Tuesday, November 07, 2006

On Income Trusts

Why are we fighting this? We're putting politics ahead of good policy, and that's the last thing we should be doing right now.

There are strong economic reasons to convert to income trusts, but we shouldn't be incentivizing the income trust-ization of our economy with the massive tax shelter which they've thus far enjoyed.

The theoretical economists who whine at the notion of double taxaton may be right, but they need to move past their abstract models and examine how they map onto the real world. There are exceptionally good reasons for taxing the hell out of income trusts.

Anonymous Liberal

4 Comments:

Blogger Kyle G. Olsen said...

You have spelled out none of the reasons here.

1:16 PM  
Blogger Peter said...

KYLE, how about our oil and gas companies all moving from Calgary to Houston. How about a loss of $15B-$25B in corporate taxes annually.

Please read the Encana experience and tell me where it does not apply to all corporations.

Encana was planning to become an income trust.

PRESENT SCENERIO: The past 9 months it had a profit of $5B and paid $1.5B in corporate taxes. The remaining $3.5B is available for dividends which individuals receive and pay taxes on.

Let's say that the average shareholder is in the 26% tax bracket (making between $72,756 and $118,285), another $900M in individual taxes is collected.

So Encana's 9-month $5B profit puts $2.4B ($1.5B + $900M) in the government treasuries to pay for services you and I enjoy daily.

INCOME TRUST SCENERIO: If Encana had been an income trust the past 9 months, $5B would have been available for unit reimbursements which indiviuals receive and pay taxes on.

Let's gain say that the average recipient is in the 26% tax bracket (making between $72,756 and $118,285), $1.3B in individual taxes would be collected.

So Encana's 9-month $5B profit would put $1.3B in the government treasuries to pay for services you and I enjoy daily. That is over $1B less than if Encana had not been an income trust!

POSSIBLE FUTURE INCOME TRUST SCENERIO: If Encana was an income trust and purchased by Warren Buffett or some other foreign multinational, only 15% of that $5B ($750M) would be collected.

So Encana’s 9-month $5B profit would put $750M in the government treasuries to pay for services you and I enjoy daily. That is over $1.6B less than if Encana had not been an income trust!

Now think of all the Canadian oil companies that would be quickly snatched up by Shell and Exxon if they were income trusts.

Now imagine $15B-$25B in higher personal taxes because of the changed income trust policy many Liberals are against.

MississaugaPeter

2:30 PM  
Blogger s.b. said...

anonymous are you a woman? e-mail me. Some people think that women don't blog. i beg to differ. catnip may be starting an eggroll for women. let us know cheers shoshana

5:40 AM  
Blogger Freddie Sirmans said...

Just browsing the internet, you have a beautiful and very interesting blog.

7:32 PM  

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