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The Bubbie effect I work for Canada's leading business publication, so I understand the merits of a competitive corporate tax regime. What I don't understand are the merits of nickel-and-diming us to death.
Today being federal budget day, I thought I'd share a childhood story with Finance Minister Jim Flaherty and his Ontario counterpart Dwight Duncan, who brings down his budget next week. I'd like to see them both be a mensch, give us all a break, and take a lesson from what might be called a Bubbie baking approach to Canadian taxes and fees.
This is not to suggest that Mr. Flaherty plans major tax changes this afternoon. Observers expect little given the heightened scrutiny over all things spending, certainly nothing like the goodies past that included the TFSA and tax credits meant to help get Canada through the recession.
At least one firm has suggested Mr. Flaherty could raise the threshold on the two highest brackets. I'd also like to see - if not today, certainly at some point - rates actually come down and limits on TFSAs and RRSPs rise. (I'm not talking about the rich or the poor here, but the middle.) For its part, Ottawa says its tax relief for families and individuals has reached almost $7-billion from 2008-09 to 2010-2011.
In Canada, as elsewhere, you've got to take everything together. Coupled with what I pay Mr. Flaherty is what I pay to Mr. Duncan and Toronto's Mayor Rob Ford.
Take a look, for example, at the introduction of the harmonized sales tax in Ontario and British Columbia. The argument there was that Ontario's reform wasn't changing how much we were taxed so much as it was how we were taxed. But many of us were taxed more nonetheless.
A credible study released last week, by Professor Michael Smart of the University of Toronto, found that the introduction of the HST raised living costs by 0.6 per cent within a few months. Although he believes the overall impact was small, he estimated the change from sales taxes alone was $231 a year for lower-income families, $461 for those in the middle bracket, and $726 for the wealthiest.
When all the initiatives of the reform are factored in, however, the poorest 20 per cent in Ontario actually saw an average net gain of $375, while the middle group, or average family, suffered a hit of $121 and the top group $208.
Prof. Smart is right, of course, that $121 is small. But don't look at it in isolation. I include taxes at other levels, municipal fees for having two cats and for parking outside my house, and added costs if I want to put out more garbage. This comes amid rising prices in areas such as food and gasoline, and an inevitable hike in interest rates later this year. And lest anyone forget, Canada still suffers a jobless rate of 7.8 per cent, in an economy whose growth is expected to slow, and presumably we'd like people to keep buying without adding to their hefty personal debts.
Which brings me to my Bubbie.
When I was small, I overheard my mother telling a story of one of her earliest chats with her mother-in-law, my grandmother, or bubbie. (We actually called her Other Bubbie, which in retrospect is no way to treat your grandmother, because my mother's own mother lived with us, and thus she held the rank of Bubbie.)
Other Bubbie was said to be a spectacular cook, so much so that she helped feed the Russian army before she fled on the back of a horse-drawn cart to escape the pogroms. (This may well be apocryphal, though I've no reason to think that.)
Once, when Other Bubbie was passing on cooking tips to my mother, she sprinkled whatever ingredient she was using on whatever she was baking, and said in a mix of Yiddish and English something like: "You shit a bissel here, and you shit a bissel here." That actually roughly translates to: "You throw a little here, and you throw a little here." (This was not an uncommon phrase among eastern European Jews, though my mother, who was born in Canada and did not at that point have a firm grasp of Yiddish, was taken aback, insulted until she learned the translation.)
The point of this story is to illustrate how, in many ways, my Bubbie's cooking was much like Canada's heavy burden of taxes and fees. She sprinkled salt, sugar or flour when baking kugel or kreplach. When Ottawa throws taxes here, and Ontario throws its own there, what you're left with is a pile more apt for the original Yiddish.
Genug - enough - already.
- Restraint the watchword in Flaherty budget
- The Globe and Mail will have extensive coverage of the Flaherty budget this afternoon. Read our coverage here
- Professor Rachel Adler of Hebrew Union College - Jewish Institute of Religion on Jewish cooking
Analysts downbeat on CP Rail Analysts are cutting their outlook for Canadian Pacific Railway Ltd. after the transportation giant trimmed its own outlook for first-quarter results because of harsh winter weather, prompting a drop in its shares today.
"Since the new year, multiple severe weather events have caused significant disruptions to train operations across our network," chief executive officer Fred Green said in a statement late yesterday.
"Slower train speeds have reduced productivity and asset velocity thereby constraining network capacity and limiting our ability to meet market demands. The impact of avalanche disruptions are just one factor that increased fivefold this year in our busiest corridor through the mountains causing very inefficient stop-start operations."
The railway projected that would the severity and length of the weather woes, combined with a lag in fuel recoveries, would cost about 40 cents in diluted earnings per share, compared to last year, and it now forecasts first-quarter profit at 12 cents to 22 cents.
Analyst Tasneem Azim at UBS Securities Canada lowered her first-quarter EPS estimate to 14 cents from from 74 cents, and cut her 12-month price target on the stock to $72 from $77.
Similarly, analyst Benoit Poirier of Desjardins Securities cut his target to $72 from $75, but said the profit warning represents a buying opportunity, noting the "moderating" weather.
"The company has increased its resources to meet the stronger demand and improve service reliability. As a result, we expect that some of the business lost in [the first quarter]will be regained in [the second] although we remain cautious."
At TD Newcrest, analyst Cherilyn Radbourne left the target unchanged at $76, and recommended the stock as a "hold."
"While railroading is an 'outdoor sport' and coping with weather challenges is part of the business, in our minds [the first quarter of 2011] has clearly delivered an unusual number of weather challenges. As such, our EPS estimates for 2012 and the balance of 2011 remain unchanged; however we would continue to characterize the associated volume assumptions as optimistic."
RIM gets ready for PlayBook Research In Motion Ltd. is gearing up to begin selling its PlayBook tablet next month, at $499.
RIM said in a statement today the tablet will be available in more than 20,000 stories in Canada and the United States. It did not announce a date, but Best Buy said it would be April 19.
"The BlackBerry PlayBook is an amazing tablet that is already being widely praised as a multitasking powerhouse with an uncompromised web experience and an ultra-portable design," co-chief executive Mike Lazaridis said in the statement.
Apple Inc. is well out in front with its popular iPad, already in its second version. RIM is also competing fiercely with the Apple iPhone and smart phones offering the Android system from Google Inc. .
The BlackBerry maker also reports financial results Thursday, and has projected earnings per share of $1.74 to $1.80, and revenue of $5.5-billion to $5.7-billion.
Retail sales sink Canadian retail sales dipped 0.3 per cent in January, led by a decline in sales of new cars, a disappointing reading given what economists were expecting.
"January's retail sales figures are disappointing and suggest that momentum in consumer spending is ebbing after a strong quarters," said economist Benjamin Reitzes of BMO Nesbitt Burns. "However, job growth has picked up and consumer confidence remained solid in February, so we could see a rebound in spending."
Added Toronto-Dominion Bank economist Diana Petramala: "The last two months of slowing momentum in retail spending confirms our view that given high household debt and a low savings rate, the Canadian consumer can no longer be the main engine for economic growth it once was. Rather, Canadian economic growth is likely to be driven through a revival in exports and business investment."
British inflation runs hot Consumer prices in Britain rose 0.7 per cent in February, with the annual inflation rate at 4.4 per cent as food and energy prices, and a value-added tax increase, feed through. Even without food and energy, costs are still up by 3.4 per cent on the year, posing a problem for the Bank of England.
Scotia Capital economists Derek Holt and Gorica Djeric noted today that those three influences now factoring heavily on inflation should drop out into the next year.
"A concern, however, is that U.K. household inflation expectations are rising," they said. "If expectations are not anchored, then the sustained influences of inflation pressures could be material. But surveys of household inflation expectations are notoriously off base the world over, and the U.K. is no exception."
Boyd Erman's Morning Meeting Canada isn't the only country dealing with a politically charged review of a proposed merger of its exchange operator with that of another country. Australia's ASX and the Singapore exchange operator have presented Canberra with a similar conundrum, Streetwise columnist Boyd Erman writes.
In Economy Lab today
Canada is totally out of step with emerging market economies such as China, India and Brazil, all struggling to rein in soaring inflation largely related to food prices, Patti Croft writes.
In Personal Finance today
Now that we stream and download more and more, it's important to have the right billing plan. Noreen Rasbach offers some advice to help you navigate the choices.
Behavioural finance shows we often don't make the most logical choices when it comes to investing, Rob Carrick reports.
What you do, say and click online could be opening the door to thieves. Dianne Nice shares some tips for staying safe.
From today's Report on Business