Omar Bennett
Political campaigns can raise money from a variety of sources, including donations from individuals, organisations, and Political Action Committees (PACs). The money is used to pay for campaign-related expenses such as travel, administration, and salaries. In the United States, there are rules and regulations in place that dictate how money can be spent and raised for political campaigns, with contribution limits indexed for inflation every two years. There is also public funding available for presidential campaigns, with eligible candidates able to receive matching funds for private contributions. Super PACs, which are independent expenditure committees, can raise and spend unlimited amounts of money as long as there is no coordination with the campaign or candidate. The sources and amounts of campaign funding are often a topic of interest and scrutiny, with critics arguing that the system allows for a legalized form of political money laundering.
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What You'll Learn
Political action committees (PACs)
In the United States, a PAC is a tax-exempt 527 organization 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 active, registered PACs are named "connected PACs" and are established by businesses, non-profits, labor unions, trade groups, or health organizations. These PACs receive and raise money from a "restricted class", generally consisting of managers and shareholders in the case of a corporation or members in the case of a non-profit organization, labor union, or other interest group. Groups with an ideological mission, single-issue groups, and members of Congress and other political leaders may form "non-connected PACs".
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. A hybrid PAC is similar to a super PAC, but can give limited amounts of money directly to campaigns and committees, while still making independent expenditures in unlimited amounts.
PACs may receive up to $5,000 from any one individual, PAC, or party committee per calendar year. They can give up to $5,000 to a candidate committee per election (primary, general, or special) and up to $15,000 annually to any national party committee. A PAC must register with the FEC within 10 days of its formation, providing the name and address for the PAC, its treasurer, and any connected organizations.
Leadership PACs are a type of PAC established, financed, maintained, or controlled by a candidate or an individual holding federal office. They are often indicative of a politician's aspirations for leadership positions in Congress or for higher office.
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Individual contributions
Political campaigns in the US are financed through individual contributions, corporations, political action committees (PACs), and sometimes the government. Individual contributions are a significant source of funding for political campaigns, and they can come in the form of monetary donations, gifts, or grassroots contributions.
The Federal Election Commission (FEC) enforces restrictions and regulations on money spent on political campaigns. All expenses must be reported through a monitored bank account, and campaigns are prohibited from retaining contributions that exceed the limits. Individual contributions are required to be deposited within 10 days of receipt, and the date of receipt is crucial for reporting and compliance purposes. The date of receipt is the date when the campaign or its representative receives the contribution. For electronic contributions, the date of receipt is when the committee obtains authorization for the transaction. In-kind contributions are recorded on the date the goods or services are provided.
Designated contributions are encouraged as they ensure the contributor's intent is conveyed, promote consistency in reporting, and help avoid the appearance of excessive contributions. These contributions are tied to a specific election and count against the donor's contribution limits for that election. Undesignated contributions are applied to the donor's contribution limits for the candidate's next election.
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Self-funding
Political campaigns are funded by donations from four main sources: political action committees or PACs, large individual contributions, small individual contributions, and money from the candidates' own pockets. Self-funding is, therefore, a legitimate way for candidates to fund their political campaigns.
While there are contribution limits for individual donors, there are no clear statutory limits on how much a candidate can contribute to their own campaign. This means that self-funded candidates can transfer funds "without limitation" to party committees. For example, former presidential candidate Michael Bloomberg transferred $18 million from his campaign funds to the DNC in March 2020.
The lack of limits on self-funded candidates has sparked concerns about the potential for corruption and the influence of money in politics. Critics argue that self-funded candidates can abuse the system and exert undue influence over political parties. Additionally, there is criticism that the "'very wealthy' are allowed to spend unlimited amounts on campaigns, drowning out the voices of ordinary Americans.
To address these concerns, some have called for legislative solutions to limit the amount of personal funds a candidate can contribute to their campaign. For example, the Columbia Law Review proposes amending the Federal Election Campaign Act (FECA) to place concrete restrictions on self-funded candidates' contributions.
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Public funding
In the US, public funding for presidential elections is available to qualified candidates who agree to certain conditions, such as complying with spending limits and keeping detailed records of financial activities. The FEC determines eligibility for funding, and the Secretary of the Treasury makes the payments. Committees that misuse public funds or exceed spending limits may be subject to audits and may be required to repay the funds.
To be eligible for public funding, presidential candidates must demonstrate broad-based public support. This is typically done by raising a certain amount of money from a minimum number of contributors in multiple states. For example, a candidate may be required to raise more than $5,000 in matchable contributions from at least 20 contributors in each of 20 different states.
In addition to direct public funding, some countries offer tax credits for political contributions. For example, in Canada, individuals can receive tax credits for up to 75% of their political contributions. This effectively subsidizes political parties and increases the amount of funding available to them.
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Super PACs
Political action committees (PACs) are organisations that collect and spend money to influence political campaigns. In 2010, two judicial decisions led to the creation of a new type of PAC, known as "super PACs". Unlike traditional PACs, super PACs are legally allowed to raise and spend unlimited amounts of money from individuals or organisations for campaign advertising. However, they are not permitted to coordinate with or contribute directly to candidate campaigns or political parties.
The lack of limits on contributions to super PACs has led to concerns about corruption and the influence of money in politics. Super PACs are often criticised for allowing billionaires, corporations, and other wealthy interests to have a disproportionate influence on elections. In 2025, the "Abolish Super PACs Act" was introduced in Congress, seeking to cap contribution limits to super PACs at $5,000 per calendar year, effectively abolishing them. Supporters of the bill argue that it is necessary to put an end to the threat of corruption and the influence of the ultra-wealthy in politics, and to return power to the people.
Despite the concerns about super PACs, they continue to play a significant role in political campaigns. The ease of raising and spending large sums of money makes them attractive to candidates and organisations seeking to influence elections. However, the debate over the role of money in politics and the influence of super PACs is ongoing, and it remains to be seen whether the Abolish Super PACs Act or other reforms will be successful in addressing these concerns.
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Frequently asked questions
Political campaigns are funded by personal and business donations, which can come from four main sources: political action committees or PACs, large individual contributions of more than $200, small individual contributions of $200 or less, and money from the candidates' own pockets.
PAC stands for Political Action Committee. These are committees established in the name of a candidate that can collect millions of dollars in contributions. There are different types of PACs, including connected PACs and non-connected PACs.
There are rules in place that dictate how money can be spent and how leftover funds can be used after a campaign ends. Personal use of campaign funds is prohibited. Permissible uses include charitable donations, refunds to donors, and donations to other candidates.
Super PACs, or independent expenditure committees, are a form of soft money that can raise and spend unlimited amounts of money to advocate for or against any candidate or issue. They are not allowed to coordinate with any campaign or candidate.
Public funding is money from taxpayers that is given to candidates during elections. Presidential candidates who qualify may receive money from the Presidential Election Campaign Fund, which is overseen by the FEC. Candidates who accept public funds agree to certain conditions, such as spending limits and agreeing not to raise private contributions.
