Finance Minister Jim Flaherty resigns: A look back at his tenure

There was the income trust tax debacle when he first got the job as federal finance minister and his recent unpopular reversal on income splitting, but Jim Flaherty will likely be best known for what he didn’t do.

“He didn’t let the government spend money,” says Laurence Booth, a finance professor at the University of Toronto’s Rotman School of Management. “He helped Canada put its fiscal house in order.”

Flaherty said Tuesday that he’s resigning from his cabinet post as finance minister, a job he’s held for eight years, and will return to the private sector.

Like most Canadians that follow politics and finance, Booth was surprised Flaherty didn’t stick around longer to present a balanced budget, expected next year.

Regardless, he and others weighing in on Flaherty’s sudden exit from the country’s top finance role, salute his tenure.

“It’s a sad day for Canada,” former B.C. finance minister Carole Taylor told BNN. “He was the person who steered us through some extraordinarily difficult times.”

In a statement Tuesday, Prime Minister Stephen Harper said he accepted Flaherty’s resignation “with great reluctance.”

“In a political career of almost 20 years, Minister Flaherty has exemplified the best qualities of those who enter public life: a true commitment to service, and a sincere desire to leave the country in better shape than it was when he entered politics.”

He credited Flaherty, one of Canada’s longest-serving finance ministers, for helping the country earn a strong global reputation for economic management.

“Canada has benefited immensely from Minister Flaherty's contributions,” Harper said.

Flaherty took on the finance minister job in 2006, after 10 years in Ontario provincial politics where he held a handful of cabinet positions including finance and deputy premier.

His first controversy after being appointed federal finance minister was an announcement on Oct. 31, 2006 to change the rules that gave tax advantages for income trusts. It became known as the “Halloween massacre” for the sudden drop in market value of trusts that resulted. Some valuations took years to recover and many trusts have since switched to corporation status.

Flaherty then held the finance mantle as Canada battled through one of the worst recessions in history. As the economy slowly recovered, he further tightened mortgage rules to ensure Canada didn’t wind up in a housing crisis like the U.S.

Last year, Flaherty was forced to disclose a health issue that explained his sometimes-bloated appearance. Flaherty said it was the effects of a steroid he was prescribed to treat a rare dermatological condition known as bullous pemphigoid. He insisted it wasn’t impacting his work, and that he would carry on minding the country’s books.

Earlier this year, Flaherty was back in the headlines for suggesting he no longer supports a 2011 Conservative campaign promise to implement income splitting for couples with children under 18. The policy was believed to be beneficial for one-income families.

Some are now questioning whether it was his position on this policy that led to the decision to leave politics.

Flaherty was clear in his goodbye letter that his departure wasn’t related to his health issue, but said little else.

“I am happy to report that I am on the road to a full recovery and the decision to leave politics was not related in any way to my health,” he stated. “This decision was made because it is the right one for me and my family at this time.”

CIBC economist Avery Shenfeld said in a note that it doesn’t appear Flaherty is leaving due to any disagreement within the party, but that his influence could linger.

“Flaherty was one voice in the cabinet that had expressed a desire to look at alternatives to income splitting as a way of meeting a promise to cut taxes on families next year, so his departure could potentially influence the form of tax reduction introduced in the next budget,” Shenfeld wrote, while also predicting a muted response to the news on the markets.

If Flaherty’s departure doesn’t cause waves, it will confirm his tenure was a success, says Booth of the Rotman School.

As for his decision: “Nobody but him really knows why he’s leaving,” Booth says.