- 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.
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.