Friday, March 15, 2013

FDA Talking Points Series: 10 Percent Rule

Desjardins' household budget calculator using Canada's 2010 disposable per capita income of $26,572 (Economic Statistics Report, 2012). Note, personal expenditures are listed as a maximum of $221 per month or $2,652 per year.
10 Percent Assumption

As part of its electoral fairness audits, the Foundation for Democratic Advancement (FDA) audits caps on contributions to political candidates and parties, caps on third-party expenditures, and limits on campaign expenditure by looking at per capita net income. The FDA assumes that per capita net income is a fair measure of what citizens can afford to contribute. Net income is the personal income after taxes have been deducted. In addition, the FDA assumes that 10 percent of per capita net income is a reasonable maximum amount to determine caps on contributions to political candidates and parties and third-party expenditures, and limits on campaign expenditures. The FDA bases this assumption on the Desjardin's household budget calculator, in which personal expenditures are a maximum of 10 percent of net income. The budget calculator considers expenditures on such things as savings, housing, and clothing. Below is the Desjardin's budget calculator for Canada based on its 2010 disposable (or net) per capita income of $26,572. 


Savings
5 to 10%
$166
(min.: $111,  max.: $221)
Housing
(rent, mortgage, taxes, insurance)
25 to 35%
$664
(min.: $554,  max.: $775)
Food
5 to 15%
$221
(min.: $111,  max.: $332)
Services
(hydro, heat, water, telephone, etc.)
5 to 10%
$166
(min.: $111,  max.: $221)
Transportation
(automobile, public transportation, taxis)
10 to 15%
$277
(min.: $221,  max.: $332)
Clothing
2 to 7%
$100
(min.: $44,  max.: $155)
Leisure and education
5 to 10%
$166
(min.: $111,  max.: $221)
Health
(insurance, dentist, glasses, medication, etc.)
5 to 10%
$166
(min.: $111,  max.: $221)
Personal
5 to 10%
$166
(min.: $111,  max.: $221)

Debt repayment (loans)
5 to 10%
$166
(min.: $111,  max.: $221)
Emergency fund
Put a small amount aside as soon as possible toward your emergency fund and then continue contributing 5 to 10% of your net monthly income to it until you've accumulated 3 months' worth of expenses.
$166
(min.: $111,  max.: $221)


Application of the FDA's 10 percent rule to the Canadian federal electoral system (2013 FDA Electoral Fairness Report on Canada (publish date April 2, 2013)):

Caps on Contributions to Candidates and Parties:

The federal cap on contributions to candidates and parties by citizens and permanent residents is $4,000 over four years. 10 percent of Canadian per capita net income over four years is $10,608. Therefore, federal cap is well within the FDA's reasonable maximum for cap on contributions.

Caps on Candidate Contributions to their Own Campaigns:

The federal cap on contributions by candidates to their own campaigns is $5,500 in an election year. 10 percent of Canadian per capita income over one year is $2,652. Therefore, the federal cap on contributions by candidates to their own campaigns in an election year ($5,500) is in excess of the FDA’s maximum cap of $2,652 in a year, and therefore, it is favouring wealthy candidates.

Limits on Campaign Expenditures:

In each Canadian electoral district, there is an average of 78,758 voters with income. Candidates need 0.881 cents from each elector to attain the maximum legal expenditure limit. The average maximum expenditure limit amounts to $69,385.80. According to FDA consensus and Desjardins' household budget calculator, $2,652 is the maximum available from each elector making the total funds available equal to $208,866,216. On average there are approximately eight candidates per federal riding, ergo, there is $555,232 funds needed to equal the legal expenditure limit. According to these calculations, there are potential excess funds of $208,310,984, and therefore the federal expenditure limit is reasonably attainable in terms of funds by all registered candidates and parties. Whether or not voters want to contribute to all registered candidates and parties is a separate issue.

Using their professional judgment and considering for example campaign advertising expenses and venue expenses, FDA auditors determine that $69,385.80 is a reasonable amount of electoral funds to campaign in a district of 78,758 voters, and with no candidate above $69,385.80 expenditure limit.

Caps on Third-Party Expenditures: 

The federal limits on third-party expenditures are $197,100 for national advertising campaigns, and $3,942 per electoral district. 10 percent of Canadian per capita net income over one year is $2,652. Therefore, the cap on third-party expenditures for a national advertising campaign is $194,448 in excess of the FDA's reasonable maximum cap for third-party expenditures. The cap on third-party expenditures in electoral districts is $1,290 in excess of the FDA's reasonable maximum cap. The FDA acknowledges that $197,100 is a reasonable and likely cost for a national advertising campaign; however, third-party spending for this campaign can affect public opinion in a non-democratic way. Contributions to candidates, parties, and party associations should fund these advertising campaigns, and therefore, eliminate the need for third-party expenditures. Finally, Canadian electoral law does not mandate public subsidies for third-party expenditures, which would help reduce electoral unfairness issues. Currently, the caps on third-party expenditures favor wealthy citizens and corporations and trade unions. 

Questions: 

Is the FDA assumption that 10 percent per capita net income is a fair way to determine reasonable caps on contributions and third-party expenditures, and limits on campaign expenditures? If you think it is not a fair measure, then please write a comment on what measure would be fair. If you agree with the FDA measure, please write a comment telling us why. All comments will be reviewed to improve the FDA's measure of the impact of government processes on a free and democratic society. 

References: 

Determine How Much to Allocate to Each Expense. (2013). Desjardins. Retrieved March 14, 2013 from http://www.desjardins.com/en/particuliers/conseils/gerer-finances/budget-mensuel/calculez-depenses.jsp

Economic Statistics Report. (November 2, 2012). BC Stats. Retrieved from www.bcstats.gov.bc.ca/Files/.../EconomicStatisticsReport1211.pdf

Canada Elections Act. May 31, 2000. Retrieved from Elections Canada http://www.elections.ca/content.aspx?section=res&dir=loi/fel/cea&document=part00&lang=e



 



Mr. Stephen Garvey, Foundation for Democratic Advancement, Executive Director


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