Where Do Political Campaigns Get Their Money?

Political campaigns can be expensive, with candidates needing to pay for staff, advertising, research, travel, and events. Candidates raise money to fund their campaigns and to demonstrate the breadth of their support. Campaign finance laws, which vary at the state and federal levels, dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs).

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Campaign finance laws

One key aspect of campaign finance laws is the distinction between "hard money" and "soft money." Hard money refers to regulated contributions made directly to a specific candidate, while soft money is used for party-building activities and independent spending, rather than advocating for a particular candidate. Soft money is not subject to federal contribution limits, although there are restrictions on how it can be spent. For example, it can be used for voter registration campaigns, stickers, posters, and television and radio spots that support a particular party platform or idea.

Federal law also recognises multiple types of political action committees (PACs). Connected PACs are sponsored by corporations, labour unions, or other interest groups and can only receive funds from a restricted class, such as managers and shareholders. In contrast, nonconnected PACs are financially independent and must cover their administrative expenses using the contributions they raise. Super PACs are another type of committee that can accept unlimited contributions from individuals, corporations, and unions, but they are not allowed to coordinate directly with candidates or campaigns.

To address the influence of large donors, campaign finance laws include contribution limits for individuals and groups. These limits vary depending on the office being sought and the source of the contribution. For example, individuals can contribute up to $6,600 to a federal candidate during the primary and presidential campaigns. Candidates for president and Congress are subject to specific limits, and they must report their personal spending to the Federal Election Commission (FEC).

Public funding is another aspect of campaign finance laws. The Presidential Election Campaign Fund allows taxpayers to designate $3 of their taxes to fund eligible presidential candidates in primary and general elections. This fund matches the first $250 of individual contributions and provides grants to major party nominees, with additional funding available for minor party candidates. Public funding can also be used to match and multiply small donations, reducing the reliance on large donors.

Political action committees (PACs)

In the United States, a PAC is a tax-exempt 527 organisation. At the federal level, an organisation becomes a PAC when it receives or spends more than $1,000 to influence a federal election and registers with the Federal Election Commission (FEC). Federal law allows for two types of PACs: connected and non-connected. Connected PACs, sometimes called corporate PACs, are established by businesses, non-profits, labour unions, trade groups, or health organisations. Non-connected PACs are formed by groups with an ideological mission, single-issue groups, and members of Congress and other political leaders.

PACs can give $5,000 to a candidate committee per election (primary, general, or special) and up to $15,000 annually to any national party committee. They can also give up to $5,000 annually to any other PAC and receive up to $5,000 from any one individual, PAC, or party committee per calendar year.

Super PACs, a type of independent expenditure-only political action committee, can raise unlimited amounts from individuals, corporations, unions, and other groups. However, they are not allowed to coordinate with or contribute directly to candidate campaigns or political parties. Hybrid PACs, meanwhile, can give limited amounts of money directly to campaigns and committees while still making independent expenditures in unlimited amounts.

Public funding

To be eligible for public funding, presidential candidates must demonstrate broad-based public support by raising more than $5,000 in each of at least 20 states. They must also agree to limit their campaign spending and may not accept private contributions. Eligible candidates may receive public funds equalling up to half of the national spending limit for the primary campaign.

In other countries, such as Canada, public funding for federal political parties is provided through election expense reimbursements and per-vote subsidies. The election expense reimbursement subsidizes 50% of the national campaign expenses of any party that obtains at least 2% support or at least 5% in electoral districts where they presented candidates. The per-vote subsidy, also known as the "government allowance," is considered the most democratic of the funding mechanisms as it takes into account the choices of all voters of eligible parties.

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Taxpayer contributions

Political campaigns can be expensive, with candidates for the 2020 US presidential election cycle drawing $4.1 billion in donations. One way that political campaigns receive funding is through taxpayer contributions.

In the US, taxpayers can choose to contribute $3 of their taxes to the Presidential Election Campaign Fund when they file their tax returns. This is done by checking "yes" on the 1040 federal income tax form. Checking "yes" does not increase the amount of tax owed, nor does it decrease any refund to which taxpayers are entitled. This fund is used to provide money to eligible presidential candidates to pay for the expenses of their campaigns. To be eligible, candidates must agree to spending and fundraising restrictions, including not using private donations. The fund also provides money to major party nominees' general election campaigns and assists eligible minor party nominees. Between 1976 and 2012, the fund also supported major parties' presidential nominating conventions and provided partial funding to qualified minor parties. In 2014, legislation was enacted to end public funding of conventions.

The Presidential Election Campaign Fund is the sole source of funds for the public funding program. The FEC audits all campaigns that receive public funds for either the primary or general election. Candidates may owe a repayment to the Treasury if they use public funds for non-campaign-related expenses, exceed expenditure limits, maintain a surplus of public funds, or receive more public funds than they are entitled to receive.

In addition to the Presidential Election Campaign Fund, taxpayers' money may also be used to fund political campaigns through public funding for major party presidential nominees. This takes the form of a grant of $20 million plus the difference in the price index. To be eligible for this funding, candidates must agree to limit spending to the amount of the grant and not accept private contributions for the campaign. Candidates may spend an additional $50,000 from their own personal funds, which does not count against the expenditure limit. Minor party candidates and new party candidates may be eligible for partial public funding of their general election campaigns.

Campaign costs

Campaigning is expensive. Candidates need to pay for staff, office space, advertising, research, travel, and events. In 2020, nearly $14 billion was spent on federal election campaigns in the US, making it the most expensive campaign in US history.

Campaign finance refers to the way political candidates raise and spend money to run for office. Candidates for political office raise money to fund their campaigns and to demonstrate the breadth of their support. Campaign finance laws—which dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported—vary at the state and federal levels. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs).

There are different types of money that can be contributed to campaigns: soft money and hard money. Soft money is money that is not supposed to "advocate the election or defeat of a federal candidate", but instead to be used for "state and local elections and generic 'party-building' activities, including voter registration campaigns and get-out-the-vote drives". There are "no federal contribution limits" on soft money. Hard money, on the other hand, is "regulated contributions from an individual or PAC to a federal candidate, party committee, or other PAC, where the money is used for a federal election".

PACs, or political action committees, are committees that solicit donations from members and associates to make campaign contributions or fund campaign activities, such as advertising. There are different types of PACs, including traditional PACs, super PACs, and leadership PACs. Super PACs are independent expenditure-only political committees that raise money to influence federal elections through advertising. They can accept unlimited donations from individuals, corporations, and unions, and they do not have to disclose their donors. Leadership PACs are often used to contribute funds to political allies and back a political agenda, including supporting other candidates. Critics argue that leadership PACs function as "slush funds" because there are few restrictions on this type of spending.

In addition to private fundraising, candidates can also choose to use public funds for their campaigns. The presidential public funding program provides eligible presidential candidates with federal government funds to pay for the qualified expenses of their political campaigns in both the primary and general elections. To be eligible for these funds, candidates must agree to spending and fundraising restrictions. For example, presidential nominees may only receive public funds if they agree not to use private donations. However, few candidates choose to use public funds because it strictly limits how much they can spend in total.

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