Malcolm Rivera
Money is used in political campaigns to influence federal elections through advertising and other efforts. The primary legal guidance for political donations at the federal level is the Federal Election Campaign Act, which was initially passed by Congress in 1971. The act set limits on campaign fundraising and spending, established disclosure requirements for campaign contributions, and created the FEC, the agency that enforces federal campaign finance law. The amount of money spent on political campaigns is strongly associated with political success, with over 90% of House candidates who spend the most winning their elections. However, critics argue that big money in politics drowns out the voices of ordinary Americans and allows the super-wealthy to have an outsized influence on elections.
| Characteristics | Values |
|---|---|
| Who can contribute? | Taxpayers, wealthy donors, corporations, labour unions, membership and trade associations, political action committees (PACs), super PACs, and dark money groups |
| How much can be contributed? | Up to $250 per individual for eligible candidates, $3 to the Presidential Election Campaign Fund, $2,300 limit for donors, $81.78 million for major party presidential nominees, $2,000 to another federal candidate, Up to $2,000 to state or local candidates |
| What can the funds be used for? | Advertising, charitable donations, donations to other candidates, future campaigns, recounts, legal and accounting expenses, salaries for family members providing bona fide services to the campaign |
| Rules and regulations | Federal Election Campaign Act, Bipartisan Campaign Reform Act, McCain-Feingold Act, DISCLOSE Act, Citizens United v. FEC, FEC v. Massachusetts Citizens for Life, Inc. |
| Other considerations | Influence of big money, lack of transparency, impact on political success, inefficiency of the market, post-campaign use of funds |
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What You'll Learn
Sources of funding: public grants, taxpayer contributions, and private donations
Political campaigns are funded through a combination of public grants, taxpayer contributions, and private donations. Public funding is available for presidential elections, with eligible candidates receiving federal government funds to cover qualified expenses for both primary and general elections. This funding aims to match the first $250 of individual contributions received by eligible candidates during the primary campaign and support major party nominees' general election campaigns. Taxpayers can voluntarily contribute $3 of their taxes to the Presidential Election Campaign Fund, which is then used to provide public funding for campaigns. The amount of money in this fund is determined by the number of taxpayers who opt in.
To be eligible for public funds, presidential nominees of major parties must agree to limit their spending to the grant amount and refrain from accepting private contributions. In 2007, the eligible public grant amount was $81.78 million, and by 2008, it had grown to $84.1 million. Minor party and new party candidates may also qualify for partial public funding. Additionally, candidates may spend up to $50,000 of their personal funds, which does not count against the expenditure limit.
Private donations play a significant role in political campaigns. Individuals and special interest groups can contribute money, time, or effort to support their preferred candidates or political organizations. However, these political contributions are not tax-deductible. Donations made to political parties, campaign committees, newsletters, or events benefiting a political entity are considered non-deductible contributions.
Taxpayer contributions to the Presidential Election Campaign Fund provide an important source of public funding for campaigns. This voluntary contribution allows taxpayers to allocate $3 of their taxes specifically for this purpose without affecting their tax liability or refund amount. The participation rate for this program has varied over the years, with 29% of taxpayers opting in during 1977, dropping to 19% by 1992, and further declining to 3.6% in 2020.
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Spending limits and restrictions
For presidential campaigns, the FEC imposes spending limits and reporting requirements. Presidential candidates who choose to receive public funding must agree to spending limits and refrain from using private donations. They may receive matching funds from the Presidential Election Campaign Fund, which is contributed to by taxpayers who voluntarily direct a portion of their taxes towards this fund. To be eligible for matching funds, candidates must establish a threshold of donations from individual contributors, limited to $250 per individual. The spending limit for primary elections is adjusted for inflation and estimated to be $40.9 million for the upcoming cycle.
In addition to limits on individual contributions, candidates must also adhere to restrictions on personal spending. A publicly funded presidential primary candidate is limited to spending $50,000 of their personal funds on the campaign. This restriction also applies to nominees of major parties, who must limit personal spending to $50,000 if they choose to receive general election public funds. These spending limits are crucial in preventing candidates with significant personal wealth from having an unfair advantage over their opponents.
Furthermore, campaigns must implement accounting systems to distinguish between contributions for the primary and general elections. If a candidate loses the primary election, any contributions accepted for the general election must be refunded or redesignated within 60 days. This prevents the commingling of funds and ensures compliance with contribution limits. It is worth noting that candidates running in the general election are permitted to use unused primary contributions for general election expenses, ensuring efficient utilization of resources.
While the FEC sets contribution limits for individuals and groups, independent expenditure-only political committees, commonly known as "Super PACs," are not subject to the same restrictions. Super PACs can accept unlimited contributions from individuals, corporations, and labor organizations. However, they are prohibited from directly coordinating with campaigns and candidates. This distinction has been a subject of debate, with some arguing for stricter regulations to prevent the potential influence of unlimited outside spending on political campaigns.
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The role of super PACs and dark money groups
Dark money groups are typically 501(c)(4) social welfare organizations or (c)(6) trade associations that are granted tax-exempt status. They can accept unlimited contributions from any source and are not required to publicly disclose their donors. These groups often engage in candidate election-related activities, but these activities cannot be their primary focus. Dark money groups provide a way for wealthy special interests to secretly spend massive amounts of money on elections, earning them political influence while concealing their identities from voters.
The relationship between dark money groups and super PACs has had a significant impact on politics. By contributing anonymously to super PACs, dark money groups allow their donors to remain undisclosed, even though super PACs are required to disclose the sources of their funds. This lack of transparency has raised concerns about the influence of wealthy donors and special interests on political campaigns.
The influence of super PACs and dark money groups has been further amplified by Supreme Court decisions, such as Citizens United in 2010, which removed many restrictions on campaign fundraising and spending. As a result, these groups have become increasingly prominent in U.S. elections, with billions of dollars being spent in the 2024 election cycle. However, there are ongoing efforts to increase transparency and tighten contribution limits to address the concerns raised by the influence of super PACs and dark money groups in political campaigns.
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Influence of wealthy donors and corporations
Wealthy donors and corporations have always played a significant role in political campaigns, but their influence has become more pronounced in recent years due to several factors. One key factor is the 2010 Supreme Court decision in Citizens United v. Federal Election Commission, which reversed long-standing campaign finance restrictions. This ruling enabled corporations and other outside groups to spend unlimited funds on elections, effectively fusing private wealth with political power to an extent not seen in decades.
The creation of super PACs, or independent expenditure-only political committees, has been a significant development in this regard. Super PACs are not bound by the same spending limits as traditional PACs, and they can raise unlimited funds from wealthy donors and corporations. While super PACs cannot contribute directly to or coordinate with specific candidates or campaigns, they can use their financial resources to influence elections through advertising and other efforts. The influence of super PACs has been such that they have become integral to most major campaigns, with affiliated super PACs raising unlimited funds.
The rise of "dark money" groups further highlights the influence of wealthy donors and corporations. These groups, often organised as nonprofits, can accept unlimited contributions while keeping their donors' identities hidden. This lack of transparency prevents voters from knowing who is trying to influence their votes, and it allows special interests to bypass campaign finance limits and improperly influence candidates and elected officials.
To address these issues, some have called for tighter limits on direct contributions to candidates, stricter rules to ensure that unlimited political spending by non-candidates is truly independent, and enhanced transparency and disclosure requirements for all groups engaged in political spending. By closing legal loopholes and strengthening enforcement, it may be possible to curb the outsized influence of wealthy donors and corporations and restore faith in the democratic process.
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How money is used after a campaign ends
Once a political campaign ends, there are rules in place regarding how the remaining funds can be used. Candidates are not allowed to use any leftover funds for personal use after all campaign-related debts are settled. Instead, permissible uses include charitable donations, or donations to other candidates.
If a candidate receives contributions for a general election, but drops out of the race or loses the primary race beforehand, contributions must be refunded to individual donors within 60 days. Alternatively, the candidate can redistribute their general election funds with the contributor's permission.
Leftover funds can also be used to create a "leadership PAC", a political committee that can be controlled by the former candidate but is not used to support that person's campaigns. Instead, it backs a political agenda, including other candidates, that the original candidate supports. Leadership PACs have been criticized for functioning as "slush funds", allowing politicians to spend on travel and entertainment they can't buy with regular campaign donations.
If a candidate has any debts remaining after a campaign ends, they may need to continue fundraising to pay these off.
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Frequently asked questions
Political campaigns raise money through donations from individuals, political action committees (PACs), and super PACs. Presidential campaigns may also receive public funds, with taxpayers able to direct $3 of their taxes towards the Presidential Election Campaign Fund.
Advertising is the major expense for campaigns, with Senate and House campaigns spending a large portion of their budgets on ads. Money is also spent on other campaign-related expenses, such as salaries and office space.
There are rules in place that dictate how money can be spent after a campaign concludes. Permitted uses include charitable donations, donations to other candidates, and saving it for a future campaign. Personal use is prohibited.
