Omar Bennett
Political campaigns are financed through a combination of donations from individuals, political parties, and Political Action Committees (PACs). In the US, the Federal Election Campaign Act sets limits on campaign fundraising and spending, with eligible presidential candidates receiving federal funds to cover expenses. The Presidential Election Campaign Fund (PECF) allows taxpayers to voluntarily contribute $3 of their taxes to fund campaigns, aiming to limit the influence of big donors. However, critics argue that court rulings like Citizens United v. FEC have allowed the wealthy to spend unlimited amounts through Super PACs, drowning out ordinary Americans' voices. Campaigns use funds for advertising, staff, and other expenses, with rules dictating permissible post-campaign uses like charitable donations.
| Characteristics | Values |
|---|---|
| Sources of funds | Individuals, political party committees, and political action committees (PACs) |
| Eligibility for public funds | Presidential candidates seeking nomination by a political party |
| Public funding amount | $20 million plus the difference in the price index |
| Permitted uses of leftover funds | Charitable donations, donations to other candidates, saving for a future campaign |
| Permissible uses of leftover funds for federal candidates | Donations to charities, $2,000 to another federal candidate, donations to state or local candidates |
| Permissible uses of leftover funds for super PACs | Support the same candidate in future elections, donate to another federal candidate or organizations with similar political causes |
| Maximum contribution to a federal candidate | $6,600 |
| Maximum contribution by a couple filing jointly to the Presidential Election Campaign Fund (PECF) | $6 |
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What You'll Learn
Sources of funding: individuals, committees, and organisations
Political campaigns are financed through a variety of sources, including individuals, committees, and organisations. Campaign finance laws dictate who can contribute, how much they can give, and how these contributions must be reported, and these laws vary at the state and federal levels. While campaigns may raise funds from individuals, political party committees, and political action committees (PACs), there are restrictions on contributions from corporations, labour organisations, and membership groups.
Individuals
Individuals can contribute to political campaigns within certain limits set by campaign finance laws. These contributions are an important source of funding for campaigns and can include both small-dollar donations and larger contributions from wealthy individuals. A 2016 study found that politicians made themselves more available for meetings with individuals when they believed those individuals had donated to their campaign. Additionally, individuals have the option to contribute $3 of their tax payments to the Presidential Election Campaign Fund (PECF) to support eligible presidential candidates, although the uptake on this option has been declining.
Committees
Political action committees (PACs) are a significant source of funding for political campaigns. PACs are organisations that pool donations from members and associates to contribute to campaigns or fund campaign activities such as advertising. There are different types of PACs, including traditional PACs, super PACs, and leadership PACs, which are created by politicians to support their allies. While corporations and labour unions cannot contribute directly to federal campaigns, they can form PACs to influence elections. These PACs are subject to federal contribution limits, although super PACs can accept unlimited sums of money from individuals, corporations, or unions.
Organisations
Organisations, including corporations, labour unions, and membership groups, are restricted from contributing directly to federal campaigns. However, they can influence campaigns by forming PACs or contributing unlimited "nonfederal money" to political parties for activities related to state or local elections. A 2011 study found a correlation between contributions to federal candidates and subsequent contracts received by the contributing companies. Additionally, organisations can sponsor "separate segregated funds" (SSFs) or "connected PACs," which can only receive funds from a restricted class, such as managers and shareholders in the case of corporations.
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Spending limits and restrictions
While candidates can spend their personal funds on campaigns without limits, they must disclose these amounts to the FEC. Notably, the FEC has ruled that political parties can fund "mixed-purpose" activities, such as get-out-the-vote drives and generic party advertising, with soft money. However, this ruling has been criticised for allowing parties and candidates to circumvent FECA's limitations.
At the federal level, public funding is available for presidential campaigns, including matching programs for individual contributions during primaries and funding for major party nominees' general election campaigns. To be eligible for public funds, candidates must agree to spending and fundraising restrictions, such as refraining from using private donations and limiting personal spending to a specified amount, which was $50,000 for the 2024 election cycle.
Campaign finance laws vary at the state and federal levels, with different contribution and spending limits. For example, state limits for the 2024 election cycle range from $1,236,000 in Wyoming to $30,176,500 in California. Additionally, certain expenses, such as fundraising and legal and accounting fees, are exempt from spending limits.
Political action committees (PACs) are subject to federal contribution limits, while super PACs, or independent expenditure-only political committees, can accept unlimited contributions from individuals, corporations, and labour organisations. However, super PACs cannot directly coordinate with campaigns and candidates.
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Taxpayer contributions
Taxpayers can contribute to political campaigns by choosing to direct $3 from their tax payments to the Presidential Election Campaign Fund (PECF). This is done by checking a box on the 1040 federal income tax form. Checking the box does not increase the amount of tax owed or decrease any refund due. The PECF was designed to use tax dollars to match the first $250 of each contribution from individuals that an eligible presidential candidate receives during the primary campaign. To be eligible for these funds, candidates must agree to spending and fundraising restrictions, including limits on campaign spending. For example, in 2024, the national spending limit for presidential campaigns is $61.79 million.
The PECF also provides funding for the major party nominees' general election campaigns and assists eligible minor party nominees. In 2008, the last year a major party candidate chose to accept a general election grant, the amount was $84.1 million. The grant for 2024 is $123.5 million. However, many taxpayers decline to contribute to the PECF, and the share of filers opting in has fallen dramatically in recent years.
In addition to the PECF, there are other approaches to public campaign financing that aim to amplify the voices of regular people in elections. These include voucher systems, where citizens receive public funds they can direct to their preferred candidates, and tax credits for small campaign donations. Small donor public financing, where public funds match and multiply small donations, has been shown to reduce the influence of special interests and empower average voters.
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Candidate eligibility for funding
The eligibility criteria for candidates to receive funding for their political campaigns vary depending on the type of election and the source of funding. Here are some key considerations:
- Presidential Election Campaign Fund (PECF): The PECF is a public funding program administered by the Federal Election Commission (FEC) that provides funds to eligible presidential candidates for their campaign expenses. To be eligible for primary matching funds, a candidate must raise at least $5,000 in contributions from individuals in each of at least 20 states, with a maximum of $250 per individual counted towards this threshold. The FEC will then match up to $250 of each individual's total contributions to the eligible candidate. The PECF is funded by taxpayers who voluntarily direct $3 of their tax payments to the fund when filing their income tax returns.
- Major Party Nominees: Major party presidential nominees may be eligible for public grants or general election grants from the FEC. To receive public funds, these candidates must agree to limit their campaign spending to the amount of the grant and refrain from accepting private contributions. The grant amount for the 2024 general election is set at $123.5 million.
- Minor Party and New Party Candidates: Minor party and new party candidates may be eligible for partial public funding for their general election campaigns. They are subject to the same spending limits and requirements as major party candidates but may supplement their public funds with private contributions and exempt certain fundraising costs from their expenditure limits.
- State and Federal Campaign Finance Laws: Campaign finance laws vary at the state and federal levels, dictating who can contribute to a campaign, contribution limits, and reporting requirements. Candidates must adhere to these laws when raising and spending funds for their campaigns.
- Political Action Committees (PACs): While corporations, labour organizations, and membership groups cannot contribute directly to federal campaigns, they can form PACs to influence elections. PACs solicit donations from members to make campaign contributions or fund campaign activities, such as advertising. However, funds raised and spent by PACs are subject to federal limits.
- Candidate's Personal Funds: Candidates can use their personal funds for their campaigns without any limits. However, they must report the amount they spend to the FEC.
It is important to note that eligibility for funding may be further influenced by factors such as the specific rules and regulations of the funding source, the candidate's political party, the office they are seeking, and the jurisdiction in which they are running for office. Candidates should refer to the relevant election authorities and legal guidelines to ensure they meet the eligibility criteria for receiving campaign funds.
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Post-campaign fund usage
Once a political campaign is over, various rules dictate how leftover funds can be spent. In the US, the Federal Election Commission (FEC) controls how money raised by candidate committees is spent after a candidate bows out or an election is over. Permitted uses of these funds include charitable donations, donations to other candidates, and saving for a future campaign. Personal use of these funds is prohibited.
If a candidate receives contributions for a general election but drops out of the race or loses the primary, they must refund the money to individual donors within 60 days. Alternatively, they can redistribute their general election funds with the contributor's permission. If a campaign still has debts to pay, it must keep the campaign open and not file a closing report. Once a campaign is closed, any surplus funds must be disposed of within 120 days.
While there are fewer restrictions on how Super PACs can spend leftover funds, they often return them after winding down costs. Super PACs can continue to use leftover funds to support the same or another federal candidate in future elections. They can also donate the money to other organizations aligned with their political cause. Although Super PAC treasurers are not legally required to refund money to donors, they often do.
Historically, surplus campaign funds have been used for varied purposes. For example, in 1976, Senator Herman Talmage used $2,045 from his surplus campaign fund to purchase a 1972 Oldsmobile. In the same year, Senator John A. Durkin used $2,000 from his surplus campaign funds to pay expenses for a WATS telephone line in his state office.
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Frequently asked questions
Political campaigns raise funds from individuals, political party committees, and political action committees (PACs). Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns but can create PACs to influence elections.
Yes, campaign finance laws vary at the state and federal levels, dictating who can contribute, contribution limits, and reporting requirements. The Federal Election Campaign Act sets federal-level limits and disclosure requirements, enforced by the FEC.
Yes, eligible presidential candidates can receive federal government funds for qualified expenses in primary and general elections. The public funding program aims to match contributions and fund major party nominees' campaigns. Taxpayers can also opt to contribute $3 to the Presidential Election Campaign Fund on their tax returns.
Leftover funds can be donated to charities, given to other candidates, or saved for future campaigns. Personal use of leftover funds is prohibited. Super PACs have fewer restrictions and can support the same or other candidates in future elections or donate to aligned organizations.
No, political contributions, including monetary donations, in-kind contributions, and volunteer expenses, are generally not tax-deductible. However, in-kind donations of goods to qualified charities may be deductible.
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