HAVING ARRIVED in Ottawa two years ago with a reputation as a tough social conservative—he had, after all, been a key member in Mike Harris’s Common Sense Revolution— Jim Flaherty has proven to be a rather jovial presence on the Hill. Few cabinet ministers seem to enjoy question period as much as the finance minister. Even fewer are as self-deprecating. Last fall, after Flaherty used a Harry Potter book as a prop in a photo-op, Liberal rival John McCallum questioned his credentials in wizardry. To this, Stephen Harper’s five-foot-four-inch money man replied, “I am, at best, a mere elf.”
His enemies—he’s made a few since taking charge of the country’s budget—have worse names for him. Flaherty’s shocking decision to tax income trusts in October 2006, breaking a Conservative party campaign promise,
turned many in the business community against him. One irate stockbroker in Louisiana allegedly threatened to cut Flaherty’s throat, prompting criminal charges. Security for the married father of 16-year-old triplet boys was later beefed up. Things also got heated on the East Coast over Ottawa’s new equalization rules, introduced in Flaherty’s 2007 budget. Newfoundland Premier Danny Williams, who claimed the government’s formula undermined the Atlantic accord, called for his resignation. When Flaherty was left in place in last August’s cabinet shuffle, but dropped from two important cabinet committees—economic affairs and the Treasury Board—it was seen by some as a sign that Harper wasn’t happy.
But the finance minister—who replaced his chief of staff last summer—saw his stock rise
again in October following the fall financial update. Instead of offering boutique tax cuts, which isn’t his style, he implemented $60 billion in long-term, broad-based tax relief. It was vintage Flaherty. He cut the GST to five per cent, lowered corporate taxes and dropped the lowest marginal income tax rate.
Even Bay Street has warmed up to him. The income trust tax doesn’t come up anymore over lunch with the country’s business elite, he claims. His new corporate tax strategy has helped patch things up. “They realize I’m approachable and will listen,” he says. “It doesn’t mean we will always agree, though.” TD Bank’s chief economist Don Drummond says Flaherty also deserves credit for trying to tear down interprovincial trade barriers, and for his efforts to create a national securities regulator. “Many a good person has resigned themselves that they’re not going to be able to solve it,” says Drummond. “But he just keeps going—like the dog and the bone.” John Williamson, federal director of the Canadian Taxpayers Federation, says the fact that Flaherty has even talked about the need to cut the top marginal income tax rate is “very courageous on Parliament Hill.”
If the economy becomes the major issue of the next election, Flaherty, who served as finance minister in Ontario, has plenty of experience on the file and will be a huge political asset. The next few months will certainly test his skills. Due to the feds’ generosity last fall, Flaherty will likely have to sell Canadians on a leaner 2008 budget. And as the U.S. economy nosedives, he will have to guide Canada through one of its rockier economic patches in recent memory. The key, says Flaherty, is “keeping a firm hand on the tiller, or a firm hand on the till, maybe both.”
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