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Friday, April 1, 2011

Harper could end $2 per voter tax subsidy

Prime Minister Stephen Harper said on the campaign trail that, if he receives a majority mandate on May 2, his government will end the $2 per-year-per-vote taxpayer subsidy. And that’s a good thing for it will pass more of the burden of directly financing political parties back to their supporters.

Parties like the Bloc Québécois and the Greens will have to make good on their claim that they have genuine supporters and not just a lot of protest votes in Quebec and across the country. Personal political contributions are, after all, subject to a very generous tax credit regardless of taxable income.

The tax refund available depends only on the amount donated to a registered political party. The formula is:

  • donations 0f $0 to $400 = a 75% tax refund;
  • donations 0f $400 to $750 = $300 plus 50% of the amount over $400 as a tax refund;
  • donations 0f $750 = $475 plus 33 1/3% of the amount over $750 up to a maximum of $650 annually as a tax refund.

This is a more generous tax treatment than is available for donations to charities.

Why then do political parties even need an additional federal tax subsidy? The parties with “real” supporters/voters—i.e., committed supporters/voters—don’t, of course, they have member-donations of millions of dollars. The fringe and protest parties have such soft support across Canada that, notwithstanding the 75 per cent tax refund (at average donation levels), they have to depend almost entirely on government subsidies.

Without these taxpayer handouts, most of these fringe and protest parties would never be able to field a full slate of candidates in election after election in anything more than a token manner. And taxpayers would be spared the irritation of seeing parties they do not support receive their hard-earned tax dollars. Moreover, regardless of how many token candidates they run in an election, some parties exist solely to give their leaders a pulpit from which to preach policies that many of us believe would ruin our country.

Let’s be frank, all federal parties depend on their government subsidy, but should they? Think about it. The parties would only need a $2 donation each year from each of their voters to make up the shortfall if the subsidy were stopped. That’s about the same as giving up one cup of coffee or tea each year—hardly a significant financial commitment. If a party’s policies, election platform and overall contribution to Canadian society is not worth a donation of $2 a year from its supporters, does that party even deserve to exist?

Surely, if those casting votes for a party were other than protesting or “parking” their votes, they’d be committed enough to put their own money on their choice. Perhaps it would serve us better to just add a line on the election ballot for a vote for “none of the above” to keep track of the protest vote. We could then scrap the $27-million paid out annually in tax subsidies.

 

© 2011 Russell G. Campbell
All rights reserved.

17 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. It would also force parties to reconsider going to the polls every time there is a whim. There would be no pot of money for them simply by forcing a vote in the first place.

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  2. I hate to burst the bubble on the tax refund for a political donation. It is not a refund, but goes on line 410, over to line 51 and is reduced from the amt of tax your owe from line 406. Enter the net federal tax on line 420.
    It is a tax deduction and not a refund. If you don't owe tax you don't get a refund.
    Anyone doubting this get a copy of the T1 tax return and check out page 4, or the steps on federal tax payable.

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  3. Good post. I sincerely hope the Conservative will have a majority and eliminate the political subsidy. This per diem is obscene and skewers the political process. Cheers.

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  4. Sorry Mary T. but it is not a tax deduction (not sure what that is - I know what an income deduction is) but a tax credit.

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  5. I agree with Mary that this is a tax credit, but I still don't understand why my donation to cancer research gets a 15% break while political donors get 75% on the first $400, and more than other charities on the next $70. This should be the subsidy we're talking about cutting first IMHO. At least when I vote Conservative in downtown Toronto, I know my vote counts for $2 to the party and isn't being pissed into the Toronto harbour. Seems relatively democratic to me, as subsidies go.

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  6. @maryT, yes, you're technically correct. But I would wager 99% of political donors are paying tax, ie. they're getting the benefit of the obscene kickback.

    It's always bugged me that politicians think that donations to their shenanigans ought to be more highly rewarded than donations to the Cancer Society, faith groups, Red Cross etc...

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  7. Check out the schedules I mentioned, the amount is deducted from the tax your owe, to get the final figure.
    Most people never see a tax form anymore as they have someone else do their taxes and they are e-mailed. You don't get the form mailed to you anymore. Whatever you call it, you will not get a refund cheque for making a donation. And yes, most donors do pay taxes. But a lot of donors do not claim it as they don't want anyone to know who they support. Those making huge ones do, but not the small donors.
    As for charitable donations, you get very little to claim as a non refundable tax credit.
    This deduction is taken off the schedule where you fed tax is figured out, along with other tax deductions.

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  8. It's my understanding that private contributions are a rebate, not a tax credit. All the political parties confirm this on their websites, that the size of the contribution determines the refund, not the persons income. This is part of why the Conservatives didn't want 2006 Liberal convention delegate fees to be considered donations, as it would entitle the payer to a refund.

    If the $2 per vote subsidy were eliminated the Conservatives would be the #1 receiver of taxpayer financial support (if they are not already). If this really is to give the taxpayers a break, the right thing to do would be to cancel the refunds and the subsidy at the same time. That way parties are supported 100% by the supporters.

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  9. I challenge anyone who has received a refund for a donation to a political party to tell us. The amt of the "refund" is deducted from the federal tax you owe, as a donation to a provincial party is deducted from provincial tax owed.
    You can call it anything you want, but if you owe no fed/prov tax you will not get a refund cheque.
    All it does is reduce your tax bill by a few dollars.
    Phone rev canada and order a copy of the T1 General, and pay attention to the form where your federal tax is calculated.
    Or, if you are using a computer program, click on Federal tax and net federal tax owing. I am looking at the form as I type.

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  10. Mary, please see this link:

    https://secure.conservative.ca/political_tax_credits/

    "The refund (or reduction in tax payable) depends only on the amount donated and not on taxable income. One only needs to file a tax return in order to receive it."

    And these refunds are very expensive. I refer you to Table 1 of the following link "Political Contribution Tax Credit"

    http://www.fin.gc.ca/taxexp-depfisc/2010/taxexp1001-eng.asp#tocpart1-06

    $20 million in non-election years and $30 million in election years.

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  11. For the umpteenth time, the donation amount is deducted from the federal tax you owe and you then transfer that amt to line 420 of your return, and you then add any other amts you might owe, including provincial tax to get your total owing on line 435, totals from line 437-479 (if any) are then transferred to line 482. Line 435-line 482, and you either get a positive or negative number.
    I don't care what websites say or other info. I go by the tax return, which I have been preparing for 35 yrs for hundreds of people.
    A federal donation applies to federal tax, a provincial donation applies to provincial tax.

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  12. Mary, election financing law and the tax code regarding private contributions were completely overhauled in 2003, and significantly modified again in 2006. I would ask if you have prepared a return with contributions since the 2004 tax year? I have clearly provided you with evidence that the tax reimbursement subsidy is not a "few dollars" unless you consider $20 to $30 million a "few dollars". In 2009 the total amount of private contributions to all political parties was around $33 million (1) from what I can see on the Elections Canada returns. The Revenue Canada expense on Political contribution tax reimbursement expenses was $20 million (2). In other words, 60% of private donations were returned to the contributor.

    (1)http://www.elections.ca/scripts/webpep/fin2/select_parties.aspx?entity=6&lang=e

    (2)http://www.fin.gc.ca/taxexp-depfisc/2010/taxexp1001-eng.asp#tocpart1-06

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  13. I understand your intention to be "stop wasting tax dollars"

    If that was the case, why do we start with a paltry 27M given to political parties? Why wouldn't we start with the much larger subsidies in the private sector (which clearly has a greater impetus to be self-sustaining)?

    You say "many believe" the platforms of particular parties are harmful to Canada. This sounds anecdotal and very one-dimensional. What does it mean to be "harmful to Canada"? Economically? Environmentally? Socially? The world is complex, and the best solution will arise from different parties of different specialization working together to solve all the issues, and not just one of them.

    So I agree with your general principle (no Canadian likes to see tax dollars wasted), but I disagree with your definition of "wasted".

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  14. Johnny F,

    I did a search on my article for the words "harmful", "waste" and "wasted" and found none. So you attribute words to me then attack me for using them.

    As to your question: "You say 'many believe' the platforms of particular parties are harmful to Canada. This sounds anecdotal and very one-dimensional. What does it mean to be 'harmful to Canada'?"

    I can't answer, because I never used the phrase which you placed in quotation marks, "harmful to Canada."

    Finally, your opening: "I understand your intention to be 'stop wasting tax dollars' is based on a faulty assumption--a straw man, I suppose.

    Thanks for your comment, though.

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  15. Russ, my mistake. I didn't mean to use quotations in the sense that you explicitly used those exact words, but it seemed to be what you were implying.

    So what is your rationale for "...scrap[ping] the $27-million paid out annually in tax subsidies [to political parties]."?

    I can only assume that it's considered a waste. If it weren't, why would someone want to do away with it? I can speculate on your motivations, but I'd rather give you a fair chance to present them.

    I'm not attacking you, I'm just wondering what the rational basis for holding your belief on the party subsidy is.

    Also, a question I still find relevant:
    Why wouldn't we start with the much larger subsidies in the private sector (which clearly has a greater impetus to be self-sustaining)?

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  16. Johnny F,

    Here's my point (lifted from my post):

    "Parties like the Bloc Québécois and the Greens will have to make good on their claim that they have genuine supporters and not just a lot of protest votes in Quebec and across the country. Personal political contributions are, after all, subject to a very generous tax credit regardless of taxable income."

    That is to say, if a party is worth its salt, it will attract supporters who are prepared to finance its operations, especially since donations will be subsidized by generous tax credits.

    It's not the waste of our tax money I object to, but the principle of the thing.

    BTW, I dislike, and am directly opposed to, "larger subsidies in the private sector," always have been, always will be, including the subsidies to the auto sector, which were much favoured by progressives in Ontario at the time of the auto industry bail-out.

    The Canadian left/progressives LOVE subsidies to the private sector—always has—so long as the companies are unionized. Not to non-union companies, though—apparently, they're all bad guys.

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  17. This policy was not implemented for the "principle of the thing," but rather to cripple the financial status of the other parties when they were already financially reeling. As a percentage of party funding, this subsidy is comparatively far less important to the Tories than the other parties. The Tories can rely upon the generosity of their supporters to a greater degree than the other parties, because of the economic demographic that forms their power base. Provide tax breaks disproportionately to the well-to-do and that group will support you financially. But if your demographic power base is among the young, the working class, or anyone living "hand to mouth," you cannot expect them to make the lavish individual donations upon which the Tories can rely. The effect of eliminating the subsidy will be to put "populist" parties on life support. It's naive to think that wasn't also the intention.

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