Strike Two for the Tories
Okay, I admit being mildly drawn to the Tories in the lead up to the last federal election. Given the turmoil in the Liberal party, the sponsorship scandal and the policy drift they were exhibiting, I was willing to give the Tories the benefit of the doubt. I'm not a party member or devotee to any party. Now I can see that the Conservatives are little better than the Liberals. It's not entirely their fault. They have only a minority government after all, and they have no allies in the Commons to give them the necessary votes. The other parties are intractable and everyone is jockeying and posturing in anticipation of another election. It's not an environment that's conducive to the enactment of sensible policy.
The first few months seemed decent enough despite Tories' pandering to Quebec. I can't fault the government for the policy regarding Afghanistan. Two things have come up lately that have been pretty outrageous though.
The first is the so-called "Clean Air Act". This misnamed piece of legislation will probably do nothing to dent Canada's greenhouse gas emissions or bring Canada closer to it's Kyoto obligations (though it could do something about the smog problem, maybe). Of course, the government got saddled with these obligations from the previous government and the Kyoto protocol is a flawed mechanism to deal with global warming. When Canada signed on, no one forsaw the boom in commodity prices and the massive growth in extrative industries such as oil and minerals. Still, it would have been nice to see if the Tories could have come up with some kind of market-based mechanism to help reduce our emissions. At the bare minimum, I was hoping to see some kind of cap-and-trade system like they have in Europe. Perhaps we could have joined their system. Better would have been a carbon tax system that would pass on the cost of emissions onto the emitters (ultimately consumers). Of course, a carbon tax would have been political suicide for the Tories. So, instead of a policy that would have had a chance to reduce Canada's emissions we got something that was only marginally better than doing nothing: a statement that the government will do something in future.
The second travesty is the government's announcement last night that it will try to end the special tax treatment of income trusts. My beef is not that income trusts will lose special tax status, but that the Tories refused to do the sensible thing and end the double taxation of dividends. That stupid taxation is what gave rise to the income trusts in the first place. The problem is that interest payments on loans and bonds are tax deductible while dividend payments are not. So earnings paid out to bondholders as interest are only taxed once (paid by the bondholders as income tax), while earnings paid out as dividends are taxed twice. It gives rise to "optimal debt ratios" and the valuation of the tax shield value of projects in corporate finance. The government should have moved to end the double taxation of dividends and made dividends deductible to either corporations or investors. Naturally, neither of these actions would have been politically palatable. Everyone's inner populist would cry out in rage to hear that either corporations or stock holders would see their tax bill reduced. Nevertheless, the Tories have moved one step closer to losing my vote come the next election. Oh, and I hope no one reading this was holding shares of BCE or Telus. They took a beating on the market today. BCE lost something like 13% of its value because of the government's announcement.
R
