You are on page 1of 3

Cut the subsidy, then make it easier for parties

to raise money on their own

Tom Flanagan, Globe and Mail – Aug 14, 2009

The Conservative government nearly blew itself out of the water last
November when it tried to cut off $27-million a year in federal
allowances to political parties. Although polls showed the idea was
popular with the public, the commentariat generally panned it as a low
blow against competing parties, because they are more dependent on
the subsidies than the Conservatives are. The opposition parties
formed their famous coalition and threatened to vote non-confidence
against the Conservatives, who quickly retracted the proposal. Prime
Minister Stephen Harper, however, has vowed to bring it back as part
of his campaign platform in the next election.

The allowances were introduced in 2004, as part of Jean Chrétien's bill

that eliminated corporate and labour contributions to parties while
capping individual donations at $5,000. The allowances were supposed
to compensate parties for revenue lost from corporate and labour
union contributions. The screw was tightened further in 2007, when the
cap for individual donations was reduced to $1,000, adjusted annually
for inflation.

Cut off from previous sources of revenue, parties have become heavily
dependent on the allowances. If they are now to be cancelled, it should
be done in steps, say over three years, to give parties time to adjust.

Also, as Julie Andrews said (playing Maria von Trapp), “When God
closes a door, somewhere He opens a window.” If parties are to lose
their allowances, they should get opportunities to raise more revenue
for themselves. Here are three non-mutually-exclusive suggestions
that could be implemented alone or in combination.

First, the amount of political party donations that can be claimed for a
federal tax credit is $1,275, yet the annual amount that is legal for an
individual to give is $2,200 ($1,100 to national parties and $1,100 to
electoral district associations). Inflation has already eroded the value
of the tax credit by about 13 per cent since it was instituted in 2004.
Raising the claim limit and periodically adjusting it for inflation would
increase the volume of individual giving to political parties.
Second, the donation limit of $1,100 to national parties is not very
high. The comparable limit in the United States is $2,400 for individual
contributions to presidential campaigns. Canadian democracy would
not be threatened with corruption and influence-peddling if the $1,100
limit were raised substantially, even doubled, while the total of
contributions would certainly increase.

Third, Canada could consider a taxpayer check-off system of the type

found in the United States at the federal level and in 41 states. The
basic idea is that taxpayers, when filing annual returns, can tick a box
indicating a political contribution. The systems vary in the limits they
set and in whether taxpayers give from their own returns or assign the
destination for money from a government fund.

A Canadian national system would look different from its American

counterparts because money would go to parties, not individual
candidates, but the taxpayer check-off mechanism would be the same.
The Conservatives included a taxpayer check-off in their 2004 election
platform but subsequently dropped the idea. Nonetheless, it's worth
another look, in conjunction with the other options mentioned above.

How much revenue would a taxpayer check-off system yield? About 25

million Canadians file income tax returns, and 25 per cent of these
claim tax credits for charitable donations, averaging about $135 apiece
(in 2005). If 5 per cent of taxpayers ticked a box directing $10 to their
favourite political party, that would be $12 million, a little less than half
the value of the current federal allowances.

One of the things wrong with the allowance system is that it

encourages parties to coast on past performance, because the
allowance is determined by the number of votes gathered in the most
recent election. Whatever is done to replace the federal allowances,
the goal should be to make it easier for parties to raise money for

What is needed are incentives for parties to keep in contact with their
supporters – to ask for money, to be sure, but also to keep people
informed. Making appeals more lucrative, or instituting a taxpayer
check-off system, would reinforce incentives for parties to find out who
their supporters are and to keep in touch with them.
There might be little or no saving to the federal treasury, because
indirect incentives through the tax system would still be involved; but
Canadian democracy would benefit if parties were encouraged to be
more active at the grassroots level.