Eleanor Finch
Political campaigns can be financed in a variety of ways, including public funding, private donations, and small donor public financing. In the United States, for example, presidential campaigns are funded in part by taxpayers who choose to contribute $3 to the Presidential Election Campaign Fund when filing their tax returns. Candidates who accept these funds must agree to certain spending and fundraising restrictions. Campaigns may also receive funds from private donors, including individuals, corporations, and political action committees (PACs). The specific laws governing campaign finance vary at the state and federal levels, and these laws dictate who can contribute, contribution limits, and reporting requirements. The primary federal law governing campaign finance is the Federal Election Campaign Act, which was passed in 1971 and has since been amended.
| Characteristics | Values |
|---|---|
| Public funding | The government provides funds to eligible candidates to cover expenses for primary and general elections |
| Presidential Election Campaign Fund | Taxpayers can choose to contribute $3 to the fund when filing tax returns |
| Campaign finance laws | Vary at the state and federal levels, dictating who can contribute, contribution limits, and reporting requirements |
| Individual donations | Individuals can make personal donations to campaigns |
| Political party committees | Campaigns can receive funds from political party committees |
| Political action committees (PACs) | Groups like corporations, labor organizations, and membership groups can form PACs to contribute to campaigns |
| Super PACs | Independent expenditure-only committees that can raise money to influence federal elections |
| Leadership PACs | Established by politicians to contribute funds to political allies |
| Bundling | Practice of organizing and coordinating donations, often by lobbyists |
| Hard money | Contributions made directly to a specific candidate |
| Soft money | Contributions made to parties for "party-building" rather than specific candidates |
| Grassroots contributions | Small donations from individuals, often under a certain threshold like $200 |
| Nonprofit corporations | Allowed to raise and spend unlimited amounts from corporations and individuals |
| Dark money | Funds raised and spent by organizations without disclosing the source |
| Voucher systems | Citizens receive public funds to direct to their preferred candidates |
| Tax credits | Provided for small campaign donations to encourage participation |
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What You'll Learn
Small donor public financing
Political campaigns can be financed in several ways, including individual donations, political party committees, and political action committees (PACs). However, one method that has gained traction in recent years is small donor public financing.
One example of small donor public financing is New York City's innovative program, which provides a multiple match on small-dollar contributions. Under this program, a $10 contribution from a city resident can be matched with $80 in public funds, resulting in a total of $90 for the candidate. Other cities, such as Seattle, have implemented voucher systems where residents can donate vouchers worth a specified amount to participating candidates, who then receive public funds in that amount.
Overall, small donor public financing is a promising reform that helps address the issue of big money in politics and works towards creating a healthier and more representative democracy.
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Campaign finance laws
The Federal Election Commission (FEC) enforces the Federal Election Campaign Act of 1971 and sets campaign contribution limits for individuals and groups. The FEC also oversees public funding used in presidential elections. Under the presidential public funding program, eligible presidential candidates receive federal government funds to pay for the qualified expenses of their political campaigns in both the primary and general elections. To be eligible for these funds, candidates must agree to spending and fundraising restrictions. For example, candidates may only spend a limited amount of their own personal funds, and presidential nominees may not accept private contributions for their campaigns.
The FEC audits all campaigns that receive public funds, and candidates may owe a repayment to the Treasury if they exceed the expenditure limits, maintain a surplus of public funds, or receive more public funds than they were entitled to receive. The campaign finance law exempts certain expenses from the spending limits, such as specific fundraising and legal and accounting expenses.
The Federal Election Campaign Act prohibits corporations and labour unions from making direct contributions or expenditures in connection with federal elections. However, corporations, labour unions, and membership and trade associations can create political action committees (PACs) to influence federal elections. Funds raised and spent by PACs are subject to federal limits.
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Political action committees (PACs)
Political action committees, or PACs, are committees organised for the purpose of raising and spending money to elect and defeat candidates. They are also referred to as leadership PACs when created by politicians, and separate segregated funds (SSFs) or non-connected committees when established by corporations, unions, membership organisations, or trade associations.
PACs have been used in US politics since 1944, when the Congress of Industrial Organizations (CIO) formed the first one to raise money for the re-election of President Franklin D. Roosevelt. The legal term PAC was created in pursuit of campaign finance reform. 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).
There are two types of PACs: connected and non-connected. Connected PACs, also known as corporate PACs, are established by for-profit entities such as businesses, non-profits, labour unions, trade groups, or health organisations. They receive and raise money from a restricted class, such as managers and shareholders in the case of a corporation. Non-connected PACs are formed by groups with an ideological mission, single-issue groups, and members of Congress or other political leaders.
Super PACs, or independent expenditure-only political committees, are a third type of PAC that emerged following judicial decisions. Unlike traditional PACs, they can raise unlimited amounts from individuals, corporations, unions, and other groups to spend on advocating for or against political candidates. However, they cannot coordinate with or contribute directly to candidate campaigns or political parties. Hybrid PACs, or Carey Committees, are a variation of super PACs that can give limited amounts of money directly to campaigns while still making independent expenditures without limits.
PACs are subject to federal limits on fundraising and spending, as well as disclosure requirements for campaign contributions. They must disclose donations of at least $200 and file regular reports with the FEC. The Supreme Court has ruled that legislative limits on PACs are unconstitutional under the First Amendment, allowing PACs to raise increasing amounts over the years.
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Private donor financing
Campaign finance laws dictate who can contribute to a campaign, how much they can give, and how these contributions must be reported. These laws vary at the state and federal levels. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs).
PACs are an important mechanism for private donor financing. Corporations, labour organisations, 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 such as advertising. Funds raised and spent by PACs are subject to federal limits.
Super PACs, or independent expenditure-only political committees, are another form of PAC that can raise unlimited sums of money from corporations, unions, and other groups to influence federal elections through advertising. The creation of Super PACs was enabled by the US Supreme Court ruling in Citizens United v. FEC (2010), which held that the First Amendment right to free speech prohibits the government from restricting independent expenditures for political communications by corporations, labour unions, and other associations.
Another approach to private donor financing is small donor public financing, where public funds match and multiply small donations. This system incentivizes candidates to seek out a broad base of supporters, not just a few large donors, and enables more candidates from diverse backgrounds to run. New York City's multiple match system, for instance, turns a $50 donation into a total of $350 for the candidate.
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Government financing
The Presidential Election Campaign Fund is a public funding program that provides federal government funds to eligible presidential candidates to cover qualified expenses during primary and general elections. This program is financed by taxpayers who voluntarily direct $3 of their taxes to the fund when filing their tax returns. In the 2019-20 election cycle, U.S. presidential campaigns raised and spent approximately $4.1 billion.
To be eligible for public funds, candidates must agree to spending and fundraising restrictions. Presidential nominees may only receive public funds if they refrain from accepting private donations. Major party nominees are provided with a grant of $20 million, plus additional funds based on the price index. They are not permitted to accept private contributions and can spend up to a limited amount of their personal funds, which does not count against the expenditure limit.
Small donor public financing is a system where public funds match and multiply small donations. This approach incentivizes candidates to seek a broad base of supporters rather than relying on a few large donors. It also enables more candidates from diverse backgrounds to run and amplifies the voices of regular people in elections. New York City's multiple match system, where a $50 donation generates a total of $350 for the candidate, has been successful in reducing the influence of special interests.
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Frequently asked questions
Political campaigns are the funds raised to promote candidates, political parties, or policy initiatives and referendums.
Political campaigns can be financed through personal and business donations, which can be used to pay for travel, administration, salaries, and any other campaign-related expenses. Campaigns can also be funded by a combination of private and public money. In the US, public financing systems include democracy vouchers, matching funds, and lump-sum grants.
Campaign finance laws dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported. These laws vary at the state and federal levels. There are also rules in place that determine how money can be spent after a political campaign concludes.
Small-donor public financing is a system in which public funds match and multiply small donations. This approach incentivizes candidates to seek out many supporters, not just a few big donors, and enables more candidates from diverse backgrounds to run.
