Simone Lawson
Political campaign funding is a crucial aspect of the electoral process, encompassing the funds raised to promote candidates, political parties, and policy initiatives. The sources of campaign funding vary, including private donors, such as individuals, trade unions, and corporations, as well as public financing options like government subsidies and taxpayer contributions. In the United States, campaign finance laws dictate contribution limits, disclosure requirements, and eligible contributors, with separate regulations for federal and state-level campaigns. The involvement of Political Action Committees (PACs) and their influence on campaign funding has been a subject of debate, particularly regarding the role of “super PACs” and their impact on the democratic process.
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What You'll Learn
Sources of funding
Political campaigns are expensive undertakings, and candidates for political office raise money to fund their campaigns and demonstrate their breadth of support. Campaign finance laws dictate who can contribute to a campaign, how much they can give, and how those contributions must be reported. These laws vary at the state and federal levels. Campaigns may generally raise funds from individuals, political party committees, and political action committees (PACs).
Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns. However, they can influence federal elections by creating PACs, which solicit donations from members and associates to make campaign contributions or fund campaign activities like advertising. Funds raised and spent by PACs are subject to federal limits.
Super PACs, or independent expenditure-only political committees, can spend unlimited amounts of money on their preferred candidates and are not required to fully disclose their contributors. They were made possible by the 2010 Citizens United v. Federal Election Commission Supreme Court ruling, which held that the government may not prohibit unions and corporations from making independent expenditures for political purposes.
Another source of funding for candidates is small donor public financing, where public funds match and multiply small donations. This system incentivizes candidates to seek out many supporters, not just a few big donors, and enables more candidates from diverse backgrounds to run. New York City's multiple match system, for example, turns a $50 donation into $350 for the candidate.
Some presidential campaigns are also funded in part by taxpayers who choose to direct $3 of their taxes to the Presidential Election Campaign Fund. To be eligible for these funds, candidates must agree to spending and fundraising restrictions.
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Campaign finance laws
At the federal level, the primary legal guidance for political donations is the Federal Election Campaign Act (FECA) of 1971. FECA sets limits on campaign fundraising and spending, establishes disclosure requirements for campaign contributions, and created the Federal Election Commission (FEC), the agency that enforces federal campaign finance law. The FEC database allows the public to search for information on where each candidate receives campaign money and how they spend it in federal elections.
FECA prohibits corporations and labour unions from making direct contributions or expenditures in connection with federal elections. However, they can influence federal elections by creating PACs, which solicit donations from members and associates to make campaign contributions or fund campaign activities such as advertising. There are two types of PACs: connected PACs and non-connected PACs. Connected PACs are sponsored by corporations, labour unions, or interest groups, and can only receive and raise money from a restricted class, such as managers and shareholders. In exchange, the sponsor may cover the PAC's administrative costs. Non-connected PACs are financially independent and must pay their own administrative expenses using the contributions they raise.
In addition to PACs, there are also super PACs, or independent expenditure-only political committees, which can raise unlimited funds from individual and corporate donors and use those funds for electioneering advertisements, provided they do not coordinate with a specific candidate.
Public financing is also available for qualifying candidates for President of the United States during the primaries and general elections. Taxpayers can choose to direct $3 of their taxes to the Presidential Election Campaign Fund, which provides grants to eligible candidates. To be eligible for these funds, candidates must agree to spending and fundraising restrictions, including limits on spending and not accepting private donations.
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Political action committees (PACs)
In the United States, a PAC is a tax-exempt 527 organisation that pools campaign contributions from members and donates those funds to campaigns for or against candidates, ballot initiatives, or legislation. Federal law formally allows for two types of PACs: connected and non-connected. Judicial decisions added a third classification, independent expenditure-only committees, which are colloquially known as "super PACs". Most of the 4,600 active, registered PACs, named "connected PACs", are sometimes also called "corporate PACs". These PACs are established by businesses, non-profits, labour unions, trade groups, or health organisations.
Nonconnected committees, as their name suggests, are not sponsored by or connected to any of the aforementioned entities and are free to solicit contributions from the general public. Super PACs, officially known as "independent expenditure-only political action committees", are unlike traditional PACs in that they may raise unlimited amounts from individuals, corporations, unions, and other groups to spend on, for example, ads overtly advocating for or against political candidates. However, they are not allowed to either coordinate with or contribute directly to candidate campaigns or political parties.
Hybrid PACs (political committees with non-contribution accounts) solicit and accept unlimited contributions from individuals, corporations, labour organisations, and other political committees to a segregated bank account for the purpose of financing independent expenditures, other ads that refer to a federal candidate, and generic voter drives in federal elections.
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Public funding
Political campaigns are primarily funded by private donors, but public funding is also available for qualifying candidates in certain jurisdictions. In the United States, public funding for political campaigns is typically provided at the federal level for presidential elections, while state and local laws govern funding for non-federal offices.
The Federal Election Commission (FEC) administers the laws regarding the public funding of presidential elections. The Presidential Election Campaign Fund, established in 1976, allows taxpayers to voluntarily designate $3 of their federal income taxes to fund eligible candidates' campaigns. This fund is the sole source of public money for campaigns, and it is used to match the first $250 of individual contributions to eligible candidates during the primaries. To be eligible for public funding, presidential nominees must agree to spending limits and refrain from accepting private donations. The public funding amount for the 2024 general election is set at $123.5 million, and candidates may spend an additional $50,000 from their personal funds.
While most states allow some level of corporate and union contributions, some states have stricter limits or no limits at all on campaign contributions. Additionally, grassroots organizations and watchdog groups track how money is raised and spent in political campaigns.
Publicly funded elections, where campaigns are financed through income tax donations or taxes, have been considered or implemented in various countries and jurisdictions, including Canada, the United Kingdom, Norway, India, Russia, Brazil, Nigeria, and Sweden, and several US states. In Canada, federal political parties receive significant public funding through electoral expense reimbursements, which subsidize a portion of their campaign expenses based on the votes they receive.
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Private funding
Supporters of private funding argue that it has several benefits. Firstly, it allows for a diversity of views to be heard, as private financing is not limited by government restrictions on speech. Secondly, it is believed to foster civic involvement and participation in the political process. Additionally, proponents argue that private financing prevents the government from favoring those in power or with political influence. In some countries, private donations are the primary source of campaign funding, while others utilize a mix of private and public funds.
There are, however, critics of private campaign financing. One of the main concerns is the potential for votes to be "bought," resulting in significant disparities between parties in terms of financial resources for campaigning. Critics also argue that private funding gives donors greater access to policymakers and increases their influence over politicians. To address these concerns, most countries that rely primarily on private donations have extensive disclosure requirements for contributions, including information such as the donor's name, employer, and address. These requirements aim to maintain transparency and prevent undue donor influence while preserving the benefits of private financing, such as the right to make donations and spend money freely.
In the United States, the Federal Election Campaign Act of 1971 sets the legal framework for political donations at the federal level. This act established the Federal Election Commission (FEC), which enforces campaign finance laws and sets limits on fundraising and spending. The FEC also requires the disclosure of certain information regarding campaign contributions, such as the names of individuals and organizations contributing to campaigns and the amounts donated. These regulations aim to promote transparency and prevent corruption in the political funding process.
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Frequently asked questions
Political campaign funding is the money raised by candidates running for political office to fund their campaigns and demonstrate their breadth of support.
Campaign finance laws dictate who can contribute to a campaign and how much they can give. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs).
The Federal Election Campaign Act of 1971 (FECA) limits the amount of money individuals and political organizations can give to a candidate running for federal office. The act also established the Federal Election Commission (FEC), which enforces federal campaign finance law.
A PAC, or Political Action Committee, is a committee that solicits donations from members and associates to make campaign contributions or fund campaign activities. Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns, but they can influence elections by creating PACs.
Organizations like OpenSecrets provide non-partisan information on political contributions. They offer access to datasets on political contributions, expenditures, and lobbying activities, as well as a searchable database of donors and politicians.
