Tories steady in polls despite income trust uproar (Canada's Conservatives holding firm)

Tories steady in polls despite income trust uproar

Norma Greenaway, CanWest News Service; Ottawa Citizen
Published: Saturday, November 04, 2006

OTTAWA -- Public support for the Harper government is holding at the strength it scored on election day nine months ago, despite the political storm this week over its flip-flop on taxing income trusts, a new poll has found.

Indeed, the national survey by Ipsos-Reid conducted for CanWest News Service paints a picture of an electorate that is virtually unmoved since voters gave Stephen Harper's Conservatives a slim minority last January.

If an election were held today, the Conservatives would garner 37 per cent of the vote, up one point from the election. The Liberals would score 29 per cent, down one point, and the New Democratic Party would get 19 per cent, up two points.

The Bloc Quebecois would get nine per cent, down two points, and the Green party five per cent, exactly the same percentage as on voting day.

In Quebec, the Bloc stood at 38 per cent, down five points from the last poll in August, whereas Tory support was almost unchanged at 21 per cent, and the Liberals were down three points to 19 per cent.

"It (the survey) shows there is a lot of sound and fury out there about a number of issues," said pollster Darrell Bricker. "But it doesn't really seem to have percolated down into affecting partisan choice."

The survey, conducted amid the furor over Tuesday's surprise tax announcement, suggests Canadians are not rushing to punish the government. "It's a fairly elite issue," Bricker, president of Ipsos-Reid, said in an interview. "This is a stock market story. People know markets go up and down."

Given the massive coverage of Harper's reversal in income trusts, anger over the issue would have shown up in the survey if it were there, he argued.

Bricker said polling over the years has shown "stock market stories" have very little impact on how Canadians view political parties, or the health of the economy.

In this case, he said, Finance Minister Jim Flaherty managed to cushion the impact by balancing the new taxes on income trusts with significant new tax breaks for seniors.

The poll of 1,002 adults was conducted Tuesday through Thursday. In a sample this size, the margin of error is 3.1 percentage points, 19 times out of 20.

In other findings, it said a slim majority, 54 per cent, agreed with the statement that "Canada is better off today than it was one year ago." Fifteen per cent of those surveyed agreed strongly with the statement.

Those living in Ontario (51 per cent) and Quebec (43 per cent) were less supportive of the statement than their counterparts elsewhere.

Despite the relatively upbeat mood, the findings show the Conservatives are still not in majority territory, and the Liberals, despite being leaderless, are still in the game.

"We've locked ourselves into this kind of minority scenario," Bricker said. "The good news for the Liberals is that they haven't dropped off the face of the planet. And the bad news for the Tories is that they haven't been able to break out of this."

Bricker predicted that once the Liberals have a leader on December, voters will start waking up and looking more seriously at the federal political choices.

As background (sorry no url):

Income trust loophole needed closing
Conservatives had no choice, but they did go back on their ill-conceived promise

Lorne Gunter, The Edmonton Journal
Published: Friday, November 03, 2006

In the uproarious (and oh-so-true) 1980s British sitcom Yes Minister, whenever Jim Hacker, the minister of administrative affairs, would propose an idealistic, but politically contentious policy, his permanent secretary Sir Humphrey Appleby would caution him the action was "bold" -- the right thing to do, but almost certainly damaging to the governing party.

When Hacker's move would be politically suicidal, Sir Humphrey would label it "courageous."

When Finance Minister Joe Flaherty realized it was no longer possible for the Conservative government to keep its election pledge to never raise taxes on income trusts, he must have had to go to Prime Minister Stephen Harper and tell him he had a "bold" idea.

And a "courageous" one, too.

The Conservatives had no choice but to go back on their campaign promise. Their platform stated, quite bluntly, that if elected, a Conservative government would "preserve income trusts by not imposing any new taxes on them."

It was a cynical and opportunistic pledge at best. At the time, the Liberals were being similarly cynical and opportunistic about trusts.

During their last two years in office, the Liberals had been told by a host of experts -- academics, tax specialists, senior finance bureaucrats -- that Canada could not sustain its income trust loophole. It would have to be closed to preserve tax fairness among corporations.

The loophole permitted companies -- mostly very large ones -- to escape paying much of their tax bills if they paid out their profits as dividends to trust holders. Not surprisingly, investors flocked to the trusts. Even large international investment houses could see the advantages, pumping tens of billions into corporations that converted to trusts.

All along, though, the arrangement was unfair and unsustainable.

It often cost corporations millions in legal and brokerage fees to convert. That made the switch to trusts an option only for very large companies.

Had the imbalance continued on much longer -- even under the Liberals -- the result would have been a two-tiered corporate tax structure in Canada: one low-tax regime for large companies and another high-tax one for small to medium firms.

One report commissioned by the Liberals, and conducted by a respected external expert on tax and equity markets, contemplated that the capital needed by medium-sized companies could begin drying up by 2008 (five years from the date he provided his recommendations), if the trust loophole were not closed.

Dozens of other experts offered similar advice: Raise the taxes on trusts or face the possibility that Canadian companies unwilling or unable to convert would have trouble raising money to start up or grow.

About the only people advocating the retention of income trusts were brokerages that specialized in placing investors in trusts and law firms with growing practices guiding corporations through the conversion maze.

Frankly, there was always more than one solution to the tax inequity. Ottawa could just as easily have lowered the taxes on regular corporate income instead of raising the taxes on trust. Open the loophole to everyone.

The defenders of trusts made one extremely valid argument in the investment's defence: Trust holders were spending the dividends they were being paid -- or investing them -- and both actions were helping fuel Canada's economic expansion.

Imagine how much more spending and investment -- and economic expansion -- would have been unleashed if the Liberals (or now the Conservatives) would have lowered corporate income tax to the level of the income trusts?

And to some degree, the Liberals chose this latter course. After being expected to close the trust provision all through 2005, on the eve of the last election, they chose instead to reduce other corporations' taxes, a little.

In order to one up them, the Conservatives then made their no-new-trust-taxes pledge, the one they have now gone back on completely. The trusts are particularly popular with seniors, who are understandably touchy about policy changes that affect their incomes and who turn out to vote in high numbers.

Most developed countries have done away with their income trusts long ago. It was only a matter of time before Canada would have had to follow suit, whoever was in power in Ottawa.

The Conservatives' promise was always impractical, if not disingenuous.

When the country's two largest telephone companies announced they would be converting to income trusts to reduce the taxes they paid, and a major bank and oil company were rumoured to be thinking of doing the same, even the Conservatives could see they were at the point of no return. They either had to act now to stop the conversion of most of Canada's largest companies to trusts, or forever hold their peace.

And forever be pressured for a better tax deal by companies too small to convert.

They have done the right thing by not letting the discrepancy in tax rates between trusts and ordinary corporations become intractably uneven.

But it is also true they lied. They should never have promised not to end the trusts' tax break. That was foolish policy. But they did promise, and now they have gone back on that promise.

Closing the trust loophole is a bold and courageous move, but one for which the government is being rightly pilloried.

They either had to act now to stop the conversion of most of Canada's largest companies to trusts, or forever hold their peace.

Nice try. They could have stopped the process of conversion by simply amending the law to prohibit further conversions, or to prohibit further conversions by non-mineral or non-energy companies. They did not. They went for the tax grab...and they're going to pay -- bigtime.

Even to date, just 3 days after the announcement of this utterly lunatic scheme, they've traded the potential of roughly C$ 750 million gained in taxes for over C$ 32 billion of capitalisation...and they won't even begin collecting their little tax windfall until 2007 or perhaps 2008.

From the standpoint of Canadian energy, this will be (should it pass, of course) an absolute disaster. Canadian energy companies will become featured items in a foreign-capital driven fire sale auction. The mineral CanRoys are already off 20%+, in some cases 30%+. Nice job, Flaherty, you clod. Wait until the gov't has to pick up the tab when the seniors scream about their pension income being cut by gov't fiat, too. That'll be a joy to see, no doubt!

These are **conservatives**? No, these are people who flunked Econ 102, likely several times. Trying to cloak this idiocy in the mantle of ''fairness'' simply won't wash. They could have been ''fair'' in any number of ways, but noooooooooooooooo, they had to go for the tax grab.

They haven't even the excuse of fiscal deficits; Canada's budget is onto something like a C$ 17 billion surplus this year.

Bah. Hard to believe that anyone on this board can't see straight through Flaherty and the rest of these incompetents. Not to worry, the fit will hit the shan soon enough, and absolutely anyone who can add will be queueing up to say ''I told you so''.

A more realistic view of what's been going on in Canada over the past decade is one where "Korporate Krupps" have been willingly funding the radical anti-majority left to buy social peace while this unholy alliance screws the majority of the population caught between them in virtually every imaginable way.

The average Canadian suffering under a far higher tax burden than is the case Stateside is becoming increasingly angry doing so while watching Canada's corporate world write off its generous donations to radical feminists and homosexuals as well as to environmental wackos and every other conceivable sub-species of moonbat.

The growing popular sentiment isn't about "stealing from the rich" but, rather, one of resentment towards wealthy de facto communists leaving the middle class to pick up the tax costs of their self-serving subsidization of what amount to the sworn enemies of traditional families & morality as well as ecco-imperialist terrorists.

A perfect example was the imposition of same-sex 'marriage'.
Surely you don't believe the majority up here wanted it or that its proponents passed the hat among themselves to fund their campaign?
Look instead to the Royal Bank (RBC) being the most lavish nongovernmental funder of radical homosexuals in the nation!

It's not about hating the phone company or showing it who's boss.
I cited BCE both because it in large part triggered the government's decision and as it's such a fitting example of the "Korporate Krupps" we have up here simultaneously buying off the radical left while making damned certain the economic costs associated with doing so fall on the backs of the vast majority of ordinary Canadians in the form of higher & higher personal taxes.

Beyond the economic side, the long range political & social costs of such irresponsible corporate funding of social fascists is well exemplified by the German experience of the 1930's & 40's.

Further, like many conservatives I'm not an economic nationalist so kissing Canadian ownership goodbye doesn't particularly concern me: in fact, I welcome investment from friendly nations and especially from America.

Since nothing is more economically and socially detrimental than ever-escalating increases in personal income & sales taxes, I agree with Jason Kenny when it comes to would-be corporate freeloaders:

"Asked what he thought of oil and gas trusts, Mr. Kenney -- who is from Calgary -- said they were an interesting form of investment from which a lot of people have profited.

But he added, "The government is obviously concerned that we were looking at the prospect of major companies in the oil-and-gas sector converting to income trusts, which would have meant prospectively billions of dollars in forgone revenue that would be shifted on to the backs of ordinary taxpayers."

Source: Trusts demand PM hear their side
Claudia Cattaneo, Financial Post, Saturday, November 04, 2006

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