The debate on the per-vote subsidy for federal political parties has been simmering since Finance Minister Jim Flaherty proposed eliminating it in his fiscal update of November 2008. It was that update that almost sent Canadians back to the polls, mere weeks after electing a minority Conservative government, because it lacked a stimulus package to spur the slumping Canadian economy.
Flaherty proposed elimination of the per-vote subsidy to ensure there is "no free ride for political parties”. He went on to say "This is the last stop on the route; there will be no free ride for anyone else in government, either," and "Canadians pay their own bills, and for some Canadians, that is getting harder to do. Political parties should pay their own bills, too, and not with excessive tax dollars.". What Flaherty overlooked are all the other direct and indirect taxpayer subsidies that political parties benefit from.
A lot has transpired in the intervening months, but the per-vote subsidy issue has remained on the back burner; occasionally being raised as is was by Tom Flanagan and David Coletto of the University of Calgary in January, and Jeffrey Simpson in the Globe and Mail on August 11th. The day following Simpson's article, Alice Funke (who runs PunditsGuide.ca ) pointed out political parties rely on four sources of revenue: the per-vote subsidy, party fundraising, as well as riding association and candidate fundraising. There are also two additional sources of revenue: leadership contests, and Elections Canada's 50% reimbursement on election expenses. Registered political parties that obtain at least 2 percent of the total valid votes cast in a general election, or 5 percent of the valid votes cast in the ridings where they have endorsed candidates, are entitled to a reimbursement of 50 percent of their actual election expenses paid. In keeping with Flaherty's assertion that political parties should pay their own bills, not with excessive tax dollars, it is worth considering all tax dollars the parties benefit from.
The per-vote subsidy, has already been well reported. The reimbursement of election expenses is published by the Receiver General in the Public Accounts of Canada in the year following an election or bi-election. The final figure is the indirect taxpayer rebate that individual taxpayers receive when making any federal political contributions. This can be found on line 410 of the federal worksheet. This indirect rebate ends up in many cases being the most significant taxpayer funding of political parties. Being indirect, and hidden, it is easy to ignore. The Canada Revenue Agency keeps this data confidential so there is no way to calculate the exact value without their cooperation. Reasonable estimates however can be made, as I have below.
All parties emphasize this tax rebate when soliciting donations with statements like “your contribution in any one year may entitle you to generous political tax credits on your next tax return”. They talk about getting 75% back on your contribution up to $400. Supporters of this rebate often counter that donations above the $400 do not benefit from the full 75% and use this argument to dismiss the significance of the rebate. With the majority of political contributions below $400, that is not a solid argument. It is worth exploring what the effective rebate would be on higher value contributions. The following graph illustrates the effective rebate in dollars and percentage on donations up to the $1,100 maximum.
As illustrated, even at the maximum $1,100 donation level the effective rebate will be just under 54%. Lacking detailed accounting from the Canada Revenue Agency we need to make some estimates on what rebates would apply. Funke has started some related investigation, she looked at the 2009 contributions from individuals based on detailed reports from Elections Canada and groups them into amount per individual contributor. Contributions vary by party, and from year to year. For the purposes of this analysis I have selected broad categories to reflect an approximate average between the parties. 55% of the contributed funds are assumed to have the full 75% rebate, with the next 15% at the $600 rebate, and so on according to the following table. With fewer donations, and those being higher in value, the Liberal party is probably benefiting slightly less from taxpayer dollars than this average and the converse for the Conservative Party.
Contributions | Value | Effective rebate |
55% | <= $400 | 75.00% |
15% | <= $600 | 66.67% |
5% | <= $800 | 61.46% |
5% | <= $1,000 | 55.83% |
20% | <= $1,100 | 53.79% |
I have calculated the average annual contribution to each federal party based on the returns from Elections Canada for the past 5 years. It is now possible to estimate the average annual tax rebate on contributions that benefits each federal party with a range of minimum (53.79%) to maximum (75%) covered by the hashed area, and my estimated value is represented by the vertical line and value.
To complete the model, tax rebates attributed to candidates, riding associations. and leadership campaigns need to be taken into account. Far less information is available on these to make reasonable estimates. I have included a very rough estimate of the public component for candidates and riding associations at the end of the next two charts, assuming a low rebate of 40%. We now sum up all these taxpayer contributions to the political parties and get a more complete picture of federal party financing from the public accounts. The following chart illustrates for each party how much funding they are receiving on average annually from the taxpayer (based on the past 5 years). The non per-vote subsidy ranges from a low of 44% of total public financing for the Bloc Québécois to a high of 69% for the Conservative Party of Canada.
One final view of the public funding is from a popular vote perspective. The original intent of the per-vote subsidy was to ensure an even playing field for public funding of political parties. The more votes the party received, the more funding it would be entitled to. In an ideal world the average annual per-vote funding should be even across all parties, but this is clearly not the case. Here is the total estimated annual public funding divided by the number of votes received in the fall 2008 General Election.
Looking at the average election cycle of 3.58 years (40th Parliament, 143 years) we can get an estimation of how many public dollars each party consumes for each vote received. Some parties are over twice as efficient in their use of public funds as others for their electoral campaigns.
If Jim Flaherty is truly interested in “no free ride for political parties”, then he needs to consider the entire public funding spectrum. Today our federal parties together have an aggregate annual revenue of about $95 million. My calculations demonstrate that 80%, or over $70 million, is from the taxpayer. The per-vote subsidy only accounts for slightly over one third (36%) of that public funding. It is a fallacy that any of the parties are self sustaining and pay their own bills.
In a democracy it is important to have strong candidates and healthy parties, and public funding helps achieve that goal. The per-vote subsidy is a fair system that levels the public funding between all parties and strengthens our democracy. Expense reimbursement and individual contributor rebates distort it.
It is time to bring accountability and fairness to public funding of federal politics:
- Request that the Canada Revenue Agency start reporting on total tax rebates (Schedule 1 line 410) relating to each federal party, candidate, riding association, and leadership contestant. We need full transparency to understand where our tax dollars are going.
- Eliminate reimbursements and individual political contribution tax rebates (step 1 will then become obsolete).
- Maintain the same overall level of public funding of political parties as today by increasing the per-vote subsidy to cover the current average of funding across all parties.
- Explore public funding alternatives for candidates, riding associations, and leadership contestants.
Copyright © ?Impact - Questionable Impact, 2010
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