Jim Flaherty

He was named Minister of Labour in the cabinet of Premier Mike Harris on October 10, 1997, and kept this position until after the 1999 election. He also served as interim Solicitor General and Minister of Correctional Services from April 27 to July 27, 1998.[9]

Flaherty was re-elected in the 1999 election in the redistributed riding of Whitby–Ajax, and was named Attorney General with responsibility for Native Affairs on June 17, 1999. On February 8, 2001, he was appointed Minister of Finance and Deputy Premier. He was a key promoter of tax credits for parents sending their children to private and denominational schools, which the Tories had campaigned against in 1999.[9] In June 2001, Flaherty was evicted from his constituency office in a theatrical action by Ontario Coalition Against Poverty which aimed to bring home the effects of his policies.[10]

Flaherty ran to succeed Harris in the 2002 PC leadership election, but lost to frontrunner Ernie Eves, his predecessor as finance minister. Flaherty's campaign featured attacks on Eves, calling him a "serial waffler" and a "pale, pink imitation of Dalton McGuinty".[11][9]

Flaherty's leadership campaign focused on "law and order" themes, and one of his proposals was to make homelessness illegal. His purported plan was to have special constables encourage homeless persons to seek out shelters or hospitals. He argued that his policy would save the lives of homeless persons; leadership rival Elizabeth Witmer and other critics described it as callous, and ineffective against the root causes of homelessness.[12][9]

Flaherty also promised to implement further tax cuts, carry through with plans to create a tax credit for parents sending their children to private school, and privatizing the Liquor Control Board of Ontario. Flaherty also emerged as a social conservative in this campaign, particularly a staunch stance against abortion and his association with anti-abortion groups. On April 15, 2002, Eves demoted him to the less-prominent position of Minister of Enterprise, Opportunity and Innovation. Flaherty retained this position until the Tories were defeated in the provincial election of 2003. Flaherty himself was re-elected by a reduced margin.[13][9]

Following the defeat of the Conservatives, Eves announced that he would resign as leader in 2004. Flaherty declared himself a candidate to succeed him, but was defeated by John Tory by a margin of 54 percent to 46 percent on the second ballot of the PC leadership election held on September 18, 2004. His supporters included former cabinet ministers John Baird, Tim Hudak and Norm Sterling.[9] His 2004 leadership campaign was similar to that of 2002. He emphasized fiscally conservative themes, including further tax cuts and greater privatization. He promised to create EXCEL scholarships, whereby students attaining high grades in high school would have half their university tuition paid by the government. Until 2005, Flaherty served as finance critic in John Tory's shadow cabinet.[9][14]

Flaherty was a central figure in the debate surrounding the new proposed rules for taxation of Canadian income trusts. His announcement on October 31, 2006 of a rule change to tax income trusts levelled the playing field between forms of business such that businesses operating as income trusts no longer enjoyed a tax advantage over businesses operating as corporations. The announcement was accompanied by a further planned reduction in the corporate rate so that the two moves together were not expected to generate additional revenue for the government.

Flaherty said that income trusts would cost the government $500 million annually in lost tax revenue and shift the burden onto ordinary people.[19] The Canadian Association of Income Trust Investors said that foreign takeovers of Canadian income trusts have had the opposite effect and caused decrease in federal government tax revenues.[20][21]

Diane Francis, editor-at-large for the National Post, urged that the rule changes be recanted, arguing that there were flaws in the policy which hurt Canadian investors.[22]

Special hearings by the House of Commons Standing Committee on Finance commenced January 30, 2007. John McCallum, the Liberal finance critic, asked Flaherty to explain the reasoning behind the change in income trust tax policy. McCallum said "Your first problem is that having lured hundreds of thousands of ordinary Canadians into income trusts by promising not to raise taxes you then cut them off at the knees."[23][24]

On February 28, 2007, the committee released their report, Taxing Income Trusts: Reconcilable or Irreconcilable differences?, recommending a reduction of the proposed tax to 10 percent from 31.5 percent.[25]

On August 21, 2008, Brent Fullard, president of the Canadian Association of Income Trust Investors, challenged Flaherty to debate supposed tax leakage associated with income trusts. Fullard announced he would put up $50,000, payable to his favourite charity. Given the minister's "current crusade on financial literacy", Fullard believed a suitable charitable cause would be a scholarship for business education. "By doing this we could help repair the damage caused by the Minister's statement that Ontario is the last place to invest."[26] Flaherty turned down the request. "The tax fairness plan is law. The Minister made his position clear before the finance committee and there is no need for further debate," according to his press spokesperson.[27]

In Budget 2007, Flaherty introduced the Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan to help Canadians with disabilities and their families save.[28] The RDSP resembles its other saving counterparts, the RRSP and the RESP, and is meant to ensure a secure future for people with disabilities. The Government assists these families by contributing through grants and bonds that supplement contributions.[29]

In Budget 2008, Flaherty introduced the Tax-Free Savings Account (TFSA), a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs.[30]

The measure, which came into effect on January 2, 2009, has clear differences with the Registered Retirement Savings Plan (RRSP). There is a tax deduction for contributions to an RRSP, and withdrawals of contributions and investment income are all taxable. In contrast, there are no tax deductions for contributions to a TFSA. Beginning in 2013, contribution room in the TFSA has increased to $5,500 per calendar year. The Canada Revenue Agency describes the difference between the TFSA and an RRSP as follows: "An RRSP is primarily intended for retirement. The TFSA is like an RRSP for everything else in your life."[31]

Flaherty's measure was supported by many organizations, including the C.D. Howe Institute, which stated: "This tax policy gem is very good news for Canadians, and Mr. Flaherty and his government deserve credit for a novel program."[32]

In 2009, Flaherty received an award from EUROMoney Magazine, naming him Finance Minister of the Year. Flaherty is the first Canadian to hold this honour. It says he "enhanced his country's reputation for sound fiscal policy that takes full account of social justice, while a strong regulatory regime has kept the financial sector out of the chaos."[33]

Flaherty responded to a report from the Federation of Canadian Municipalities that suggested that cities had an infrastructure deficit of $123 billion and the federal government should step up with some cash with the suggestion cities should stop "whining" and repair their own crumbling infrastructure.

Calgary Mayor Dave Bronconnier claimed Flaherty sidestepped responsibility for billions in infrastructure dollars being sought, when Flaherty advised municipalities to "do their job" because the feds are "not in the pothole business". "Let’s get on with the job and stop complaining about it and do their job", Flaherty continued, noting the Building Canada fund will inject $33 billion into cities to help deal with the infrastructure crunch. However Bronconnier said the plan is merely a "repackaging" of a number of pre-existing funding arrangements.[34] The Building Canada Fund was strongly criticized for being designed to fail, due to excessive red tape, which has delayed much of the funding from being awarded.[35]

Mississauga Mayor Hazel McCallion went further by issuing a challenge to Flaherty to publicly debate the need for permanent federal funding for the repair and upkeep of municipal roads and bridges. McCallion said "Flaherty has stated in the media that some of the municipalities have not kept up with infrastructure and did not establish adequate reserves. Well, I can tell him that he is dead wrong. The facts are that Mississauga has carefully set aside reserves for infrastructure for years." McCallion noted that cities are trying to maintain 58 per cent of public infrastructure with eight cents of every tax dollar.[36] Flaherty did not accept Hazel McCallion's offer to debate.[37]

Flaherty said his office broke government contracting rules in hiring MacPhie & Company to help write the 2007 budget speech and provide advice on how to sell the document. MacPhie & Company was awarded the $122,000 contract without tender by Flaherty's office.[38] On February 7, 2008, Liberal finance critic John McCallum formally called on Auditor General Sheila Fraser to conduct an audit into the untendered contract awarded by Flaherty to MacPhie & Company for work done in advance of the 2007 budget.[39]

The Toronto Star determined that several people who supported Flaherty when he was an Ontario cabinet minister or who supported his two failed bids to lead the Ontario Tories were awarded employment contracts or given appointments.[39] The employment contracts awarded were under the $25,000 Treasury Board contract bidding limit. Bronwen Evans received a $24,877.50 contract to write speeches for Flaherty from June 2006 until last February.[40] David Curtain, who worked on Flaherty's Ontario leadership campaign, received $24,877.50 to write the finance minister's first budget speech. Curtain was also paid $3,350 to write a keynote address earlier in 2008 for Flaherty. Lawyer James Love, who donated $63,000 to Flaherty over two leadership campaigns, was appointed to the Royal Canadian Mint. Another Flaherty donor, Carol Hansell, was appointed to the board of directors of the Bank of Canada in October 2006. Toronto family law lawyer Sara Beth Mintz, an Ontario Progressive Conservative Party vice-president, received $24,900 for budget "analysis, assessment and advice".[41] MacPhie & Company also got another contract for $24,645 for work done on Advantage Canada, a long-term, national economic plan.[42] Opposition parties said they were suspicious that contracts were coming in just under $25,000 in order to give business to Flaherty's friends and supporters.[43]

On May 13, 2008, Flaherty appeared before the Public Accounts committee, facing questions about multiple sole-sourced contracts worth more than $300,000 that were given by the government.[44] Flaherty says he was unaware his former chief of staff broke government rules in handing a well-connected Tory an untendered contract to write the 2007 budget speech.[45][46]

The Foreign Account Tax Compliance Act is American legislation that requires cooperation, legal and financial, from Canada (and other nations), in order to be implemented. The official reason given for this legislation was efforts to crack down on tax evasion. However, in a letter Flaherty sent to U.S. newspapers in September 2011, he said the law would waste resources and raise privacy concerns. On February 5, 2014, Flaherty signed Canada on as a participant to FATCA through an Intergovernmental Agreement (IGA).[47]

While announcing Economic Action Plan 2012 on March 29 in the House of Commons, Flaherty explained that, by February 2013, the government would be phasing out the penny. The cost to produce each new penny was 1.6 cents, which exceeded the penny's face value by 0.6 cents. The estimated savings for taxpayers from phasing out the penny is about $11 million a year. Even though the government eliminated the penny from circulation, Canadians can continue to use pennies for cash transactions indefinitely for businesses that choose to accept them or they can redeem rolled pennies at their financial institutions.[48][49]

The now defunct Crown Corporation PPP Canada was created during Flaherty's tenure to highlight the commitment of the federal government to Public-private partnerships (PPP, P3). It was responsible for promoting and facilitating Public-private partnerships, and operated under Infrastructure Canada. PPP Canada managed the “P3 Canada fund” where provinces, territories, and municipalities could apply for funding from the federal government.[50] PP Canada served as Canada's centralized PPP Unit from its creation in 2009 until it was dissolved in 2018 under Prime Minister Justin Trudeau.[50]

Flaherty intended to fund most of Canada's new infrastructure though Public-private partnerships. He intervened in the 2013 Regina wastewater plant funding referendum, during which he wrote an open letter arguing that voters should select the P3 option. His arguments included the promise of allocating $58.5 million of federal funding if the P3 option is selected.[51]

On May 21, 2013, Flaherty introduced his 2013 Budget. The Budget contained a new Building Canada Plan for the construction of public infrastructure such as roads, bridges, transit and port facilities.[52] The plan provides $53 billion in investments to support local and economic infrastructure projects, including more than $47 billion in new funding over 10 years, starting in 2014–2015.[53]

Flaherty presented nine budgets to the Canadian Parliament as Minister of Finance.

• 2006 Canadian federal budget
• 2007 Canadian federal budget
• 2008 Canadian federal budget
• 2009 Canadian federal budget
• 2010 Canadian federal budget
• 2011 Canadian federal budget (presented in March 2011 and again in June).
• 2012 Canadian federal budget
• 2013 Canadian federal budget
• 2014 Canadian federal budget

On March 18, 2014, Flaherty announced that he was resigning as Minister of Finance in order to return to the private sector. While he had openly discussed health challenges associated with managing bullous pemphigoid, including taking prescription steroids, he said the decision was reached after many months of consultation with his family and that his health was not a factor in his decision.[54][55] Flaherty continued sitting in the House of Commons as an MP until his death three weeks later.[1][56] At the time of his resignation, he held the honour of being the Longest continuous serving cabinet minister in a single portfolio in the 28th Canadian Ministry.[57]