While the per-vote subsidy is being phased out, it is only one of four subsidies given to political parties, with the other 3 being as follows:
- A tax rebate to persons making a political donation, including a 75% rebate to those donating $400 or less (Sec. 127(3) of the Income Tax Act)
- A 50% spending rebate to parties that receive 2% of the popular vote or 5% of the vote in ridings they contest (Sec. 435 of the Elections Act)
- A 60% spending rebate to candidates/riding associations that receive 10% or more of the vote (Sec. 464 of the Elections Act)
While the spending rebates, particularly the ones to individual candidates, have been criticized on fairness grounds, they are also problematic as they amplify or compound the per-vote subsidy and the income tax rebate.
Suppose I make a $400 donation to my local NDP, Liberal or Conservative riding association. I am out of pocket $100 and the government has contributed $300, a 1:3 ratio.
The candidate spends that $400 in the election, wins 10% or more of the vote, and receives a cheque for $240 (60% of $400).
Next election, the candidate spends the $240 rebate from the government, wins 10% or more of the vote, and receives a cheque for $144 (60% of $240).
This goes on ad infinitum, so long as the party stays above 10% of the vote. The total amount of money the party gets to spend this way is a simple geometric series and can be calculated by a(1 / 1 – r), where a is the initial amount ($400) and r is the rebate value (60% or .6). A quick calculation yields the value of $1000.*
I have contributed $100 and the government has contributed $900, so the true ratio is not 1:3, but rather 1:9 and government is subsidizing 90% of the cost ($300 from the income tax rebate, $600 from the spending rebate).
Is there anyone in Canada who is willing to defend a 90% political donation subsidy?
And we haven't even touched the fairness issue – a donation to my local Green Party would not receive any government money from the spending rebate, with 2008 being a notable exception.
—
* One issue I have not taken into account here is inflation. Although the purchase power of a dollar does erode over time, between elections this money will be sitting in a savings account earning interest. These two effects should roughly cancel each other out.
Worthwhile Canadian Initiative 
Great explanation, unfortunately reform is difficult. Most politicians wouldn’t vote to cut off their funding and most major media knows pushing the issue would be cutting their own throats. Pressure from social media may be the only hope for progress.
But what is fair? Should we let corporations donate, as they used to, to make up for losing 90% subsidy? That is the only silver lining here, that unions and corporations can not donate anymore. But we have to remember that middle and low income people have little or no money to spare to fund a party to defend their interests, while wealthy ones have money to spare – the 75% subsidy corrects this a little.
The current system was one reason why the Bloc have been around so long – they basically didn’t have to raise money because success in an election guarranteed that they would have money to fight the next one. The current system discriminates against new party, and independents, of course.
Frankly, the one thing I would like to see is a ban on negative advertising between elections – reduce what parties can spend along with any reduction in subsidies – I doubt that haprer would do this, of course.
The solution I like is one that Tom Flanagan and other have proposed – every year, send out a form with the income taxes – let people choose the party they support and have it get $10.00 – this would be tabulated separate from the taxes. Every canadian is treated equally, it doesn’t lock in support based on a past election but is based on current popularity. Funding for independents is still an issue unless they are allowed to register early – after all, parties were not a fundamental part of the parliamentary syste, the system is based on voting for a person to represent your riding, and funding should recognise this or not be contrary to the concept.
“But what is fair? Should we let corporations donate, as they used to, to make up for losing 90% subsidy?”
I don’t see why you’d need to do this. One option would be to slice both the subsidies and spending limits in half.
Great stuff Mike! Not quite the same but along similar lines, government subsidies contribute positively to GDP in the Input-Output tables so multiplier magnitudes and subsidies are strongly correlated. So governments picking industrial winners based on Input-Output multipliers can potentially reward earlier subsidies or tax cuts.
This is Canada where the state pays fishermen to overfish and destroy fish stocks.
I had no clue the subsidy was so big. And that is a great explanation.
Unfortunately, I’m not entirely comfortable with the idea running the other way …
“Political parties should be judged as much by the money people send to them as by the votes people send to them.”
You might think that to be a bit of an overstatement – but there doesn’t seem to be any disagreement on that point that parties that do not fundraise will have almost no effectiveness, and will likely soon cease to exist as a functioning party.
The obvious side effect is that political parties will start to develop policies that favour the people who either can or do send them money. Convesely, they may no longer bother with policies of interest to people who don’t have money, because those people couldn’t send any.
And we think this is a good idea? Isn’t this the essence of plutocracy?
Looked at this way, maybe we shouldn’t let parties fundraise at all – let them be judged at the ballot box alone.
One minor caveat: not all funds raised by riding associations and political parties are spent during elections. You would need to discount the original amount in the geometric series by some estimate of what percentage of funds are spent outside of elections. For example, if 25% of funds were spent outside of elections, a would be 400*1/4 = 300 and the sum of the series would be $750 instead of $1,000, giving a ratio of $1:$6.50 or an 87% subsidy. This would also apply, and perhaps be more significant, for the 50% rebates granted to political parties. They spend quite a bit of money outside of elections.
Err, a would be $400*3/4 = $300.
I would argue it’s not big enough.
Political fundraising is by its very nature corrupting. All parties pay more attention to the class of donors than the class of non donors. We only take notice of this when the classes shrink to the point of being individuals.
Fundraising should be banned.
Parties should be financed by public expenditure.
There are lots of potential details, but those should be the principles.
I agree with Jim Rootham.
I do NOT want to go back to the days of corporate and union donations which were institutionalized bribery. Large corporations would donate to multiple parties and expect to get influence with the winner, by way of hedging. This is simply wrong. It is dishonest, it is corrupting and it is undemocratic.
I worked as a DRO this past federal election. I can tell you that more than one person said to me publicly that they were persuaded that their vote counted by the fact that their party got the $2.00/year subsidy and not just the fact that they were voting to send their candidate to Ottawa. In fact I would say it was one of two main attractions for otherwise marginal voters. The other was the surprising number of people who voted because their kids convinced them it was the right thing to do or did it to show their kids that it was the right thing to do. Civics classes work! These voters brought their kids with them to vote.
I recently purchased an NDP membership. I declared that I was unemployed on the website’s application form and the fee was discounted from $25 down to $5. According to Mike’s markup, the NDP actually received $45. And I feel good because they did me a favour in my straightened circumstances. When they are getting that much money through leveraging the various rebates, no wonder they felt they could afford it.
I’m with Chris, Jim and Determinant. Kill the special interests.
“You gotta take the power back” – Zack de la Rocha
The per-vote subsidy was a great way of encouraging party diversity and voter participation.
I am a riding président and regional vp in a provincial party and collecting money takes so much time and energy there is nothing left to talk about policies. So we talk only about money which fuel voters cynicism. But then , discouraging voting is part of the PC game plan for their eternal soft dictatorship ( In South America they distinguish between dictadura and dictablanda).
Collecting money takes a huge infrastructure. Only the already strong can do it.
btg: you are a victim of the usual incompetence and laziness of the press at large and the genetic intellectual dishonesty of the anglo press regarding Québec. The Bloc didn’t take most of its funding from the subsidy ( which comes from the taxes we pay as still citizens of this country).
Other parties including the provincial ones everywhere have a complex system of money moving between head office and riding. In my party, riding are assigned objectives according to some uncomprehensible formula that makes the one for equalization payments looking sane.It is based on population, population average income, distance from Québec City and Montréal, whether you have an MNA or are orphan and whatnot. When you meet your objectives you get some more from head office as acknowledgement of your good work plus money for some specific expenses. And the Directeur Général des Élections auditing the whole mess.
Unlike the others, the Bloc separated money from the subsidy which went to the party at large from individual contributions which stayed with the riding associations. By separating the two , it looks like they don’t collect anything at the local level.
In a sane country,you might expect honest, competent reporting but then it’s MacLeans-G&M-Sun so…
I was in the Public Galleries of the House of Commons on Wednesday. I happened to be in Ottawa for an appointment and was meeting up with friends for dinner and had some time to kill. I decided to take in Question Period and whatever debate came after. Parliament is free.
After taking off my belt twice to pass through the metal detectors and having to suffer the indignity of threading my belt back through my pants on the halls of Parliament, I got to the galleries. The debate was on the ritual NDP amendments to the budget which have zero chance of passing. However I did see Dave Christopherson, the NDP Member for Hamilton Centre speaking to the budget.
The Hon. Member for Hamilton Centre mentioned that he had been in several delegations to ex-Soviet states which were brand new to constitutional representative democracy. They really wanted to know how you handled money in a competitive multiparty system and how to minimize the inevitable corruption. He was proud of the per-vote subsidy for dealing with that and was ashamed that we might go back to the days of Big Money.
He was a bit of a windbag but he did make a fair point.
“They say jump, you say how high” – Zack de la Rocha
Yup, I too would ban fundraising and pay for politics 100% out of public money. Put Elections Canada in charge of doling it out and have the Auditor General audit them and all recipients every 2 years and after elections. Irregularities referred to the RCMP. I don’t care if it’s imperfect, it’s infinitely better than bought and paid for politicians pandering to moneyed interests. Just look at the disgraceful state of affairs south of the border or in any number of developing countries.
Is anyone, anywhere, advocating that corporations be allowed to donate to political parties again? I’m not sure where this meme is coming from, but it needs to die.
Let’s suppose we went to 100% public financing, by keeping the per-vote subsidy but eliminating donations.
Then Section 464 of the Elections Act I argued against becomes more, not less, problematic IMO, because it effectively kills small parties.
Jesse: That’s true. The more riding associations spend outside of elections, the smaller this effect is.
Is anyone, anywhere, advocating that corporations be allowed to donate to political parties again? I’m not sure where this meme is coming from, but it needs to die.
What Mike said. I don’t see what public subsidies for spin doctors and attack ads has to do with democracy. If people want to spend their money on that, fine. But let’s not pretend that it has anything to do with democracy.
Thanks, Stephen.
I’ll paraphrase something I said earlier in the thread: If you’re worried about money in politics, why not simply cut the spending limits in half? A lot of the money spent at the riding level goes to things like elections signs on public property, which is nothing but an arms race. Why on earth should governments subsidize this?
IMO, cutting by half doesn’t go far enough. For an average riding this would put the limit down to the $40-45 000 area. My good friend Monica Jarabek ran a very effect campaign in 2008 for $15 000 (Source). I’d start by reducing the limits in half and if it works, halve them again after that.
Err.. effective campaign.
And what is the case for subsidising parties, anyway? What is the positive externality that isn’t being incorporated in peoples’ decisions to contribute to the political party of their choice?
“If you’re worried about money in politics, why not simply cut the spending limits in half?”
The party in power is able to use public dollars to advertise its ‘achievements’ (e.g. Canada’s Action Plan signs on infrastructure projects). Reducing spending limits effectively gives the party in power another advantage. Based on the last few years, it appears that election advertising is no longer confined to elections. That’s another issue that needs to be addressed.
“I don’t see what public subsidies for spin doctors and attack ads has to do with democracy”
Fine, let’s ban them too. But in the world as we find it, spin doctors and attack ads are now the machinery of democracy. And incentives matter. I prefer that their pay master be the public of Canada.
Why are we assuming that spin doctors and attack ads must be funded? This is the part I don’t get. Why aren’t we also assuming that Slap Chop infomercials must be funded, and that public money is the best way of doing it?
eta: Again, what is the positive externality that justifies public subsidies for political parties, but not infomercials?
“If you’re worried about money in politics, why not simply cut the spending limits in half?”
This also would enhance the incumbent advantage. Right now the party in power gets to choose the election date. If it knows that the election campaign is going to start on September 15th, it can spend millions of dollars on advertising on September 14th, effectively bypassing the spending limit.
Other parties can spend in anticipation of an election too, of course, but they are seriously disadvantaged in that they don’t know when the election is going to be called.
If only there were a law prescribing fixed federal election dates….
eta: Just to make it clear, the snark was directed at the Conservatives, who ignored the law in 2008 and called an election anyway. The law is on the books, but no-one seems to expect the government to obey it.
“If it knows that the election campaign is going to start on September 15th, it can spend millions of dollars on advertising on September 14th, effectively bypassing the spending limit.”
Assuming of course, they had millions of dollars to spend. Which is why I also suggested reducing the subsidies in half.
The other thing I don’t get is how arguments like the ‘bypass the spending limit’ aren’t also arguments to raise the current spending limits (which I don’t believe anyone is proposing). What makes the status quo so special?
That law was dead on arrival, Stephen, per the constitutional conventions on Prime Ministerial Advice and Confidence of the House. It is of no consequence whatsoever and is unenforceable.
Politics is sales. Spin-doctors, pollsters, war-rooms, they are all salepeople of one kind or another. That is what it takes to play the game in our current system. Anytime you have a voluntary behaviour with choices you get the apparatus of sales.
Positive externality that differentiates politics from infomericals? Stephen, that’s disingenuous. Politics is about slicing the federal budget, Slap-chop is about slicing food. Slap-chop does not set my tax rate, command the RCMP, organize our National Defence and set the Criminal Law. Slap-chop does not have the power to legally shoot me, the government does.
Patrick also makes the excellent point that the Government has an inbuilt advantage to leverage the Public Service into its agenda through things like the “Economic Action Plan”. It’s been that way since 1867. It’s thought that John A. McDonald insisted that Superior Court justices be federally appointed partly because it provided a ready source of federal patronage in every riding.
Informercials don’t influence who runs the country.
What’s the positive externality? How about equality. Why should only people rich enough to have money to buy influence have a voice?
I don’t have a voice in how the vote subsidy is used. And I have no problems with capping contributions at low levels.
Patrick: How does a “60% spending rebate to candidates/riding associations that receive 10% or more of the vote” ensure equality? It would seem to me to promote the exact opposite.
Your post is a complete non-sequitur. Nobody here is advocating anything close to what you’re suggesting.
Determinant
“That law was dead on arrival, Stephen, per the constitutional conventions on Prime Ministerial Advice and Confidence of the House. It is of no consequence whatsoever and is unenforceable. ”
You’re right, as usual.
It is of course unenforceable if the GG obeys a PM that has lost the confidence of the House so much that cancels the confidence vote. In 2008, the Nitwit General ( according to the Krugman principle, sometimes you can’t be both thruthful and polite) cooperated in a coup d’état.
With due respect to the Governor General, the fixed-dates law says the following: “Nothing in this section affects the powers of the Governor General, including the power to dissolve Parliament at the Governor General’s discretion.”
Which means that the Prime Minister is still completely free to walk across Sussex Drive and ask for an election whenever the he feels like it and it would be a completely legal and constitutional thing to do as the Crown’s chief advisor. As the Governor General always takes the PM’s advice, the fixed-election dates law was a sham, a lie, so much posing and puffery. That little sentence eviscerated the entire law.
It wasn’t a coup, just the normal rules operating instead of unconstitutional fixed-dates nonsense.
To be fair to both Harper and the Coalition, Mackenzie-King played far worse games, for far longer and far harder during the King-Byng Affair to drive Meighen from power and undermine the Governor General. Harper doesn’t hold a candle to Mackenzie-King in terms of using parliamentary procedure as a weapon.
Stephen:
“I don’t have a voice in how the vote subsidy is used. And I have no problems with capping contributions at low levels.”
What? Nonsense. The subsidy goes to the party that you vote for. Your X means cash for your party.
Persuading people to choose the NDP over the Liberals is essentially the same task as asking them to choose a particular car insurance company. Notice how the ads and tactics are so similar? It’s sales. All sales. It’s been like that forever.
In the 1800’s riding associations used to hold grand picnics with booze and speeches. It was a party for your party. The leader would roll into town on the train and be the headline act. John A. McDonald was in his element making these speeches semi-sober.
In the 1920’s the rallies became less boozy and more media-focused. They were for the benefit of newspapers as much as for supporters. The rallies were held to be reported, especially the speeches.
In the 1950’s we entered the TV Age where we still are. Dalton Camp, Tory backroom boy extraordinaire was an ad man. He used to run brilliant ad campaigns for free for various federal and provincial Tories, in return he would be rewarded with a lucrative ad contract, untendered of course. Provincial tourism promotions were his stock-in-trade, as it were.
Politics is convincing and convincing is sales. The stakes are high and people play for keeps. Politics is a dirty, messy, people-oriented business.
Mike: given that the OP is talking about the propriety of using public funds to subsidies political parties, and the question in bold, and that at least one other commenter (K) raised the issue of banning fundraising, it’s a stretch to say my point is a non-sequitur. Anyway, I’ll just reiterate briefly: I don’t think a 90% donation subsidy makes sense at all. I’d rather no tax breaks or matching subsidies. Instead candidates’ campaigns should be 100% publicly funded (they all get the same amount) and highly regulated (e.g. spending limits, full transparency, no attack adds, lying, making fun of the nerdy guy or the frumpy woman, etc …).
Patrick: it wasn’t me, though I don’t object in principle. In practice, though, the power of the incumbent party to use public funds for advertising purposes is a problem. I’m not sure how to neutralize or counterbalance that. Maybe ban government tv ad spending? Given the other available real information channels the loss of benefit would be negligible (no more Participaction ads?).
Basically I’d be willing to consider most any reform that would push us toward a world where we would have to get information about the parties by 1) reading the platforms and 2) watching the parliament channel.
Stephen: If it were a goal to have political equality for poor people you’d have to set the contribution limit very low indeed. Say $2, an amount so small nobody could afford to collect it. And then, why not just use the per-vote public subsidy? Because the rich would be subsidizing the full democratic equality of the poor?
“Assuming of course, they had millions of dollars to spend. Which is why I also suggested reducing the subsidies in half.”
The party in power does have millions to spend. Not subsidy dollars but program spending that can easily be allocated to what is essentially election spending. That’s the incumbent advantage. To pretend it does not exist is more than naive.
Keep the subsidies.
The fundamental problem is that fundraising creates a potential difference in power and interest between the voters a party chooses to target and the people from whom it collects funds. In an ideal world these two groups should be equal so that the more votes a party gets the more money it gets by way of strict proportionality. The problem is when a party tailors its policies and governing decisions to cater to its donor base instead of its voter base. In the extreme limit this becomes the institutionalized bribery I mentioned, especially when corporations are allowed to donate.
The per-vote subsidy in my mind was a good compromise in the fact that in order to get more funds you had to solicit more votes. Votes were dollars and your policies were your advertising. The subsidy went a long way to unifying voting and fundraising and eliminating conflicts of interest between these two groups.
I appreciate it takes money to launch a political party so perhaps a party with less than 5% of the popular vote she be subject to less stringent donor limits. When they break that threshold the limits would kick in. You could also allow them to amass a standing set limit of a few million dollars as a war chest. In a Westminster system where elections can happen frequently like they just did this seems fair.
Mike, I appreciate you doing this calculation.
I’m not going to defend the 90% subsidy, but the two main instruments here – the tax credit for contributions and the rebate for election spending – are independently and eminently reasonable.
The tax credit was intended to broaden the base of small donors to political campaigns, and has been largely successful in doing that. Given that the government is in effect reinforcing decisions made by hundreds of thousands of individual donors, it’s a democratizing instrument. And given that it’s more generous in its treatment of smaller donations, it does nothing to incentivize ‘big money’ politics. (In my personal experience – which is substantial – the credit doesn’t motivate people to become donors but may motivate people to donate more than they otherwise would – to move from a $50 donation to a $100 donation.)
The rebate allows a candidate to borrow from a reputable lender to get a campaign started – and this is essential. Donations typically come at the end of a campaign or even after a campaign ends, but most of the spending has to be done at the outset of a campaign. Given the uncertainty of fundraising, the rebate allows financial institutions to be reasonably certain of getting paid back.
Given that donors are now limited to donating a maximum of $1,100 in a year, the potential for corruption in fundraising is very, very low. Frankly, I never worried about upsetting a donor when I was advising on decisions because a single donor or even a group of donors has a trivial impact on a party’s fundraising. Or, to be more precise, a party with a halfway competent fundraising effort has so many donors (over 150,000 when I was in PMO for the Conservative Party) that losing one or one hundred is just not an important impact on the bottom line.
As a result, I am convinced that the spending cap during an election campaign is now unjustified. If a party can raise, say, $25 million to spend during an election, why are they capped at $19 million? The $25 million came in in pretty small chunks – no more than $1,100 each. So, why should they be penalized for mobilizing hundreds of thousands of small donors?
What would happen if we repealed the spending cap? Parties would eventually spend more money on election campaigns. They would use the marginal dollars they were allowed to spend to reach more voters. And they would take bigger risks, or incur more spending per marginal voter, as a result. If you think parties should be reaching beyond their bases more, and reaching out to unengaged voters, or trying to mobilize more people to vote, the only way to do that is to abolish the spending cap. Otherwise, parties have a huge incentive to “play it safe” during a campaign.
Canadian campaigns are usually under-resourced compared to any similar marketing campaign. A $19 million election campaign is small beans compared to what GM spends on advertising in a similar 5 week period. And yet GM only has to sell a few thousand cars to a few thousand consumers in 5 weeks to be successful. A party has to appeal to millions of voters, some of whom are located in very hard to reach places.
It’s true, that might involve more so-called “negative” advertising. But, so what?
So why is money more important than votes? You want to see what money can do, look at the Newfoundland Confederation Referendums of 1948.
Joey Smallwood was sent to Ottawa by the Newfoundland Convention to check out Confederation as an option. While there Mackenzie-King’s Chief of Staff took him aside an gave him a list of large Liberals donors willing to fund his Confederation campaign. Newfoundland had no electoral spending limits or regulations at all. He was also given access to the Globe & Mail’s editorial cartoonist. All those fancy cartoons in the Confederate Newspaper, his election rag, were done in Toronto by the Globe’s staff cartoonist and mailed to Newfoundland daily. The public never knew.
It was Canadian money, given to Joey Smallwood, a pig farmer who had worked in radio and slept on park benches, in the form of a blank cheque that enabled him to win the Confederation referendums. Otherwise it is clear he would never have got out of the starting gate.
Money matters. A lot.
Hi Ian,
Great to hear from you, as always.
A spending cap does seem kind of redundant if there’s a cap on donation size. I can, however, think of two reasons why it’s needed:
1. Since transfers from riding associations to the main party (and vice versa) are allowed, you can do a bit of an end-run around the rules. I could donate $1200 to the CPC and $1200 to the CPC riding association in Crowfoot. Since Kevin Sorenson in Crowfoot doesn’t need the money (84%!), he could then turn around and transfer the money to the CPC, thereby effectively doubling the limit.
2. The Income Tax Act allows for unlimited donations by estates upon death. So if some billionaire dies and leaves the NDP a few hundred million, they could blow everyone out of the water.
Mike – On Point 1, I agree, but that’s not a huge impact really – $2000 versus $1000. True, but maybe not massively material. On 2, yes, that’s a problem that needs resolving. Although if anyone ever made a large bequest to a party, I’d be more worried about it.
Here’s an unorthodox argument – given that the limit is now $1100, we need to make the political tax credit valuable up to that point. It doesn’t make much sense to me to end the favourable tax treatment of contributions at $1,000 when the contribution limit is $1,100.
Depends how we define ‘big’ – the NDP have gotten ones in the 6 figures:
$210,000 NDP Donation.
But that’s a long way from my 9 figure example.
It is strange that the tax treatment doesn’t adjust the same way as the limits do. The $1100 limit is increasing next year to $1200. Not sure why the tax treatment doesn’t rise along with it.
Co-sign.