Although it is barely election courting time, federal Liberals are already making promises to Bay Street in an effort to score a few easy points. The latest Liberal foray among Canadian businesses basically sent this message: "Yes, the Conservative's moratorium on new income trusts from last year was a bad Halloween joke, to an extent, and yes, we promise to fix things, at least for some types of income trusts." And who better to appeal to than the guys in the oil patch.

The Liberals are not completely opposed to taxing income trusts -- existing or new. It's just that some sectors, such as the companies digging or drilling for hot commodities, are among the few who could actually keep their income distributions high, put capital back into the underlying business, and still pay reasonable amounts of taxes.

Although initially the Liberals supported the Conservatives' moratorium on all new income trusts, they thought repealing the ban at least in some sectors might be a good tool to attract more votes from the financial district. For example, the Harper government made the real estate income trusts exempt from both the ban and the tax. The Liberals believe, however, that the energy trusts deserve the same exemption, if not more so. In contrast, when it comes to federally regulated industries, the two parties still see eye-to-eye: financial institutions, telecommunication and transportation companies should not be allowed to form income trusts.

To start the ball rolling, the Liberals have already promised to decrease the 31.5% income tax to a 10% tax -- well, a levy really -- that Canadian citizens could at least get a refund for, leaving foreigners out of the loop (and rightfully so). Investors should bear in mind that the Liberals are still in the process of redrafting their income trust policy and that it will take more "singing and dancing" with the Bay Street movers and shakers before it is finalized.

Of course, the Conservatives are dismissing the Liberals' income trust initiative, offering a very convincing argument that, during the Liberal reign, the income trust mania has gone a little overboard. On the other hand, the income trust industry welcomes the idea of revamping the sector, although major players disagree with the government being the one to pick which sectors should be let out of the gate and which should remain permanently under the ban.

My two cents on the issue is that Canadians need income trusts. Our nation is aging and trusts represents a viable investment vehicle for generating extra income for those who need it the most. However, I also believe that not all income trusts are created equal. Trusts with the underlying asset being a commodity hot in demand have what it takes to pay taxes, deliver strong and steady income, and still invest a healthy potion of capital back into the business. Trusts in other industries, especially banks, telecoms, railway or airlines, still strongly smell of corporate tax evasion.