A Lengthy Ponderable

            Is there something in the DNA of Liberal politicians whose names end with the letters “eau” that renders them incapable of understanding that there are almost always unintended consequences when whimsical social engineering thinking drives economic policy? Pierre Trudeau’s policies (e.g. his disastrous National Energy Program) almost ruined the Canadian economy. His son Justin, and Justin’s finance minister, Bill Morneau, seem to both have this defective gene.

            The younger Trudeau revealed a telling clue during the last election campaign by announcing that he had no problem with a series of ten-billion-dollar deficits. Morneau, after his appointment as finance minister, leapt on Trudeau’s bandwagon. Their economic shortcoming is evidenced by their failure to recognize that the cost of all the other “sunny ways” promises made by Trudeau would mean that holding yearly deficits to ten billion dollars was impossible. The current deficit is about seventeen billion. And the eau twins seem to think this is good economic news because it isn’t as high as most pundits predicted. Continued deep deficits mean future steep tax increases.

            Then, early in their mandate, they increased the top-rate of personal income tax. Every informed objective observer reminded them before the law was passed that increasing the top personal income tax rate always results in less revenue than more. Morneau, however, stubbornly predicted revenue would rise by three billion dollars. The actual result is a decrease of 1.3 billion.

            So in just those two examples, their economic forecasts are off by almost 12 billion dollars. Then in July they waded into another fiscal quagmire by proposing changes to the taxation of private corporations which, to say the least, were not very well thought through.

            Although their goal of ending the tactic known as “income sprinkling” is laudable, the eau twins have again completely overlooked the effect of unintended economic consequences. Their proposed legislation is killing a fly on a mirror with a sledgehammer.

            As mentioned, I have no problem with the proposal to eliminate income sprinkling, which is an arrangement by which family members receive salary or dividends from a private corporation for no reason other than to reduce the overall family tax burden. I made my “fly” comment because the proposals go far beyond plugging this particular loophole, and there are already ample provisions in place to catch egregious arrangements. If enacted, the proposals will harm many people whom I’m sure (or at least, hope) weren’t intended to be affected.

            But there’s a bigger problem with the proposals. Family trusts are a far more effective, and more widely used, method of tax avoidance (anything allowed by law is not tax evasion, even though the eau twins have implied that it is ), but family trusts aren’t even mentioned in the proposals.

            Trudeau has already admitted his “family wealth” (Trudeau’s own words) is sheltered in family trusts, and I’ve seen reports that at least some of Morneau’s is as well. A cynic might think this is why family trusts are being ignored.

            Of course, I may be completely wrong that this has all come about because of genetics; it may be nothing more than the usual posturing of wealthy socialists.


            Writing about income tax reminded me that one of the most valuable lessons I learned from the Dale Carnegie Course was the importance of enthusiasm.

            Many years ago I was travelling coast to coast in Canada, and to a number of US cities, explaining to large audiences massive changes to the Canadian income tax system.

            The first few presentations were highly successful; I thoroughly enjoyed giving them and they were well received. But then I became bored giving the same talk over and over. I soon noticed that the audiences weren’t enjoying themselves either.

             It was only after I remembered two things about enthusiasm that I, and the audiences, began to enjoy the presentations again. The two things are: act enthusiastic and you’ll become enthusiastic; and, enthusiasm is as contagious as the measles.


            Noticing that he’s been absent from these pages for quite some time, a few of my long-time followers have inquired about what happened to my alter ego, Paddy.

            Paddy has been away for a while, but will be returning sometime this fall.