Tuesday, April 22, 2008

not at all related to Earth Day

Just a little tidbit for any doubters out there of public choice theory: compare the incentive to donate to a registered charity to the incentive to donate to a registered political party. You sure can see the difference it makes when you're the one who passes the law and the one who benefits from it.

For charitable donations in Canada:
In 2007, the first $200 you donate is eligible for a federal tax credit of 15.25% of the donation amount. After the first $200, the federal tax credit increases to 29% of the amount over $200. Generally, you can claim all or part of this amount up to a limit of 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income.

For donations to a political party in Canada:
Income tax credits

When Parliament changed the Canada Elections Act, it also changed the Income Tax Act to allow higher income tax credits for political contributions by an individual:

* for contributions up to $400, a credit of 75 percent (for example, a $300 credit for a contribution of $400)

* for contributions from $401 to $750, a credit of $300 plus 50 percent of the amount over $400 (for example, a $475 credit for a contribution of $750)

* for contributions over $750, the lesser of $650 or $475 plus 33⅓ percent of the amount over $750 (for example, a $650 credit for a contribution of $1,275)


EDIT: As someone points out in the comments, your tax credit is hardly the end of it - it's hard to say, really, how much a $100 donation to a political party costs the taxpayer. $75 upon donating, plus if you're near an election, you can add 60% of any the donation spent in that election... plus 60% of any of that refund spent in the next election. It's safe to say, though, that every time you donate to a political party, especially during an election, you're probably going to cost the taxpayers as much as you're willing to pay - and maybe more.

2 comments:

Ken said...

Then to add to it, political parties get part of their spending given back to them. So really, it isn't just spending $100 of your own money to give the party $400 (your first example), but they actually would get a lot more than that.

Janet said...

Yeah, we figured out a while ago how much a political donation of $100 costs the taxpayer, assuming it's spent during an election.

Taxpayers foot the bill for $75, then the $100 is spent in an election, and the taxpayers foot the bill for $60 of that as well. The money probably goes through that cycle a few more times before it's finished, too. It's really pretty dispicable.