Senior economist and Professor Jack Mintz was reported in the Globe & Mail as saying, “The Conservative government may abandon its hands-off approach to income trusts if another rash of big companies convert to the structure or if the next Liberal leader leads a crackdown on the investment vehicles.”

Jack Mintz is a well respected professor at the Rotman School of Management at University of Toronto and spoke to a group organized by Merrill Lynch Canada Inc. He proposed that the next leader of the Liberal party “could exert pressure on the Tories to crack down on trusts...[and] they would find allies in the New Democrats and Bloc Quebecois.”

According to newspaper reports, Prof. Mintz characterized the governing Conservative party as being leery of “tinkering” with trusts.  The Liberals are not yet calling for action on trusts. So he says, “There’s a 90-per-cent probability that Ottawa will do nothing on income trust taxes as things stand now.”

But in this context, Prof. Mintz reminded Canadians that a new Liberal leader is being selected in December to face the minority Conservative government. Furthermore, his fresh statements about political plans came in the same week as similar statements by former Liberal Minister of Finance, John Manley.

Mr. Manley provided a forewarning that trust taxation might be a necessary and pending policy.  Yet, Mr. Manley also described his sense that hundreds of thousands of voters were lost along the way as the previous Liberal government raised the need for trust taxation as an issue and then decided against new taxes.

For his part, Prof. Mintz’s words have garnered plenty of media coverage. His calculations of taxes “lost” on personal taxation for trust income provided the basis to media calls for tax that far outnumber alternative perspective or academic critiques of his numbers. Prof. Mintz is often credited for acting as an advisor on taxation and producing reports for use by the Liberal-run government. 

Following announcement by Ralph Goodale that there would be improved tax credits on corporate dividends, but no new taxes on income trusts, Prof. Mintz expressed displeasure with the 2005 government decision on taxation that defied his recommendations. As President of CD Howe, Prof. Mintz published a December “e-alert” to announce there was, “Unfinished Business: Achieving Neutral Taxation of Corporations and Income Trusts”.

All told, it’s not clear where the current “pressure” on the Conservative government regarding action against trusts, really originates this year: With former Liberal advisor Prof. Mintz, with Liberal party hopefuls, sitting members of Parliament or with on-going back-room political strategists. 

In a telephone call with the iTrust Institute, policy analysts working for Liberal leadership hopeful, Michael Ignatieff, suggested that no position will be taken by him on the income trust “issue” until after a new leader is selected in December.  There is no guarantee about his political direction after that.

Canadians are being shown evidence that trusts are used as a pawn in the annual cycle of political struggle in Ottawa and Canadian media.  Yet, trusts are not isolated entities that exist apart from markets and the Canadians who sell or earn a living by owning trust units or working in the companies financed by unit issues.

As a result, it is people who are made the pawns if there is a political game here, regardless of political intent. Given the 17% market sell-off of trust units and the loss of value by individual investors in 2005 at the time of political action on trusts, it’s a serious concern to many when anyone risks further harm to Canadians in an attempt to win back power in Ottawa.

Some analysts suggest that threat of new taxes, heard so often in the media, distracts discussions from potential new learning about very real returns, risks, economic values and development potential seen by so many in income trusts and their markets. At the time of government budget surplus in 2005 and again in 2006, there may be financial margin and time available for deep and wide consideration of Canadian requirements for beneficial tax reforms that go beyond discriminatory policy focused on crippling businesses seeking low cost financing and their owners.