Jim Flaherty did the right thing when he poured water on the over-heating income trust business. He's right on tax avoidance. When corporations avoid taxes, the burden is shifted mainly to middle-class taxpayers, who already pay too much. But that's not my biggest problem with income trusts. I wonder whether they're good business, and good for Canada. Essentially, they force managers to shovel every available dime to the unit holders. That means no money for R&D, to upgrade physical plants, to hire talent, to buy proprietary information. In effect, it's a recipe to bleed not only the taxpayers, but also to suck the guts out of Canadian business and industry. No decent executive would want to be hounded by unit-holders, and, I suspect, talent flees this kind of environment. Income trusts are the opposite of leveraged buy-outs, and they are a sign that the dynamic and interesting part of growing a business is finished. Who wants to be in on that?
The idea that the telecom sector, which is such a big R&D spender and is so reliant on re-investment to stay competitive, was embracing income trusts must have -- or should have -- scared the hell out of the feds. To me, income trusts are like reverse mortgages. They're a way of getting a short-term flow of money with no regard for the long-term implications. They're not only bad for the country, they're also probably a lousy investment, even before the tax changes.