Opinion: Cut the subsidy, then make it easier for parties to raise their own money

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 themselves.

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.

Tom Flanagan is professor of political science at the University of Calgary and a former Conservative campaign manager.