Wednesday, March 09, 2005

Rules are no substitute for good judgement

Babble on.

Kudos to Steve Maich at Maclean's for bringing attention to a dismal situation, and to the astounding level of Liberal duplicity that has allowed it to fester for so long:

Part of the JDS benefits package was an employee stock purchase plan, which let workers buy company shares at a huge discount. As JDS's stock surged in 2000, workers were able to get shares worth more than $300 for roughly $2 apiece through small deductions from their paycheques. Plant workers with modest incomes suddenly had visions of expensive cottages and early retirement. But the celebration was short-lived. The stock peaked in March of 2000, then tumbled almost as fast as it rose. By the end of the year, it had dropped by 68 per cent.

The plunging share price was a disappointment, but the real disaster came that winter, when the tax forms arrived. Because the workers got stock at a discount, they were taxed on the difference between what they paid and the stock's value on the date it was issued -- $305. Joe Wood worked as an engineer at JDS for $40,000 a year, and he suddenly had a tax bill for $138,000. By the time he realized what was happening, it was too late to sell -- the shares had fallen by 80 per cent and were worth a fraction of the taxes he owed. To make matters worse, JDS closed its Victoria plant in the summer of 2001, putting Wood and hundreds of others out of work, with no way to pay their tax bills.

John McCallum has the power to overturn any unfair tax assessment, and this certainly qualifies. In fact, Paul Martin promised just that on the campaign trail last year. Of course, power and promises aren't necessarily connected in the Liberal psyche. Here's the latest Liberal position, as recently stated by McCallum to Parliament:

"What is critical is that each and every taxpayer knows that he or she will be treated exactly the same as every other taxpayer," he said. "The integrity of the tax system requires that each and every taxpayer be treated in a manner that is fair in comparison with other Canadians."

Way to hide behind the red tape, McCallum, you spineless twit. To think this weasel used to be our Minister of National Defence. Maich's scathing response is absolutely perfect:

If Ottawa can't bring itself to address the legal flaw of taxing income that never existed, it should at least be willing to recognize the tax code was never meant to crush people for the sake of phantom stock profits. But in lieu of fairness, Ottawa offers equality, and it's a poor substitute. Bad news: government is willing to screw you, and take everything you've worked for, on the basis of a foolish technicality. Good news: at least everyone gets screwed equally. How reassuring.

Maich has a blog, and if he can pen pieces like this, I'll be reading it.

Babble off.

Update: I nail the landing on the ever-elusive flip-flop here.


At 6:40 p.m., Blogger Prolix said...

Hmmm... brings to mind that if $540,000 of tax debt of former-Privacy Commissioner George Radwanski can be forgiven then certainly their debts can be too. I would be curious as to the ultimate outcome... in the meantime, a good lesson to us all if you should be about to exercise those options.

At 5:50 p.m., Blogger Gordon Pasha said...

I sincerely hope the govt fixes this before someone succumbs to the stress and takes their own life.

At 7:41 p.m., Blogger Bruce Gottfred said...

I have to disagree with you here. When these guys received their options, they were notified that they had to pay taxes on them. They could cash in enough of the stock to pay them, or just let it ride and hope the stock appreciated even more by the time tax time came around. Essentially their position is no different from a small businessman who borrowed from his tax fund to gamble on the stock market. Should he be forgiven his taxes if he takes a bath? I don't think so.

This isn't money they never had. They were given very valuable assets and could have sold them anytime; but they got greedy and wanted more.

I can feel sympathy for them; at the time I'm sure everyone at the company was walking around with dollar signs in their eyes thinking the stock would never stop going up. But it's no reason to give them a break on their taxes. Too bad, they have to take their medicine.

Of course I think Radwanski should never have got a break either, but that's another story...


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