Justin Trudeau and the Sunny Ways Government - Who Really Represents Canadians?

With the Trudeau II government moving forward with its changes to Canada's tax code and the public backlash against changes to the private corporation tax regime that has been in place since 1972, it's time to see who backs the Liberal government's proposals.  Other than public pronouncements by various Liberal MPs who are playing a game with their constituents, the only way that we can really tell what Finance Minister Bill Morneau's Liberal peers really think of his proposals and the short, 75 day period of public consultation, is to look at the voting record on Vote Number 355 from Sitting Number 211 held on Tuesday, October 3, 2017.

Here is the opposition motion as proposed by Pierre Poilievre, MP for Carleton and one of Stephen Harper's former House of Commons pitfalls:  

"That, given the proposed changes to the taxation of private corporations as outlined in the Minister of Finance's paper “Tax Planning Using Private Corporations” will have a drastic negative impact on small and medium sized local businesses, the House call on the government to continue, until January 31, 2018, its consultations on these measures."

On the surface, this proposal seems quite reasonable, given the scope of the proposed changes to the tax code.

Here are the overall voting results:

Here are the voting results by party:

Note that only one Liberal voted for the opposition motion and that every other Liberal member voted against what would seem to be a reasonable request of a three and a half month delay.  The only brave Liberal MP who stood against his party's unreasonableness was Mr. Wayne Long, representing Saint John - Rothesay in New Brunswick.  I guess we now know what his chances are of getting a seat around the Cabinet table let alone getting Justin Trudeau's stamp of approval as a candidate for the Liberal Party of Canada in the next federal election, don't we?  In fact, Mr. Long was removed from two committees; the Standing Committee on Human Resources, Skills, Social Development and the Status of Persons with Disabilities and the Standing Committee on Access to Information, Privacy and Ethics although his photo still resides on the human resources committee's websites as shown here:

Despite protestations by Liberal MPs like this from the Chair of the Commons Finance Committee, Wayne Easter, representing the riding of Malpeque in PEI:

"The government really needs to step back from this a bit. Let's go to the end of the consultation period, October 2nd. Let's ensure that these consultations are meaningful.  Maybe do a couple of the simpler things that were proposed, like ensuring that there isn't sprinkling of income to take undue advantage of the tax system."

Fortunately for him, Mr. Easter just happened to be AWOL on the day that the vote was taken.

...and like this from Liberal MP Sean Casey representing the riding of Charlottetown in PEI:

"I will freely acknowledge that to the extent the net has been cast too broadly, or has been perceived as being cast too broadly, that we missed the mark."

...and like this from Liberal MP Andy Filmore representing the riding of Halifax in Nova Scotia:

"Any changes that happen have to be able to provide parity for those that are funding their own retirements with those Canadians that are lucky enough to have those things looked after for them."

...and like this from Liberal MP Stephen Fuhr respresenting the riding of Kelowna - Lake Country in British Columbia:

"In my opinion, based on a ton of discussion I've had with people in my riding, and other MPs, I think we need a mediated solution between what's being proposed and what can be done.  We need some sort of compromise.  Some folks don't think these proposed changes are the right way to do it, and they're quite boisterous about it. I'm definitely going to convey their opinions to the decision-makers."

...the ladies and gentlemen that we elected to represent us under the Sunny Ways government in Ottawa are little more than sheep, following the orders of their Liberal Party elders rather than actually paying heed to those who took the time to vote for them.  Why should we be surprised?

Meet the new boss, same as the old boss.

Justin Trudeau and Bill Morneau - A Lesson In Using Private Corporations as a Tax Strategy

With Canadian private corporation owners about to experience a major change in how they are taxed, I wanted to take a look at how Mr. Trudeau and Mr. Morneau have availed themselves of the current tax landscape.  Fortunately for us all, the Office of the Conflict of Interest and Ethics Commissioner has a website which contains a searchable database which lists the public declarations from all MPs, right up to the Prime Minister, the man in charge of the government that is about to make these changes.  With that in mind, let's take a look at the declarations for the two gentlemen responsible for one of the most significant changes in the Canadian personal tax landscape since the early 1970s.

Justin Trudeau

1.) Private Corporation - dividends were paid from 7664669 Canada Incorporated which holds a significant interest in 176078 Canada Incorporated.  Earlier declarations (February 4, 2014) show that this company owns publicly traded securities and that 3323561 Canada Inc. was an affiliated corporation.

Shares of 7664699 Canada Inc. are currently in a blind trust.

2.) Private Corporation - joint ownership in 9190-0563 Quebec Incorporated

In previous public declarations, particularly the one dated September 21, 2009, we get more information on Mr. Trudeau's assets:

1.) Co-owner of a residential property in Montreal, Quebec

2.) Other sources of income included employment income with JPJT Canada Inc. (a company at which Mr. Trudeau is President - company offers public speaking services).

3.) Co-owner and Vice President of 90562 Canada Limited which owns investments and pays Mr. Trudeau dividends.  This is the company that held Pierre Trudeau's portfolio of securities which were inherited by his sons upon his death.  The company pays out dividends to both heirs.

4.) Co-beneficiary and Board Member of the Pierre Elliot Trudeau Trust.

From what I can see, from his public declarations, Mr. Trudeau has at least 6 private corporations, some of which are affiliated with others and some of which pay Mr. Trudeau dividends, a preferred method for removing assets from a private corporation from a tax perspective.  From information released during the 2015 election, Mr. Trudeau's inheritance was worth about $1.2 million in 2015 and his public speaking business, JPJT Canada Inc. earned him more than $450,000 in its best year.

Bill Morneau 

1.) Beneficiary of the Nancy McCain 2013 Family Trust which owns interests in NCM Holdings Inc, an investment holding company which holds a nominal interest in White Marsh Holding Company Inc.  (note - Nancy McCain is Bill Morneau's spouse and one of the heirs to the McCain family fortune).  Nancy McCain is President and Director of NCM Holdings Inc.

2.) Employment income including dividends, interest and capital gains from investments from 1193536 Alberta Limited

3.) Joint ownership with 4 siblings of 2254165 Ontario Inc., a real estate holding company located in Toronto, Ontario

4.) Sole ownership of 2070689 Ontario Limited a holding company located in Toronto, Ontario

5.) Joint ownership with 4 siblings of 1446977 Ontario Inc., a real estate holding company located in Toronto, Ontario

6.) Joint ownership with 4 siblings of 2135042 Ontario Inc., a real estate holding company located in Toronto, Ontario

7). Joint ownership with 4 siblings of 2135041 Ontario Inc., a real estate holding company located in Toronto, Ontario

8.) Joint ownership with 2070689 Ontario Limited of 1193536 Alberta Limited, an investment holding company located in Calgary, Alberta

Bill Morneau's spouse, Nancy McCain, is President and Director of 2070689 Ontario Ltd. and President and Director of 1193536 Alberta Ltd.

From what I can see from his public declarations, Mr. Morneau has ownership in at least 7 private corporations, excluding those of his spouse, Nancy McCain.  Unfortunately, we have no idea of the assets held in each of these corporations nor do we know their value, however, we can safely assume that they are rather substantial given Mr. Morneau's previous seven figure salary and his connection to the McCain family fortune.

It is quite apparent that Messrs. Trudeau and Morneau know of what they speak when they talk about the wealthy abusing Canada's private corporation tax incentives.  In both cases, these gentlemen have taken the private corporation strategy to a point that is far beyond the relatively simple strategy used by an average Canadian taxpayer who utilizes the strategy to balance out income inequities that are associated with running a higher risk private business.  At least they know all about "tax fairness".

Who is the Real Bill Morneau and Does He Understand Middle Class Canada?

Those of you that live outside of Canada are unlikely to be aware of the fact that the Trudeau government is about to enact the largest change in the country's tax system since the 1970s.  Under the guidance of current Minister of Finance, Bill Morneau, the federal government is currently undertaking consultations with stakeholders on the proposal which would essentially put an end to the use of private corporations as a tax advantage, a system which has been in place since 1972.  Why is this being done?  It's all under the guise of redistributing wealth from the so-called upper classes of Canadian society to the middle classes which have been the beneficiary of changes to  social programs under the Trudeau government.  In at least some people's minds (mine included), the pitting of one social class against another is little more than class warfare, a technique often used by governments throughout history.

Let's see what Prime Minister Justin Trudeau had to say about the changes:

"We’re doing more for the people who need it, and less for the people who don’t. That’s the commitment we made to Canadians and will continue to make to Canadians."

Now, let's see what Bill Morneau had to say about the changes from his recently released "Tax Planning Using Private Corporations" publication:

"One of our Government’s first actions was to cut taxes for the middle class, and raise them on the richest one per cent. Because of our Canada Child Benefit, nine out of ten families with children are now receiving more in child benefits than they did under the previous system, leaving them with more money to spend on their groceries, summer camps and school supplies. Thinking about the long-term, we worked with the Provinces and Territories to strengthen the Canada Pension Plan so that workers today and future generations can look forward to a more secure retirement. And we increased the Guaranteed Income Supplement top-up benefit by over $900 annually for the most vulnerable single seniors. This focus on the middle class, the help we bring to those working hard to join it, as well as historic investments in our communities—on things like roads, bridges and water purification—have had a real, measurable impact...

In addition to efforts to combat international tax evasion and avoidance, our Government is looking closer to home, and is taking steps to address tax planning strategies and close loopholes that are only available to some—often the very wealthy or the highest income earners—at the expense of others. Currently there are signs that our system isn’t working as well as it should, specifically when it comes to private corporations. There are worrying trends. There is evidence that some may be using corporate structures to avoid paying their fair share, rather than to invest in their business and maintain their competitive advantage." (my bold)

Is it just me or does Mr. Morneau make it sound like taxpayers that use the existing private corporation tax laws are criminals?  

So, who is it that the Trudeau government is targeting with these changes?  The private corporation tax strategy is used by millions of Canadian taxpayers including (but not limited to) farmers, fishermen, doctors, dentists, contractors, tradespeople like plumbers, carpenters and electricians, lawyers, small business owners, accountants and consultants of all types; certainly, while some of these would be considered "upper class", many of these individuals would be classified as "middle class".  In many cases, this system compensates business owners for the fact that they do not have access to pension plans, sick days, health insurance benefits, stock options and other perquisites that are often available to full-time employees (like government workers, private sector employees, Members of Parliament etcetera).

Since most Canadians are aware of Mr. Trudeau's connections to Canada's upper classes, let's take a closer look at the less well known Bill Morneau and see how well he understands middle class Canada.   Mr. Morneau is the son of W.F. Morneau who founded W.F. Morneau which became Morneau Sobeco Income Fund in 2005 and Morneau Shepell in 2011.  The company is a "human resources consulting and technology company that takes an integrated approach to employee assistance, health, benefits and retirement needs."  The company claims that it isa eh largest provider of retirement and benefits plans and the largest provider of integrated absence management solutions in Canada with 20,000 clients under its wings and more than 4000 employees in offices across North America.  It is a publicly traded company (symbol - TSX: MSI).  Frank Morneau is still Honorary Chair of the company as shown here:

Mr. Frank Morneau certainly looks very well connected and not exactly middle class, doesn't he?

Now, let's look back in time at Morneau Shepells Management Information Circular dated March 3, 2015, seven months before Bill Morneau was appointed Minister of Finance.  Here's what we find under the list of the company's Board of Directors:

You will notice that as Executive Chair of the Board, Bill Morneau controlled 2,247,812 shares.  At the current market price of $20.45, the shares under his control are worth $45.97 million.  Additionally, not too many middle class Canadians can afford to attend the London School of Economics, can they?  

Now, let's look at his compensation:

Here is his compensation going back to 2010 so you can see that his million dollar plus paydays are not one-offs:

Note that his total compensation of $1,071,859 in his last year of working prior to becoming Finance Minister was down from the previous year when it totalled $1,779,562.  It would take a median Canadian family 13.2 years to earn what Mr. Morneau earned in 2015.  It really doesn't get much less middle class than that, does it?  You will also note that Mr. Morneau also uses the tax advantages afforded by share-based awards.  In case you were not aware, taxes on capital gains from stock price appreciation are significantly more advantageous than taxes paid on salaries.  Apparently, Mr. Morneau feels that there is nothing wrong with lining up at the tax trough when it comes to his own compensation!  This is a tax strategy that corporations use to enhance the compensation packages for their executives and upper level managers; those who spend their middle class days, sweating for a living, can only dream of such compensation.

From this posting, you can clearly see that Mr. Morneau clearly does not practice what he preaches.  While he publicly states that he is concerned about the welfare of Canada's middle class, this background information  would suggest that he has spent his entire life living among the fraction of one percent of Canadians who can call themselves multi-millionaires.  Additionally, let us not forget that his wife, one Nancy McCain, is one of the heirs to the privately-held multi-billion dollar Mccain Foods empire which was co-founded by her father, Andrew McCain.   The family recently donated $1 million to Acadia University in Wolfville, Nova Scotia, a sum that is unimaginable to middle class Canadians.

Basically, with these moves, the Canadian government is sending a very strong message to all Canadian taxpayers; your money is only yours until we decide that we need it because we can't control our overspending habits.  These proposed tax changes are nothing more than state-sanctioned theft and are just the first step on a slippery slope of government confiscation of your hard-earned dollars.  Governments around the world will, at some point, realize that their debts are accumulating at unsustainable levels, a factor in the Trudeau government's 2017 - 2018 budget deficit of $28.5 billion and one of the main reasons why they, like other governments, will have no choice but to take more from taxpayers.  Apparently, it's always easier for governments to raise taxes than it is to rein in spending.

In closing, let's go back to both Justin Trudeau and Bill Morneau.  As the prophetic George Orwell put it so eloquently in his book "Animal Farm", "All animals are equal, but some animals are more equal than others."  At least now we know two Canadians that are more equal.