Even if you don’t have $1,500 for a night with the PM, you’re still paying for part of it
It doesn’t matter if you can’t spend an evening with the prime minister because the $1,500 ticket price for entry to a party fundraising event is too high. You’ll still be on the hook for some of the bill.
And you can thank Canada’s political financing laws, which award donors significant tax credits on contributions to political parties and in election years reimburse parties half (or more) of their election expenses, to the tune of tens of millions of dollars.
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Political contributions are subsidized by taxpayers in two ways. Firstly, donors receive non-refundable tax credits worth 75 per cent of the first $400 donated, 50 per cent of the next $350 and 33.3 per cent of the remaining donation (topping out at a maximum credit of $650).
Secondly, parties and candidates receive reimbursements for election expenses at rates ranging from 50 per cent for national parties to 60 per cent for candidates who get at least 10 per cent of the vote in their riding.
This means that a $1,500 donation made to the Liberal Party to attend an event headlined by the prime minister will result in a $650 tax credit for the donor and up to $750 in reimbursements to the party if that money is spent in the next election campaign.
A smaller donation is an even worse deal for taxpayers. A $400 contribution to a political party means $300 less for the treasury and $200 in election expense reimbursements to a party — turning a $400 donation into the equivalent of $500 of taxpayer subsidies.
$140 million in 2015
An analysis of Elections Canada data shows how these subsidies can add up very quickly.
In 2015, parties raised about $74 million from individual contributors. Canadians also donated about $17.7 million to their local electoral district associations (EDA) and about $10.3 million to election candidates.
This gave donors access to about $65.7 million in tax credits, though the Department of Finance projects that the cost of the credit in 2015 was actually $35 million — suggesting that a significant number of donors either did not pay taxes (and so had no access to the credit) or forgot to claim the credit.
Election expense reimbursements are even more lucrative. As a group, candidates who had at least 10 per cent support in their ridings are eligible for $44.5 million, while reimbursements made to national party organizations for election expenses were $60.7 million.
Altogether, this adds up to about $140 million in tax credits for donors and reimbursements to parties for 2015.
Higher in election years
Last year was a particularly expensive one because of the election. In addition to reimbursements for expenses, parties also ramp up their fundraising activities in an election year.
But non-election years are still costly. The five major parties raised about $35 million in 2012, $40 million in 2013 and $48 million in 2014 — not counting the money raised by the local EDAs. The Department of Finance estimates that the cost of the credit was about $25 million per year.
Coincidentally, that’s roughly equal to the yearly cost of the per-vote subsidy that the Conservatives phased out after the 2011 federal election. That subsidy awarded parties about $2 for every vote they received in the previous election.
Fundraising spiked in 2015 due to the election, with about $102 million being raised by federal political organizations, including money contributed to political parties, EDAs and election candidates.
Including tax credits and amortizing the election reimbursements over the four-year election cycle, about $61 million of the $102 million raised in 2015 was subsidized by the taxpayer, or roughly 50 cents for every dollar contributed.
And that does not take into account the reimbursements for 2015 being spent again in the 2019 federal election, an expenditure in turn reimbursed at a rate of 50 per cent and spent in subsequent elections, over and over again.
Worth the political cost?
Political parties need money. Elections are expensive and parties need to continuing operating between them — meaning they need to pay for office buildings, staffers and other day-to-day expenditures. Without direct public financing, parties need to raise these funds themselves.
In the current system, this means regular public appeals — and fundraisers, which can raise ethical questions when politicians in power mix with people who have donated to their party. The opposition has dogged Prime Minister Justin Trudeau and some of his ministers this fall with questions about their attendance at $1,500-per-ticket party fundraisers.
Per-vote subsidy ‘a partial answer’
On Wednesday, NDP Leader Tom Mulcair said that a return of the per-vote subsidy would be “a partial answer to some of these ethical issues.”
The per-vote subsidy could be re-introduced and even enriched without any net cost to the taxpayer, if it replaced the tax credit on donations. With money going directly to the parties, Parliament could choose to drastically reduce the limit on donations (Quebec, for example, has dropped those limits to $100 for provincial parties), reducing the incentive for politicians to attend these fundraisers entirely and eliminating those questions about ethics.
Of course, the per-vote subsidy has been tried before. It was a political hot button issue while it existed, fiercely opposed by the Conservatives and defended just as fiercely by the Liberals and New Democrats. It was a major factor in the near-collapse of Stephen Harper’s government in 2008-2009 during the coalition affair. It took the Conservatives winning a majority government in 2011 to get rid of it.
A return of the per-vote subsidy could solve some problems for the Liberal government. But it could also simply trade one political controversy for another.