trust. the run up was for the most part rational due to the higher yield.



> Bryanc has it right.
> 
> The Liberals were clearly in the tweaking mood - that was all the flap about the leaks.
> The error the Cons made was in the promise not the change.


this was my original argument, which apparently you say you disagree with.



> One of the commentators I heard (Royal Bank, I think) hit it right on. If the company had real value, the stock is still good.


what he means is that the stocks are good at their current valuations which are 10-20% off their highs. here's the rest of it: those stock will not regain their old highs in four years.


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## zoziw (Jul 7, 2006)

> what he means is that the stocks are good at their current valuations which are 10-20% off their highs. here's the rest of it: those stock will not regain their old highs in four years.


I think that some of the better ones will (specifically some of the energy trusts in Calgary). I've seen many energy companies in Calgary move their revenue producing assets into these trusts and they require that a very large percentage of the income generated goes back to unit holders (some upwards of 85 - 90%).

Even if this income is now taxed leaving the trust, they still make for a great investment.

I think several of them will recover and that their future has more to do with the price of oil and natural gas than with the tax changes.


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## RevMatt (Sep 10, 2005)

TroutMaskReplica said:


> why wouldn't it affect them? you buy a stock high and sell it low, you lose money.


I was unclear. A stock becomes money when it is cashed. If someone had ALREADY cashed, then this move wouldn't bother them. If they hadn't cashed, they lost pretend money. Pretend money that had the potential to become real money granted, but it wasn't yet.



TroutMaskReplica said:


> re: dumb risk - the run up in the prices of investment trusts was caused by the cons assertion that the income trust vehicle would be left alone. this happened in a very short period of time, and if you believed the cons it would have made sense to invest in an income trust. the run up was for the most part rational due to the higher yield.


Here we agree. A big part of the artifical price spike was the Conservative party's original promise. That was an enormous error on their part, and those who made the mistake of trusting them got burned.



TroutMaskReplica said:


> what he means is that the stocks are good at their current valuations which are 10-20% off their highs. here's the rest of it: those stock will not regain their old highs in four years.


He meant that they were a good investment. The company would continue to grow and yield profits. No, they won't reach their previous highs. That's because those highs were artificial. You play the lottery that is the stock market, you get burned. That's how it works. Yes, in this case, a significant amount of potential wealth was lost, and yes it was lost because people were deceived by their politicians. I certainly have vastly more empathy for the losers in this round than in some others. But it's all part of playing the market. You want absolute certainty, don't invest there.


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## TroutMaskReplica (Feb 28, 2003)

> Yes, in this case, a significant amount of potential wealth was lost, and yes *it was lost because people were deceived by their politicians.*


thank you. this is what i was driving at. i think we are in agreement on most points, except that i lay the blame for this entirely at the feet of the government, not the investor.


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## TroutMaskReplica (Feb 28, 2003)

> I think that some of the better ones will (specifically some of the energy trusts in Calgary). I've seen many energy companies in Calgary move their revenue producing assets into these trusts and they require that a very large percentage of the income generated goes back to unit holders (some upwards of 85 - 90%).


i realize it didn't become a trust, but i think Telus will best its old high eventually. they seem to be unstoppable. i think there's nowhere to go but down for Bell though. Rogers and Telus are going to eat them alive.


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## adagio (Aug 23, 2002)

Blame the government? Think again. Blame this entirely on the large, greedy corporations.

If it weren't for this move by the big guys to stop paying their fair share of taxes none of this would have happened. I know plenty of people who hate Harper but they're bright enough to figure out what happened.


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## RevMatt (Sep 10, 2005)

adagio said:


> Blame the government? Think again. Blame this entirely on the large, greedy corporations.
> 
> If it weren't for this move by the big guys to stop paying their fair share of taxes none of this would have happened. I know plenty of people who hate Harper but they're bright enough to figure out what happened.


Not entirely, but you raise an excellent point. Income trusts used to have a purpose. they have been around for a long time after all. If it weren't for the larger companies being greedy, trusts would have been left alone. Of course, part of why there WERE greedy was because the Conservative policy egged them on. So it is a shared burden of blame.


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## MacDoc (Nov 3, 2001)

Adagio the tax would be shifted to the individuals - not entirely lost but as corps often are in a much higher bracket ( despite the dodge em games ) the flwo to the gov may well have been much lower and a lot of the individuals will have these investments in shelters such as RRSPs.

I'd also like someone to explain the downside risks to investors the trusts hold - I've read those risks are increased but not sure why.

Money is not wealth.
99% of the financial transactions on the planet every day are speculative such as these are not wealth building.

Build a house that's wealth building.
Flip a house for monetary gain without any improvement that's speculative gain not wealth building.
Buy a run house for cheap - put sweat and money into improvements then sell it - THAT's wealth building.

We have too much speculative activity in world society/economy and too little wealth building.

Now about those green retrofits.....THAT'S wealth building.

The gov did the right thing tho I suspect partly for their own survival at the polls once the impact was felt in gov coffers and a recession hit - goodbye surpluses.


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## Beej (Sep 10, 2005)

Wealth building includes efficient allocation of capital. It doesn't have to be so tangible. A huge problem when there is interference is that capital flows are redirected (presumably for someone's good...usually "the children") and wealth is lost in a large unmeasured way (never had it). As easy as it is to dismiss various speculation, it and arbitrage are important parts of well-functioning markets. Physical capital isn't the extent of human wealth.

Second, if you put 1000 hours of "sweat" into adding $1000 in value, is that wealth building in-line with Canadian expectations? The matter is complex.


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## adagio (Aug 23, 2002)

MacDoc, the risk of income trusts is they are based on the disposition of profits. Almost no profit is set aside as a nest egg to weather any downturn in the economy. With everything flowing out there is a very real chance the company can go bankrupt. There is little to none innovation. I also read that shareholders of trusts aren't protected from lawsuits but I'm not certain about that.

As an example of a regular corporation I'll give something dear to us all... Apple. They plow a great deal of their profit into R&D and in turn produce new and exciting products. They also have a tidy nest egg which I believe is currently around 4 billion. If there were a bad recession tomorrow they'd still plow along. Not so if they were an income trust. There'd be no innovation. No nest egg. See why the government acted? Not just money loss for now but also the future. Our economy would stagnate and whither.


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## TroutMaskReplica (Feb 28, 2003)

> Blame the government? Think again. Blame this entirely on the large, greedy corporations.


this is a huge oversimplification.

let's not forget the distributions are still taxed.

publicly held corporations are driven to increase shareholder value. that is their mandate and it is the law. as long as the income trust structure existed and it was legal and had the support of the federal government, one would assume CEOs would be obligated to convert to that structure if it benefited shareholders.



> If it weren't for this move by the big guys to stop paying their fair share of taxes none of this would have happened. I know plenty of people who hate Harper but they're bright enough to figure out what happened.





> As an example of a regular corporation I'll give something dear to us all... Apple. They plow a great deal of their profit into R&D and in turn produce new and exciting products.


also a bit simplistic.

apple is an example of an exceedingly well run company riding the ipod wave. most companies in apple's position would be driven to make dubious aquisitions in the quest to get the corporate tax bill down on behalf of shareholders. how do you think bell or quebecor became so diworsified?

in light of a public corporation's mandate as stated above, what would be more responsible, acquiring an asset or paying an unnecessarily large tax bill?

i fear this incident will actually translate to tory support, since no one seems to understand the issue isn't whether trusts are good or bad, it's how the tories handled the matter.

here's how it went down. the tories made a foolish election pledge, inadvertently created a bubble in the income trust sector, pulled the punch bowl away screwing investors in the process, and are now lauded as heroes because 'corporations are evil.'


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## Dr.G. (Aug 4, 2001)

There has been an interesting Cross Country Checkup going on re this very topic.


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## TroutMaskReplica (Feb 28, 2003)

> Build a house that's wealth building.
> Flip a house for monetary gain without any improvement that's speculative gain not wealth building.
> Buy a run house for cheap - put sweat and money into improvements then sell it - THAT's wealth building.


i agree with your housing analogy, and it general i feel it applies to the stock market, but less so to income trusts and stocks that pay dividends, since they generate income.

let's not forget there are many reasons for investing, and one of the most important is to prevent capital depreciation due to inflation. it isn't always about speculating. investing and speculating need not be the same thing.

i think you are deflecting. you also sound like you just dislike the stock market in general.


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## MacDoc (Nov 3, 2001)

No just pointing out the difference between wealth and money. Something too often forgotten.
Capital is a needed resource as are skilled populations ( one of Ontario's important wealth sectors ), universities, schools, libraries parks .

Some aspects I don't like are manipulations of currencies and artificially shipping profits south or outside the country. Some companies like the health care paid workforce but don't want to ante up for the cost.

Bourses are integral to matching capital and wealth building projects - a bit too much ( perhaps way too much ) is artificial money plays that do not build wealth just move funds around as in a casino but I know of no way to unmix the two.

I always was amused by the orginal 1/8th stock designations on Wall Street.....says it all.


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## TroutMaskReplica (Feb 28, 2003)

hey macdoc, i don't know if you'll remember it, but there was a scene in pirates of silicon valley which shows that a pirate flag once flew at apple headquarters.

my point? i don't know if there is one. just thought it a strange coincidence.


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## MacDoc (Nov 3, 2001)

Oh I remember the flag - it was very real - Jobs set the Mac team ( then a complete secret ) apart from the Apple team. It actually goes back further.

If you want a great read ( won the Pulitzer price in 1981. tyr *The Soul of a New Machine*










Brilliant tour de force into the rise of computing that went far beyond the ability of any one man to comprehend. Good foundation for understanding how far we've come.

You can read the first chapter here

http://www.businessweek.com/chapter/kidder.htm


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## Kosh (May 27, 2002)

http://ca.news.finance.yahoo.com/06112006/6/finance-toronto-stocks-levels-tax-bombshell.html

Interesting news. TSE is back up. This tax change doesn't seem to have really affected the TSE.


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## RevMatt (Sep 10, 2005)

And the word on the radio news is that Encana has confirmed they were intending to convert to a trust model, which would have been bad.


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## TroutMaskReplica (Feb 28, 2003)

Kosh said:


> http://ca.news.finance.yahoo.com/06112006/6/finance-toronto-stocks-levels-tax-bombshell.html
> 
> Interesting news. TSE is back up. This tax change doesn't seem to have really affected the TSE.


money simply flowed from one area of the index to another. ie., sector rotation


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## RevMatt (Sep 10, 2005)

TroutMaskReplica said:


> money simply flowed from one area of the index to another. ie., sector rotation


In other words, that $20B worth of wealth (of debatable tangibility) wasn't actually lost?

Having said that, of course, I am aware that those who lost will not be the same as those who have since gained, but on the macro level am I more or less understanding?

Also of note, the government has apparently apologised for the havoc caused by the announcement, although not for the actual decision.


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## zoziw (Jul 7, 2006)

RevMatt said:


> And the word on the radio news is that Encana has confirmed they were intending to convert to a trust model, which would have been bad.


There was an article on the frontpage of Saturday's Globe and Mail that said the Encana trust is what pushed the government into action.


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## Beej (Sep 10, 2005)

RevMatt said:


> In other words, that $20B worth of wealth (of debatable tangibility) wasn't actually lost?


Wealth was lost to private investors, although estimating it is difficult. Let's use the $20B for now. 

If you have a house that you know you can readily sell for $120k (market value, many buyers willing at that price) but then the next day the government says "Boo!", thereby spooking the market, and that house can now only be readily sold for $100, you've lost $20k of wealth, and it hasn't gone anywhere else. It's just gone. 

If, however, that $20k of wealth only existed because the government previously said, "Unless we say Boo!, we guarantee $20k in tax credits to whomever buys RMs house, and we will never say it." then the $20k is only lost in the sense of the general economic damage caused by increased taxation and policy uncertainty. Some wealth was just shifted to future government tax revenues (they Boo!'d the tax credit away).

How's that for a strange explanation? Was it scary when I said, "Boo!"?


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## Macfury (Feb 3, 2006)

It wasn't scary, but I was just counting my pocket change and three quarters and a nickel disappeared when you said it.


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## HowEver (Jan 11, 2005)

.


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## adagio (Aug 23, 2002)

Those with a well diversified portfolio are winning. A good financial planner ALWAYS stresses this. The more I think of it the less sympathy I have for anyone who has lost on paper more than 10% of their wealth. The tiny bit I gave up on income trusts has more than gained in other types of investments. I've seen the biggest gains SINCE the so-called meltdown than I've had in the last 4 months or so.


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## RevMatt (Sep 10, 2005)

Beej said:


> How's that for a strange explanation? Was it scary when I said, "Boo!"?


Truly scary 

I understand your explanation, but, to follow the analogy, if I am understanding what has happened here, then it is this (isn't it?):

I had a house worth $120k. The government said Boo. My house is now worth $100k. BUT a week later, my car, which used to be worth $40k, is now worth $60k. Thus, the market as a whole is back to where it was.

Of course, it is more likely that it is my neighbour's RV that has gone up $20k, while his house never went down. One the specific level, some investors are still screwed here. But on the macro level, all is back to where it was.

That's how I understand the current situation. Or am I out to lunch?

None of that, of course, addresses your second point, Beej, about why my house was overpriced in the first place.


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## MacDoc (Nov 3, 2001)

Yes but you are talking about monetary values not wealth and it's speculative until realized.
Not a single oil well burned or a Bell facility blew up but speculative dollars shifted around changing earning multiplier norms for certain categories.

No wealth change just the touts changed the chalkings.


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## Beej (Sep 10, 2005)

RevMatt said:


> BUT a week later, my car, which used to be worth $40k, is now worth $60k. Thus, the market as a whole is back to where it was.


This is where the trouble comes in measuring the $20. Nobody knows the number, but estimates can be made. 

Was it only $10 lost while 10 shifted? Both are at play here and, in the meantime, there's normal market movements that shouldn't just be lumped in as having been caused by the announcement. 

Wealth was shifted out of the market into future government coffers, some wealth was just shifted away from income trusts to other investments, and another amount that will never be estimated got completely lost in overall risk expectations. Then there's overall capital efficiency and on and on. 

So no, all the wealth wasn't just shifted to other private assets.


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## MacDoc (Nov 3, 2001)

Money Beej - money - not wealth you know very well the difference.
•••

BTW does everyone know the 1/8 stock designation story and why it's so appropriate for Wall Street?//......or no interest.


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## Beej (Sep 10, 2005)

MacDoc said:


> Money Beej - money - not wealth you know very well the difference.


I do know the difference, thus the wording of my post. Wealth has been shifted and probably some lost (a case could be made for long-term gains too, if taxes were truly distorting capital allocation). The expectations of after-tax profits were real (not illegal accounting shananigans), and their [edit: their, they're] expected allocation has changed. Wealth has been reallocated.


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## TroutMaskReplica (Feb 28, 2003)

> BTW does everyone know the 1/8 stock designation story and why it's so appropriate for Wall Street?//......or no interest.


are you going to tell us a story?


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## MacDoc (Nov 3, 2001)

Well Beej we'll agree to disagree - there was no wealth aspect- only money and at that mostly future based.

I'll stick with this a fairly succinct summary



> The first point he made is that wealth is not money. *Wealth consists of assets – land, tools, factories and skills*. Money is merely a medium of exchange. The difference is important. A truly rich man owns stuff – land, houses, factories, means of transportation. He does not depend on a salary for cash flow. Nelson Rockefeller, for example, once testified before Congress that many years he had no taxable income. He, of course, didn't need it. He owned stuff, and he owed nothing.
> 
> The easiest way to understand this difference is to imagine that you are about to be marooned on a deserted island. You are given a choice of one of three cases: one case contains $1 million in gold; another contains $1 million in Federal Reserve notes; and the third case contains tools. Which would you choose? Well, unless you are hopelessly stupid, you'd choose the tools. With the tools, you could create the wealth necessary for survival – shelter and food. Gold and dollars are useless unless there is someone willing to exchange real wealth for them.
> 
> ...


•••••

Trout - does "pieces of eight" ring a bell....pardon the pun 

••••

Not only Wall street has a rather suspect basis for it's orgins....

In the classic error of wealth versus phantom representation......



> In 1610, French ladies wore corsages of tulips, and fabrics were decorated with tulip designs. Most of the bulbs were grown in Flanders by monks. The bulbs became a currency, and their value was quoted like stocks and shares. About ten million bulbs were represented in the market. *It is believed the word bourse [stock exchange] derives from that period, because those who speculated in the tulip market held their meetings at the house of the noble family Van Bourse.* In 1637, speculation became illegal, many people, in Holland, were ruined as prices fell. In the seventeenth century, a small bed of tulips was valued at 15,000 to 20,000 francs. Tulip mania flourished between 1634-1637 and *people abandoned jobs and businesses* to become tulip growers. The frenzy spread from France, to Europe


One wonders if tulip bulb stew was tried in the final throes of THAT disaster. Small wealth indeed.


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## Macfury (Feb 3, 2006)

OK, Doc--we're walking through downtown Toronto and I see three boxes in front of me:

* One contains some lumber, a hoe, seeds, and a hammer and nails. 
* One contains $1,000,000 in cash.
* One contains $1,000,000 in gold.

MacDoc goes for the tools and I go for the cash (the gold is too heavy to carry). I will let MacDoc tell everyone he is wealthy (he will not have to pay tax on the tools).

It's situational. The desert island scenario only works if all the variable of the story are fixed. A little Marxian fairy tale designed to overvalue labour and undervalue other factors.


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## Max (Sep 26, 2002)

Agreed. A neat concept. For those of us marooned on desert islands.


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## SINC (Feb 16, 2001)

Max said:


> Agreed. A neat concept. For those of us marooned on desert islands.


Pass the canteen.


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## Max (Sep 26, 2002)

Okay, who's the bright bulb who decided to fill up the canteen with seawater?


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## SINC (Feb 16, 2001)

Max said:


> Okay, who's the bright bulb who decided to fill up the canteen with seawater?


:lmao: :clap:


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## Beej (Sep 10, 2005)

For those without lives:

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

MF has it right. For anyone who prefers some of the alternative theories/definitions of wealth, I invite them to give me their financial assets and I will provide them hugs, the most valuable commodity of all.


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## Paul O'Keefe (Jun 3, 2005)

Macfury said:


> MacDoc goes for the tools and I go for the cash (the gold is too heavy to carry). I will let MacDoc tell everyone he is wealthy (he will not have to pay tax on the tools).


Paper is heavy in large quanties. $1million in gold could potenially weigh less than $1million in paper currency depending on the value of the currency.


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## Beej (Sep 10, 2005)

I think I'd just run away from that much money lying on the street in downtown Toronto. Something bad is about to go down.


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## HowEver (Jan 11, 2005)

.


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## Macfury (Feb 3, 2006)

My crude calculations:

* 10,000 bills in $100 denominations will weigh about 22 pounds (one gram per note). 
* At $700 per ounce, the gold would weigh about 90 pounds.


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## TroutMaskReplica (Feb 28, 2003)

Flahery says he's sorry:
http://www.theglobeandmail.com/servlet/story/RTGAM.20061107.wxtrust07/BNStory/Business/


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## kps (May 4, 2003)

I applaud Harper for having the cohones to do this. It shows me several things. Mainly, that he isn't a lackey of Bay St. and that several of his policies seem to have the average Canadian's best interests as a priority. Unlike the elitist Liberals who are so far detached from the average Canadian, that it's measured in light-years.

The tax "beast of burden" that is the middle class in this country needs some relief. The 1% GST cut was a start. The income trust taxation is another.

Harper is proving to me that in the next federal election he may deserve my vote.


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## SINC (Feb 16, 2001)

Many more think along those same lines kps. Beats corruption and "old boy" Liberal leadership races.


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