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October 18, 2017 | Bad Dog

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Well, the news just keeps on getting worse for poor Bill Morneau. On Monday he was humiliated at a presser by his boss who didn’t trust him enough to answer media questions. T2 is no happy puppy. On Tuesday more revelations about Morneau’s ethics problem, unable to make it clear why he sheltered a French villa in an undisclosed corporation or refused to put his millions in a blind trust, as ministers are required.

The same day the bank regulator dropped a bomb on the housing market, and Wednesday the federal agency CMHC talked about how it would survive a 30% real estate crash. Gulp. Plus the federal ethics commish revealed our finance minister keeps a huge equity stake in his publicly-traded family business, Morneau Shepell, under his control in a holding company.

All of this happened while Ottawa targeted any small incorporation that earns more than $50,000 a year on retained earnings – taxing the money at a rate of 73%. But the finance minister’s own slew of company stock has gained 14.3% since January, with the maximum rate of tax he’ll pay on that profit being merely 25%. Suck. Blow. The optics are terrible.

(By keeping shares within a holding company, the minister avoids disclosing the securities to the parliamentary watchdog. Sounds kinda like retained earnings, doesn’t it?)

By casting entrepreneurs, professionals and the self-employed as tax cheats, social pariahs, loopholers and sprinklers, the feds tried to forge an us-and-them wedge issue as justification for taxing a slew of non-wealthy people who create half the jobs. It failed. And in the process, the prime minister looked like an out-of-touch millionaire with a finance minister who wants two sets of rules. One for rich guys. Like him. One for you.

Well, here’s the latest news on the fading Crusade against Incorporations: if you earn money in your corp, pay the taxes on it and invest the remainder, you can grow it by up to $50,000 a year, using the funds later for payroll, expansion, to retire on or finance a mat leave. Of course if the cash passes into your hands it will be taxed again, but not at 73%. Above fifty grand, you’re SOL.

We also know changes will be delayed until well into 2018. The proposed legislation will be tabled with the 2018 budget (in March or April), discussed, then implemented. That might mean a 2019 launch. As for income-splitting between spouses who have created a business and both own equity in it, we’re waiting for that shoe to drop.

Meanwhile, this self-inflicted kick in the stones could not have come at a worse time for the T2 gang. NAFTA is falling apart as the Trump White House insists on America-first provisions, while Ottawa wants the trade deal to foster gender parity. Seriously. The bank cop’s B-20 bomber has just taken off and will be reducing real estate to controlled rubble over the next few years. The US central bank is 80% certain to raise interest rates again by the end of the year, cranking long-term Canadian mortgage rates. Household debt is at another all-time high and 12,000 people just went overboard at Sears Canada. The Canadian economy has been growing well, but employment and wages are stuck. The federal deficit is on track to be 300% larger than we were assured. And the minister of finance is being proven to be a bigger loopholer than the family doctors, dentists and veterinarians he’s hounding.

It’s a rare thing for a finance minister to be booted. But there’s little doubt Bill Morneau is toast. Only the timing and style of his punting remain. The guy has single-handedly transformed the government’s image from street-fighting defenders of the deplorable middle class to entitled trust fund brats picking on people with real jobs. There is no recovery from the French villa. The personal holdcos. The ethics questions. Or the fact your company specializes in tax-avoiding retirement strategies for the highest-paid CEOs, while you’re terrorizing hair salon owners.

Trust me. If you want to be in politics, be perfect. You’re never unwatched, pardoned nor given the benefit of the doubt. Unless your name is Trump.

Well, Bill does it again Thursday morning as the prime minister makes sure he’s all used up. The fun starts at 9:15 am, live here.

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October 18th, 2017

Posted In: The Greater Fool

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