Income Trusts 2.0, an unwanted sequel

Shopping for votes among elderly investors who loved the income trusts the Grits invented and the Harper Tories effectively killed last fall, the Liberals are trial-ballooning what they describe as a better-thought-out version of Income Trusts 1.0, which the entirety of Corporate Canada was threatening to exploit at a massive cost to the federal treasury.

Last October, Tory finance minister Jim Flaherty wisely reneged on a Tory campaign promise not to touch the trusts by wrestling the monster to the ground with the imposition of a 31.5 per cent tax of most income trusts and a ban on new trusts for an indefinite period.

Income Trusts 2.0, Liberal finance critic John McCallum claims, would be more judicious in winnowing out the undeserving, including banks, railways, airlines and phone providers. (Recall that it was BCE Inc.'s decision to follow rival Telus Corp. down the income-trust route that finally rang the alarm bells at Finance.)

How the Liberals' new version of trusts doesn't amount to Ottawa picking winners and losers – a discredited practice of which the Grits certainly don't want to be accused – is quite beyond us. For starters, if you were going to revive the trust abomination, why would you exclude airlines, a chronically tough-luck business that could use the help, in a country suffering duopoly service and in need of more carrier competition?

We think the moratorium on this fiscally destructive loophole should stand, if only because Flaherty has been subjected to so much abuse over a misguided policy he inherited, including two emailed threats of bodily harm to himself and his family by a Shreveport, La. stockbroker who pleaded not guilty last week on two counts of sending a threatening interstate communication.

And because of the Grits' own acknowledgment when they floated the income-trust revival late last week that they still haven't nailed down exactly how Income Trusts 2.0 would actually work. The trust thing is a hairball the Grits need to get out of their system.