Tax Credits for Small Donors in Politics Should Be Part of Tax Reform
To shrink the clout of rich campaign contributors, look to the tax bill talks going on in Washington and the states.
Cross-posted at USA Today.
Americans of all political stripes are increasingly disgusted by our country’s broken campaign finance system. Many believe that the system is out of balance, with big money having far too much influence over policy — drowning out the voices of individual voters and leaving them feeling disconnected from their government.
The problem has gotten exponentially worse over time, as shown by the change in giving patterns to federal candidates, parties, and committees. In 1994, small-dollar donors gave three times more money than donors giving $10,000 or more. Two decades later, those positions are reversed: Those who contribute over $10,000 now give more money than all small donors combined.
Since the 1976 Buckley v. Valeo decision, a series of Supreme Court rulings has eviscerated wide swaths of federal campaign finance law. That has led to Super PACs, “dark money” groups and widespread voter disenchantment. Yet in the last decade, Congress has failed to adopt any major reforms that could increase the participation and voice of average citizens.
So, how do we break the logjam? We think the key is to find a starting point where there is common ground. Counterintuitively, that starting place could be the current discussions on tax reform happening at the federal and state levels.
Why tax reform? Progressives and conservatives are oceans apart politically, but many on both sides agree that restoring federal tax credits for small-dollar donations could help address Americans’ greatest concerns about the current campaign finance system.
If structured the right way, tax credits could increase and diversify participation in the electoral process by having a larger pool of Americans making campaign contributions. They could encourage candidates and parties to connect with a broader swath of prospective voters by having them spend more time fundraising from them. And they could encourage a more diverse group of candidates to run by assuring they'd have enough small donors to get their messages out — even if there are no huge donors sponsoring their campaigns.
Offering a tax credit to boost political participation is nothing new. Between 1972 and 1986, millions of Americans claimed federal tax credits for small-dollar campaign contributions. Ironically, this credit was eliminated in the last big federal tax reform in 1986 — a casualty of a tax simplification bill that consolidated rates and eliminated some deductions.
Similar programs introduced at the state level seem to spur candidates to spend more time appealing to small donors. For instance, in a 2006 survey from the State University of New York-Albany and The Campaign Finance Institute, 86% of state legislative candidates in Minnesota and 60% of candidates in Ohio “asked for contributions from less affluent people” because of their state’s system of tax incentives.
State-level programs also appear to promote contributions from a broader population than those who normally contribute to political campaigns. In Ohio, for example, filers using the state’s tax credit are more representative of the public than donors generally are. In 2006, 63% of donors who used the tax credit had annual incomes of less than $75,000. And in Minnesota, 66% of candidates surveyed said that the state’s tax credit program brought in new donors who would not have given otherwise.
Additionally, several cities have taken up campaign finance tax credits or similar programs. In Seattle, residents can make small political donations using tax dollars. Tallahassee voters passed a program that refunds small political donations.
Progressives and conservatives will disagree on plenty when it comes to exactly how federal tax credits should be structured, but it’s a conversation we need to have.
Our broken campaign finance system forces candidates and officeholders to spend an inordinate amount of time with big donors, leaving little time for them to connect with the constituents they represent. We owe it to our country to have this discussion, and exploring common agreement on a topic like tax credits is a constructive way to begin.