James Michael Flaherty (December 30, 1949 – April 10, 2014) was a Canadian politician who served as the federal minister of finance from 2006 to 2014 under Conservative Prime Minister Stephen Harper.
First elected to the Legislative Assembly of Ontario in 1995 under the Progressive Conservative (PC) banner, Flaherty would sit as a member of Provincial Parliament (MPP) until 2006, also serving in a number of Cabinet positions from 1997 to 2002 during Premier Mike Harris' government. He unsuccessfully ran for the PC leadership twice.
Flaherty entered federal politics and ran for the Conservative Party in the 2006 election. With his party forming government, Prime Minister Harper named Flaherty as finance minister. As finance minister, Flaherty reduced personal income taxes and corporate taxes, reduced the goods and services tax to 5%, introduced the tax-free savings account, and dealt with the Great Recession; the $55.6 billion deficit in the 2009 Canadian federal budget was eliminated in 2014 as a result of major spending cuts. Flaherty tabled nine federal budgets and was the longest continuously serving minister in Harper's government until his resignation in 2014.
Flaherty died of a heart attack three weeks after his resignation as minister. His widow, Christine Elliott, later served as the deputy premier of Ontario.
Early life, education and career (1949–1995)
Flaherty was born on December 30, 1949 in Lachine, Quebec, the son of Mary (née Harquail), who was from a "prosperous family", and Edwin Benedict Flaherty, an entrepreneur and chemist. His parents were from New Brunswick, his father from Loggieville and his mother from Campbellton. He was the sixth of eight children. He attended Bishop Whelan High School and Loyola High School, Montreal. Flaherty attended Princeton University, where he graduated cum laude with an A.B. in sociology in 1970. He wrote his senior thesis, titled "Camp X: Sensitivity Training with a Group of Young Adults", on the sensitivity training at Camp X, a military training institute in Ontario. He then received a Bachelor of Laws degree from Osgoode Hall Law School of York University.
He practised law for 20 years, and was a founding partner of Flaherty Dow Elliott after splitting from Gilbert Wright and Flaherty. Now known as Flaherty & McCarthy LLP (formerly Flaherty Dow Elliott & McCarthy LLP), is a law firm specializing in civil tort / vehicle accident and personal injury litigation.
Flaherty ran for in the provincial election of 1990, finishing third against New Democrat Drummond White and Liberal Allan Furlong in the riding of Durham Centre. He ran again and was elected in the 1995 election.
Provincial political career (1995–2005)
Cabinet 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.
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. 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.
2002 Ontario PC leadership bid 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"."Flaherty gets personal with attack on Eves", National Post, January 31, 2002
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.
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.
Opposition and 2004 Ontario PC leadership bid 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. 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.
Federal finance minister (2006–2014)
On June 13, 2005, the Canadian news website bourque.org reported that a meeting of prominent Conservative organizers and fundraisers had been held to plan for a Flaherty bid for the leadership of the federal party should Stephen Harper resign. In December 2005, the 2006 general election was called. Flaherty resigned his seat in the Ontario legislature to run for the Conservative Party of Canada in the riding of Whitby—Oshawa, narrowly unseating incumbent Judi Longfield.
Flaherty's wife, Christine Elliott, won Flaherty's former provincial seat in a by-election, defeating Longfield who was running as the provincial Liberal candidate. This marked the first time in Canadian history that a husband and wife have simultaneously represented the same electoral district at two different levels of government.
On February 6, 2006, Flaherty was sworn in as Minister of Finance in Stephen Harper's new Conservative Cabinet.'Western Tories may miss out on Cabinet posts' , National Post, January 16, 2006 He was also appointed Minister Responsible for the Greater Toronto Area. In his capacity as Minister of Finance, he served as a Governor of the World Bank and the International Monetary Fund.
He announced his resignation from the cabinet on March 18, 2014.
October 31, 2006, income trust announcement 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. 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.
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.
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."
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.
Fullard opposition 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." 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.
Registered Disability Savings Plan 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. 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.
Tax-Free Savings Account 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.
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."
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."
EUROMoney Magazine 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."
Federation of Canadian Municipalities report on infrastructure