Ottawa is dismissing the
well-financed and well-organized advocacy group protesting the change in taxation of income trusts as just another rump group with little influence on Parliament Hill, just as the Reform Party and the National Citizens’ Coalition were at one time dismissed.

Indeed, one could say Ottawa is dismissing the Canadian Association of Income Trust Investors just as it once did Stephen Harper, whose past employers include the NCC and the original Reform Party.

Even the Parliamentary press gallery is not paying as much attention to CAITI as it should, just as in the past it underestimated so many groups that were gathering strength out in the heartland.

But the CAITI is showing no signs of going away and, at some point, the government will have to deal with it — for a number of reasons.

Toronto residents who have recently used the Gardiner Expressway have seen the CAITI billboard advertisement that calls Finance Minister Jim Flaherty a liar, just as they used to see the billboards against government waste that our current prime minister ran as NCC president in the 1990s.

In fact, CAITI appears to have borrowed a lot of the NCC’s modus operandi, including not disclosing the source of its donations.

It would be difficult for any government to attack a group that resembles an advocacy group that once employed the prime minister. And, of course, this issue would be difficult for any government that promised not to tax income trusts as ordinary equities during the 2006 election campaign and then announced it would do just that, as Flaherty did last fall.

But this government has another problem with this group, and it is a problem of the government’s own making.

The Federal Accountability Act, the government’s marquee legislation to clean up Ottawa, banned corporate, union or any donation of material size to political parties. But it left advocacy groups out of the act’s jurisdiction.

The Federal Accountability Act is already widely regarded as legislation passed in reformist zeal that will create almost as many issues as it was supposed to solve.

With political donations limited to just $1,000 from individual Canadians, no political party will ever be beholden — at least, legally — to any particular issue or interest group.

Nor will any political party be able to solicit donations from these groups.

But not so for advocacy groups, and this is why there have been predictions that Canada will import a trend from the U.S., where campaign finance laws have propelled so-called “political action committees” into major outside players that tilt elections.

Witness the damage done to the presidential campaign of Democrat John Kerry by the Swift Boat Veterans, a PAC that was long on funds but short on facts in 2004.

As in Canada, U.S. election laws do not cover PACs. As a result, PACs have become surrogate players in U.S. elections.

Under Canadian election laws, third-party advocacy groups are restricted to spending no more than $150,000 during election campaigns.

Harper has opposed this law, both as NCC president and as prime minister. However, it has been upheld in the courts.

Groups such as the NCC and CAITI are free to spend as much as they like up to the election writ, which means they are still able to be major players in Canadian politics without having to disclose donors or follow any rules — at least, until the official campaign begins.

Finally, it would be difficult for the government to engage CAITI in battle, as the Conservatives attacked the Liberals for even considering the idea of changing the method of taxation for income trusts in the most recent federal election campaign.

The Conservatives did such a wonderful job of convincing voters that this was an issue affecting senior citizen investors as well as Bay Street that they have done much of the advance work for CAITI.

CAITI has already caused the Tories considerable grief in their southern Alberta stronghold.

Not enough to cost the Tories a riding, perhaps, but enough to take a chunk out of the party’s credibility, regionally and nationally.

The voters may not be keen to return the Liberals to power. However, there have been lingering doubts in voters’ minds about the Tories’ sincerity for months.

This is why support for the government has receded in the polls to just below the level it was after the 2006 election.

@page_break@At this point, it would be difficult to predict whether these public misgivings could put the Tories out of office in the next election.

But the Tories now have an exposed flank CAITI can exploit.

Look for a deal between the Conservatives and CAITI before the next election.

CAITI has the potential to be a pain in a lot of rumps in the Tory caucus. IE