How Canada’s political fundraising model supports extremism

Federal Liberals say they are worried about polarization — and want to crack down on social media and online platforms to address the misinformation and disinformation that leads to extremist views. Polarization is a problem with no easy solutions, but one option staring the government in the face has been ignored since 2015.

It wasn’t in the budget; it wasn’t raised as part of the co-operation agreement with the NDP, even though the NDP’s national director Anne McGrath calls it an “an issue near and dear to her heart;” it isn’t, frankly, even on the policy radar.

It is the per-vote subsidy, a public financing regime that provides political parties with a small amount of money for every vote received in the previous election. It’s not a magic bullet. It won’t address online radicalization, but a few reforms could encourage political parties to tone down divisive rhetoric, helping to create a less polarized citizenry.

Not sure what I’m talking about?

Back in 2004, when former prime minister Jean Chrétien banned corporations and unions from donating to political parties, he brought in a public subsidy, $1.75 per vote annually. The Liberals had been dependent on large corporate donations and this was seen as a way to compensate for that income loss. The Conservatives never liked the per-vote subsidy. They had developed a successful fundraising system with a large base of donors that made small donations. They were well placed when Chrétien’s reforms came forward.

When the Tories formed government in 2006, they tinkered with the regime, eliminating corporate and union donations to candidates and lowering the maximum individuals could donate from $5,000 to $1,000. Then, one month after prime minister Stephen Harper was re-elected with a minority government in 2008, his government announced it would scrap the subsidy to all political parties the following spring. The opposition cried foul. It was among the stated reasons — along with the lack of action to address the global recession — why the Liberals and NDP banded together, with the support of the Bloc Québécois, and tried to defeat the government. But Harper prorogued Parliament rather than face a non-confidence vote, and, as they say, the rest is history. After the Conservatives won a majority government in 2011, then-democratic reform minister Pierre Poilievre increased the individual donation limit to $1,500 (it now goes up by $25 each year and is currently $1,675) and phased out the per-vote subsidy in 2015.

While the Liberals reversed many of the Conservatives’ policies when they came to power — bringing back the long-form census and ending some mandatory minimum sentences, for example — they did not touch the per-vote subsidy.

Perhaps, they felt they were raising enough money on their own and the subsidy would benefit smaller players, like the NDP, the Greens and the Bloc Québécois (which still campaigns to bring it back).

But political parties’ reliance on individual donors comes with problems.

McGrath believes it sows division.

“The polarized politics of today are partly because of the way that political fundraising has to operate,” she recently told me. “It is a style of raising money for your party that really, really capitalizes on wedge politics.”

It’s hard to argue with her, although there isn’t much research in Canada.

The hundreds of email blasts parties send urging supporters to hand over their hard-earned cash by insinuating forthcoming attacks on law-abiding gun owners, or abortion rights, or LGBTQ2 issues aren’t catalogued, and therefore escape the eye of political scientists.

Holly Ann Garnett, an associate professor at the Royal Military College, crunched donation and ideology data from the 2019 Canada election survey. She found Conservative voters who reported donating to the party or one of its candidates were more likely to place themselves much further to the right on the political spectrum than those who didn’t donate. “There is definitely a difference between donors and non-donors among Conservative supporters,” said Garnett, who refers to the phenomenon as “ideologically extreme donations.” The same seemed to occur on the left with NDP donors, though the sample size is too small to offer a clear conclusion. Liberal donors, meanwhile, were more likely to place themselves closer to the centre than non-donors.

Lisa Young, a political science professor at the University of Calgary, notes there is nothing published on this subject in Canada because of difficulties studying party donors. Her intuitive sense, she said, is that donors are now a core constituency inside political parties and have changed the internal ecosystem though she’s not sure anyone “really has a great grasp on exactly what that means.”

Research in the United States has shown a clear link between wedge politics, partisanship, and fundraising. Several studies have demonstrated Republican and Democratic donors are more likely to be on the extreme ends of the political spectrum. A 2017 California study found extremist or ideological legislators — those outside their party’s median — reported greater fundraising hauls than their centrist counterparts. Author Stan Oklobdzija concluded that extremist positions were not only more appealing to polarized political elites who fund campaigns but their response encouraged legislators to drag out partisan battles unnecessarily.

This is not the only problem with an over-reliance on individual donations.

A 2014 study by Paul Howe at the University of New Brunswick and Brianna Carmichael, found people who donated to political parties were substantially more likely to live in richer neighbourhoods. Those who gave larger amounts of money (more than $200) were a smaller minority but as a group they provided most of the donations, they tended to give more frequently, and were more likely to have family members giving as well.

“It’s a system that has built-in inequalities,” said Howe. While Canada doesn’t have the large political donations found in the United States, once you scratch below the surface, he said, the system you see is “pretty heavily weighted towards higher income people who are the ones making more of the donations which have been subsidized by the state.”

Howe believes — along with McGrath — that the per-vote subsidy should return. “Every single voter has some impact on the funding for political parties, that’s just inherently more egalitarian,” he explained.

Parties are already heavily subsidized in Canada. Political parties are reimbursed 50 per cent of their eligible election expenses after each campaign — and candidates get 60 per cent back. In 2019, those subsidies were worth more than $63.1 million.

Individual donors also get very generous tax refunds — more generous than what’s offered to those who give to charities — ranging from 75 per cent off the first $400, then 50 per cent off to $750 then 33 per cent to $1,675. In a year with a party leadership race, donors can give a maximum of $5,025, by giving to the party, riding associations, and leadership contestants.

In 2017, the last year for which the Canada Revenue Agency has data, only 148,440 people claimed a federal tax credit for a political donation — that’s 0.5 per cent of the adult population that year. The credit was worth $25.757 million.

That’s more than the per-vote subsidy cost — $23 million — when it was introduced back in 2004.

So what should the government do?

It should lower the individual donation limit to make parties less reliant on such gifts (who can really afford to give parties $5,025 in one year?) and bring back the per-vote subsidy. Moreover, if parties want to hand out tax receipts, they should be forced to send all their email blasts and fundraising pamphlets to a database, perhaps one held by Library and Archives, so researchers can have access to them — just as they do with a party’s Facebook ads. This transparency would help to add a bit of accountability into the mix and maybe some discipline when it comes to waging wedge politics.

Althia Raj is an Ottawa-based national politics columnist for the Star. Follow her on Twitter: @althiaraj


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