Posted on 11/02/2006 12:02:17 PM PST by defenderSD
Roger Brown has long been a Conservative Party member and donor, but not any more. Not after losing about $100,000 on his investments Wednesday because of Finance Minister Jim Flaherty's decision to tax income trusts.
“It's the biggest loss I've ever experienced,” Mr. Brown said from his home in Nanaimo, B.C., as he watched 10 per cent of his life savings vanish. “The credibility in my mind of the Conservative Party has gone right down the toilet.”
Mr. Brown, 51, ran a small business before selling it a few years ago. Now, because of the income trust situation, “I guess I might be looking for a job now.”
(Excerpt) Read more at theglobeandmail.com ...
I'm amazed that a Canadian administration would make such an unfair proposal and that this has a good chance of being enacted into law by their legislature. I don't think any US administration could get the US congress to vote to destroy many billions of dollars of wealth overnight by increasing taxes on a large US industry. US investors and Wall Street wouldn't stand for it. We increase taxes sometimes, but we include grandfather exemptions for investors who have already made investments and we raise rates slowly over a number of years. This Canadian proposal is a clumsy, draconian proposal that needs major revisions to protect investors. The Candian government appears to be a government of the government, by the government, and for the government, with no respect and regard for small investors.
I didn't even know this was coming. Had not heard anything about it. I went online last night to check my portfolio and couldn't believe how much money I had lost in a couple of days. I am not impressed. I had a lot of money in energy trusts. All gone, just like that.
Richard Lehman must be shocked. he touts the royalty Trusts in the current issue of Forbes.
I'd like to try to answer your questions today, but right now there's way too much uncertainty about this situation to even attempt an answer. Perhaps this is the opening proposal by Harper in a negotiation and his administration may back off partially from here. A lot of people are irate about this in the oil producing regions of Alberta and BC, and that may lead to revisions of this proposal. But it's impossible to predict with any certainy how this will end and what legislation will be enacted into law.
This is a very clumsy proposal made with no regard for investors. It shows the disdain for free enterprise that exists within some agencies in the Canadian government.
When considering projects for potential investment, let the investment stand on its own aside from any tax considerations. Don't do anything under a certain favorable tax treatment that you wouldn't do under a neutral or unfavorable tax structure.
So what would be fair? Why should income from these trusts be treated differently from other kinds of income?
Canadian trusts tax divedends paid to non-Canadians already.
In this one case, I'm sorta happy to see this guy get screwed.
What has spurred the greatest economic booms since the 1950's? Answer: Cutting INCOME TAX rates. Kennedy in the '60's, Reagan in the '80's and Bush in 2002.
As far as I know, trust income is taxed the same way as other income at the personal income tax level. The difference is at the corporate level where trust income is not taxed but is mostly distributed to shareholders where it is taxed as personal income. This is similar to the taxation of REIT income in the US. The unfairness results from switching the tax laws after people have made investment decisions, without excluding existing investments from the tax law change. To be fair, the Canadian law should exclude existing energy trusts from this tax increase, at least for 12-15 years so as not to suddenly crush the market value of these trusts.
Post #12 is right on the money (no pun intended.)
I lost several thousand dollars on paper, but I completely support and applaud the decision. Something had to be done before every large corporation in Canada became a trust.
It was a brave and principled decision which will hurt the Conservative party, but benefit the country. In other words, the type of action you would expect from Conservatives.
By the way, I am buying as much Canadian Oil Sands Trust (COS.UN-TC or COSWF) as I can get my hands on.
You said: "I don't think any US administration could get the US congress to vote to destroy many billions of dollars of wealth overnight by increasing taxes on a large US industry. US investors and Wall Street wouldn't stand for it."
I say: Canada is giving us a preview of what a Clinton - Pelosi-Reid goverment would do.
Just to clarify this issue, Harper's government wants to greatly increase corporate taxes on trusts so that trust income is hit with double taxation the same way corporate income is hit with double taxation. The lower overall taxation of trusts was motivating companies to switch to a trust corporate structure to lower total taxation of income and increase shareholder value. There is some justification for increasing trust tax rates to maintain government tax revenue, but the unfairness is in imposing the tax increase within four years on existing trusts (as well as new trust conversions.) That unfair aspect of the proposal is crushing the market value of trusts in the stock market and generating huge losses for many Canadians. The new tax increase should only apply to new trust conversions, so as to stop more corporate conversions and lost tax revenue but not hammer investors who have already made investments.
But why not have a grandfather clause to protect investors in existing trusts, even if this adds some complexity to the tax law? That's the way we do business in the US. This proposal is taking a hatchet to the life savings of many people.
I think you're right on this. If you read the article, it looks like no individuals are paying more taxes under the new law. The change in taxation simply reduced the value of their assets by making their investments less attractive than they were previously.
As far as I know, this is a corporate tax increase proposal on the trusts, with possibly some tax breaks for seniors to try to offset lower trust distributions. The problem that a lot of people are being hit with large capital losses that they can't afford.
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