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Or sign-in if you have an account.On balance, it’s better to let Canadians themselves choose whether they want to contribute to renovate a politician’s home or not. Photo by James Park/PostmediaDeeply indebted governments are looking for creative ways to cover the budgetary cost of their spending. One approach, instead of soaking taxpayers with more taxes, is to use a foundation and allow private donors to contribute to the cost of building public works. At least, that’s the idea.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorIf not done right, however, such foundations raise conflict-of-interest concerns, with donors expecting a payback down the road. And the donations are partly funded by government anyway, as big donors happily claim tax credits while taking credit for their charity.In the U.S., President Donald Trump is using the Trust for the National Mall to fund his 999-person White House ballroom, for which the latest estimate is US$800 million to build. The foundation is expected to raise half the money, with security expenses covered by the government. The White House and investigative journalists have disclosed a partial list of 37 contributors, including Amazon, Blackstone’s CEO Stephen Schwarzman and the Lutnick family. But since the trust is not required to reveal donor names, eyebrows continue to be raised about potential conflicts.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againIn 2020, the World Health Organization created the WHO Foundation to fund health programs in poor countries. Donors include the Gates Foundation and medical device and pharma companies. Under Swiss law, donor names are published only if the donor agrees. As of 2023, 48 per cent of donors contributing over US$100,000 were listed as anonymous, again raising concerns about transparency and undue influence.Here at home, the latest entrant to the foundation game is the Rideau Hall Foundation, which Ottawa has created to cover the cost of rehabilitating 24 Sussex Drive. The final cost is not yet known but the RHF is expecting to raise $50 million to cover construction costs, though more will likely be needed for security and other costs. RHF will be disclosing all donor names, however. On transparency, at least, Canada gets it right.With Ottawa splurging tens of billions of dollars lately, fixing up 24 Sussex may seem a mere trifle to add to the federal debt — even if it’s a lot more house than you or I would ever buy. But every dollar counts, so offloading the cost onto the RHF donors looks like a good tactic.But creating a foundation doesn’t mean taxpayers are off the hook. About a third of the money the foundation raises will be covered by governments. When Canadians contribute to a foundation, they can claim both federal and provincial tax credits. The federal credit is 14 per cent for the first $200 of annual donations and 29 per cent or 33 per cent for taxpayers in the top income bracket for donations in excess of $200. Provincial credits are in addition to the federal credit, with the combined federal and provincial top tax credit rate equal to 58.75 per cent in Quebec, 54 per cent in Alberta, 53.5 per cent in B.C. and 51 per cent in Ontario.Most donations are made by the highest-income taxpayers. According to the latest available data, Canadians in the top two income brackets claim almost three-fifths of donation credits. On top of the charitable tax credit, donors who give marketable securities to a charity can claim an exemption from capital gains. That adds about another five per cent to the cost of donation tax relief.Totalling the effects across income groups, roughly a third of the cost of donations is covered by the federal and provincial governments through donation credits and the capital gains exemptions for donated property. So if the RHF raises $50 million, federal and provincial governments will cover about $17 million of that. It won’t just be the federal government paying for the Sussex renovations — provincial governments will be on the hook, too.On balance, it’s better to let Canadians themselves choose whether they want to contribute to renovate a politician’s home or not. If it were all tax-financed instead, we could only say no at the ballot box. And if the government used deficit financing, future taxpayers wouldn’t have any say at all since they don’t vote.Many Canadians decide on an overall budget for charitable donations each year, so it’s possible any money they give to the RHF will mean less for food banks and other good causes. That suggests governments shouldn’t go too far down this road of creating foundations to cover their costs.Scarcity is the first lesson of economics. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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