Malcolm Rivera
Political campaigns are financed through funds raised to promote candidates, political parties, or policy initiatives. In the United States, campaign financing happens at the federal, state, and local levels through contributions from individuals, corporations, and political action committees (PACs). Campaign finance laws vary across different levels of government and aim to regulate who can contribute to a campaign, how much they can give, and how these contributions are reported. The rising cost of elections and the influence of large contributors have sparked debates about the role of money in politics and the need for regulations to prevent corruption and protect democratic principles.
| Characteristics | Values |
|---|---|
| Primary legal guidance for political donations at the federal level | Federal Election Campaign Act |
| Campaign finance laws | Dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported |
| Donors | Individuals, corporations, political parties, and charitable organizations |
| Recipients | Individuals, corporations, political parties, and charitable organizations |
| Campaign finance regulations | Limit partisan contributions |
| Campaign finance law exemptions | Certain fundraising expenses, legal and accounting expenses |
| Public financing systems | Democracy vouchers, matching funds, and lump-sum grants |
| Presidential public funding program | Eligible presidential candidates receive federal government funds to pay for qualified expenses of their political campaigns |
| Small donor public financing | Increases the diversity of political donors |
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What You'll Learn
Campaign finance laws
The FEC sets contribution limits for individuals and groups and oversees public funding used in presidential elections. Candidates for political office can 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 form PACs to influence federal elections. Funds raised and spent by PACs are subject to federal limits, while donations to super PACs, or independent expenditure-only political committees, are not.
Small donor public financing has been proposed as a solution to dilute the power of large donors and increase the diversity of political donors. This approach, advocated by groups like the Brennan Center for Justice, uses public funds to match and multiply small donations, reducing the influence of special interests and empowering average voters. Other proposals to address the influence of money in politics include fully disclosing all political spending and providing tax credits for small campaign donations to encourage greater participation.
Campaign spending in the United States has been steadily increasing since at least 1990, with nearly $14 billion spent on federal election campaigns in 2020, more than double the amount spent in 2016. Critics argue that Supreme Court decisions, such as Citizens United v. FEC, have weakened campaign finance regulations and contributed to the dominance of wealthy special interests in political funding.
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Private vs. public financing
Political campaigns are financed by contributions from individuals, corporations, political action committees (PACs), and sometimes the government. Campaign spending has been steadily rising since 1990, with nearly $14 billion spent on the 2020 US federal election campaigns.
The US campaign finance system has been criticised for unfairly favouring a small group of wealthy donors. This has resulted in a disconnect between elected officials and the majority of people they represent. In response, some have proposed small donor public financing as a solution, where public funds match and multiply small donations. This has been shown to reduce the influence of special interests and empower average voters. New York City's multiple match system, for example, turns a $50 donation into a total of $350 for the candidate. Other approaches to public campaign financing include voucher systems and tax credits for small campaign donations.
On the other hand, critics of public financing argue that public funds may be vulnerable to corruption. However, supporters of public financing argue that oversight mechanisms can prevent and catch attempts to abuse the system. Additionally, public financing has been shown to reduce the financial and electoral advantages of incumbency.
Private financing, on the other hand, often relies on donations from a small group of wealthy individuals, corporations, and PACs. While there are laws in place to regulate campaign donations, spending, and public funding, critics argue that these laws do not sufficiently address the influence of money in politics. For example, the Citizens United v. FEC Supreme Court ruling in 2010 held that the First Amendment right to free speech prohibited the government from restricting independent expenditures for political communications by corporations and unions.
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Political action committees (PACs)
In the US, 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, or 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 and may receive up to $5,000 from any one individual, PAC or party committee per calendar year. They can also give up to $15,000 annually to any national party committee and $5,000 annually to any other PAC.
Super PACs, or independent expenditure-only political committees, are a type of PAC that can raise unlimited amounts from individuals, corporations, unions, and other groups to spend on advertising for or against political candidates. However, they are not allowed to coordinate with or contribute directly to candidate campaigns or political parties. Hybrid PACs are similar to super PACs but can give limited amounts of money directly to campaigns and committees.
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Taxpayer contributions
Taxpayers can contribute to political campaigns in several ways. Firstly, they can choose to donate money directly to a political party, candidate, or campaign committee. These donations are not tax-deductible and can include both monetary and in-kind contributions, such as goods or services. However, it is important to note that these donations are subject to certain limits and regulations.
In the United States, taxpayers have the option to contribute to the Presidential Election Campaign Fund by designating $3 from their tax returns. This contribution does not affect their taxes or deductions. To be eligible for these funds, candidates must agree to certain spending and fundraising restrictions, and they cannot accept private donations. While this option provides public funding for presidential campaigns, it is worth noting that many major-party candidates opt for private fundraising instead.
Another way taxpayer contributions can influence political campaigns is through the creation of political action committees (PACs). PACs are formed by corporations, labor organizations, or membership groups and they raise funds to support campaigns or influence elections. While PACs have federal contribution limits, super PACs, or independent expenditure-only political committees, can accept unlimited contributions without directly coordinating with campaigns or candidates. This has led to concerns about the influence of wealthy special interests and the lack of transparency in campaign financing.
To address these issues, organizations like the Brennan Center for Justice have proposed small donor public financing. This system uses public funds to match and multiply small donations, reducing the reliance on large contributions and empowering average voters. New York City's multiple match system, where a $50 donation becomes $350 for the candidate, is an example of this approach. Additionally, voucher systems and tax credits for small campaign donations have been suggested to encourage broader participation and amplify the voices of regular people in elections.
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Campaign finance regulation
One of the most significant pieces of legislation is the Federal Election Campaign Act (FECA), initially passed by Congress in 1971. This act set limits on campaign fundraising and spending, established disclosure requirements for campaign contributions, and created the Federal Election Commission (FEC) to enforce federal campaign finance law. FECA has undergone several amendments, including in 1974, when the FEC was given jurisdiction in civil enforcement and the authority to write regulations and monitor compliance.
Another notable regulation is the Pendleton Civil Service Reform Act of 1883, which made it illegal for government officials to solicit contributions from civil service workers or award these positions based on anything other than merit. Prior to this act, many government employees were expected to contribute financially to political campaigns to keep their jobs.
In recent years, there has been a growing disconnect between elected officials and the people they represent, partly due to the influence of large campaign donations from a small number of wealthy individuals and organisations. This has led to proposals for reform, such as small donor public financing, where public funds match and multiply small donations, reducing the influence of special interests and empowering average voters.
The effectiveness of campaign finance regulations is a highly debated topic, with critics arguing that they are often insufficient in curbing the influence of money in politics. For instance, the 2020 US election cycle saw nearly $14 billion spent on federal election campaigns, with a significant portion coming from super PACs, which are not subject to federal contribution limits. As a result, there are ongoing efforts to strengthen and improve campaign finance regulations to promote fair political competition and transparency in the funding of political campaigns.
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Frequently asked questions
Campaign finance refers to the funds raised to promote candidates, political parties, or policy initiatives and referendums. Political campaigns usually involve considerable costs, including travel, staff, political consulting, and advertising.
Political campaigns are financed by individuals, corporations, political parties, and charitable organizations. In the US, campaigns may also be financed by political party committees and political action committees (PACs).
Public campaign financing is where public funds are used to finance political campaigns. This can take the form of matching and multiplying small donations, or grants, subsidies, and lump-sum payments.
Critics of private campaign financing claim that it leads to votes being "bought" and produces large gaps between different parties in terms of their financial resources. It is also argued that large contributions can contradict the democratic principle of "one person, one vote".
