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Proposal: Counter Big Donor Influence with Small Donor Tax Credits

Our campaign finance system makes fundraising skills and connections to Big Donors – not good policy ideas, desire for public service, or strong connections to constituents – the most important qualification for being elected. If you think that’s bad for American democracy, then explore one way to help solve the problem.

The Issue

Problem Defined

Our campaign finance system skews public policy outcomes by serving Big Donors at the expense of regular citizens.  

Increasing campaign costs cause members of Congress to spend more time fundraising than serving the interests of their constituents and to focus their fundraising on a tiny slice of voters. Many people don't get involved with political campaigns because they feel they can't make an impact – 42% of eligible Americans voted in a Congressional election in 2014, but only 13% contributed to political campaigns.* The current system also discourages qualified candidates who lack access to Big Donors from running.

* Sources: US Census Data, Pew Research Center 

Expand all bullets
1. Fewer than 0.5% of eligible voters accounted for 65% of individual campaign contributions in 2014MORE

The most efficient way for candidates to raise the multi-million dollar war chests needed to win an election is to focus on Big Donors.

* Sources: US Census Data, Pew Research Center

2. Incumbents have a huge advantage over challengers in raising moneyMORE

Incumbent Senate candidates raised $9.8 million on average to the challenger's $1.4 million. Incumbent House candidates raised $1.6 million on average to the challenger's $0.3 million.

Incumbent politicians have built relationships with wealthy donors and special interest groups and are in a position to deliver the results they want.

3. 90% of Congressional incumbents were re-elected in 2014 despite Congress' 14% approval ratingMORE

4. Fundraising is a barrier to entry for potentially great new candidatesMORE

Our current system makes fundraising skills – rather than a desire for public service, qualifications, or the right solutions for the people of their district – the primary factor to win an election. 

Incumbents' ability to raise money cements their existing advantages, making it difficult for anyone without money to mount a successful challenge.

5. Our campaign finance system results in skewed policy outcomesMORE

Big Donors – individuals, corporations, unions and special interest groups – disproportionately influence which candidates run for office. 

Candidates who spend the bulk of their time raising money from Big Donors get a narrow – and often distorted – view of the general public's priorities. 

In addition to campaign contributions to elected officials and candidates, companies, labor unions, and other organizations spend billions of dollars each year to lobby Congress and federal agencies, further skewing political outcomes. Lobbying spending has more than doubled in the last 15 years, from $1.4 billion in 1999 to $3.2 billion in 2014.*

Once in office, lawmakers spend more than 50% of their time fundraising. So, who's doing the "work of the people?" 

Source: Center for Responsive Politics

6. There is federal and state precedent for giving tax credits for political contributionsMORE

7. Key campaign finance definitions and court rulingsMORE

Citizens United v. Federal Election Commission: This 2010 Supreme Court decision repealed certain sections of the Bipartisan Campaign Finance Reform Act of 2002 that forbade independent expenditures on candidates and ads that named candidates with the intent of swaying voters 60 days before an election. Citizens United allows corporations and unions to spend unlimited amounts of money on elections provided that they are made "independently" from a candidate's campaign itself (e.g., through Super PACs)

Political Action Committee (PAC): An organization that pools campaign contributions from members and donors and then gives that money to politicians' campaigns. PACs cannot take donations from corporations or unions and have limits on how much they can contribute to parties and candidates. PACs act as extra fundraisers for candidates.

Super PACs were created by the Federal Election Committee (FEC) following the Supreme Court's ruling in Citizens United v. FEC (see above). The key difference between a Super PAC and a PAC is that Super PACs are independent expenditure-only committees. They cannot give money to any candidate or party directly. They can, however, raise unlimited contributions from any person or organization (e.g., corporations and unions).

McCutcheon v. Federal Election Commission: This 2014 Supreme Court decision eliminated the aggregate limit of $123,000 on individual contributions to national party and federal candidate committees during a 2-year campaign cycle that was established by the Federal Election Campaign Act (FECA) of 1971. Individuals are still limited to giving:

  • $2,600 per candidate per race
  • $5,200 total for an individual candidate's primary and general election campaigns
  • $5,000 per year to a PAC
  • but there is no longer an aggregate giving cap limiting the total an individual can give to multiple candidates or committees during an election cycle
Go deeper
The Money Chase: Moving from Big Money Dominance in the 2014 Midterms to a Small Donor Democracy

Adam Lioz, Karen Shanton, Emma Boorboor, Michael Russo and Dan Smith - PIRG Report (2015)


Analysis of the cost of running a competitive race in the 2014 Congressional elections and the source of these funds. Authors profile seemingly qualified candidates from both major parties who are not serving in DC today in part due to having been out-raised by their opponents.

Taxes and Political Contributions

Take Back Our Republic - Take Back Our Republic Educational Paper (2015)


Recommends tax credits for political contributions as a way to encourage more people to become involved in the political process and at the same time remind candidates that the source of their power is the people.

Toward a Small Donor Democracy: The Past and Future of Incentives for Small Political Contributions

Thom Cmar - PIRG Report (2004)


The report discusses money's impact on elections and recommends providing public incentives for small political contributions to help average Americans play a more meaningful role in growing the pool of individuals with resources to get elected. 

Affluence and Influence: Economic Inequality and Political Power in America

Martin Gilens - Affluence and Influence: Economic Inequality and Political Power in America (2013)


Affluence and Influence, written by a professor of politics at Princeton, explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. The book won the 2013 Woodrow Wilson Foundation Award.

Political Action Committees

Center for Responsive Politics - (2015)


The Center for Responsive Politics is a premier research group tracking money in U.S. politics and its effect on elections and public policy. Nonpartisan, independent and nonprofit, the organization aims to create a more educated voter, an involved citizenry and a more transparent and responsive government.

Expert Authors

US PIRG (PUBLIC INTEREST RESEARCH GROUP) protects American consumers by standing up to powerful interest groups when they threaten our health and safety, our financial security, or our right to participate fully in our democratic society.  Since 1971, PIRG has worked to counter the influence of big banks, insurers, chemical manufacturers and other powerful special interests. PIRG's researchers uncover the facts; their staff brings the findings to the public; and their advocates bring the voice of the public to the halls of power.

TAKE BACK OUR REPUBLIC believes that individual participation in the American political system is the best way to preserve and strengthen our liberty. They engage in research, education, and advocacy about returning political power to individuals and ending the system of escalating campaign contributions by corporations, labor unions and special interests that fuels government spending. Take Back believes politicians should be responsible to the people, not to self-serving, moneyed interests seeking government subsidies and special treatment at taxpayers 'expense.

Andre Delattre
Executive Director - US Public Interest Research Group

A resident of Chicago, Andre Delattre has served as Executive Director of US PIRG since 2007; he also heads the US PIRG Education Fund and is the National Campus Director for the Student PIRGs.

Previously, Mr. Delattre served as the National Campus Director for the Student PIRGs. During his tenure, the campus program grew in both scope and impact. Ninety staff currently work with more than 1,200 student interns and 12,500 volunteers on more than 100 campuses. Since 1997, the PIRGs have added chapters at nine campuses, increased funding for the program through student membership dues, and attracted grant support from such foundations as The Pew Charitable Trusts, the Carnegie Corporation of New York and the Open Society Institute.

Under Mr. Delattre’s leadership, PIRG campus chapters have also launched several new initiatives, including the New Voters Project, Make Textbooks Affordable campaign, the Affordable Higher Education campaign, and the Energy Service Corps. The New Voters Project alone has achieved enormous success, resulting in 3.4 million new young voters in 2008. Intensive follow-up studies confirm that the Project also helped boost young voter turnout.

Early in his career, Mr. Delattre served as organizing director for California PIRG (CALPIRG). From 1993 to 1997, he helped build the organization’s student membership to 38,600 people at seven schools, while overseeing CALPIRG’s many student programs and projects, including efforts on campaign finance reform, recycling, clean air and forest preservation.

Mr. Delattre is a 1989 graduate of the University of California at Berkeley. While attending the school, he volunteered with CALPIRG and was elected chair of CALPIRG’s student board of directors in 1986.

Richard Painter
Professor - University of Minnesota Law School

Richard W. Painter is a member of the board of directors of Take Back Our Republic.

He received his BA summa cum laude in history from Harvard University and his JD from Yale University, where he was an editor of the Yale Journal on Regulation. Following law school, he clerked for Judge John T. Noonan Jr., of the US Court of Appeals for the Ninth Circuit and later practiced at Sullivan & Cromwell in New York City and Finn Dixon & Herling in Stamford, Connecticut.

He has served as a tenured member of the law faculty at the University of Oregon School of Law and the University of Illinois College of Law, where he was the Guy Raymond and Mildred Van Voorhis Jones Professor of Law from 2002 to 2005.

From February 2005 to July 2007, he was Associate Counsel to the President in the White House Counsel's office, serving as the chief ethics lawyer for the President, White House employees and senior nominees to Senate-confirmed positions in the Executive Branch. He is a member of the American Law Institute and is an advisor for the new ALI Principles of Government Ethics. He has also been active in the Professional Responsibility Section of the American Bar Association.

Professor Painter has also been active in law reform efforts aimed at deterring securities fraud and improving ethics of corporate managers and lawyers. A key provision of the Sarbanes-Oxley Act of 2002 requiring the SEC to issue rules of professional responsibility for securities lawyers was based on earlier proposals Professor Painter made in law review articles and to the ABA and the SEC. He has given dozens of lectures on the Sarbanes-Oxley Act to law schools, bar associations, and learned societies, such as the American Academy of Arts and Sciences. Professor Painter has on four separate occasions provided invited testimony before committees of the US House of Representatives or the US Senate on securities litigation and/or the role of attorneys in corporate governance.

His book, Getting the Government America Deserves: How Ethics Reform Can Make a Difference, was published by Oxford University Press in January 2009. He has written op-eds on government ethics for various publications including the New York Times, the Washington Post and the Los Angeles Times, and he has been interviewed several times on government ethics and corporate ethics by national news organizations, including appearances on Lawrence O'Donnell (MSNBC), Anderson Cooper 360 (CNN), CNN News, Fox News, National Public Radio All Things Considered, and Minnesota Public Radio News. In 2011, he testified before the U.S. House Government Oversight Committee on partisan political activity by government officials and reform of the Hatch Act. Professor Painter has also given expert testimony in cases involving securities transactions and the professional responsibility of lawyers. He testified as a defense witness in SEC. v. The Reserve Money Market Fund (SDNY, November 2012), a jury trial of an SEC enforcement action against the founders of the world's oldest money market fund that ended with a defense verdict on all of the fraud counts.

Professor Painter is the author of two casebooks: Securities Litigation and Enforcement (with Margaret Sachs and Donna Nagy; West 2003; Second Edition, 2007; Third Edition 2011) and Professional and Personal Responsibilities of the Lawyer (with Judge John T. Noonan Jr.; Foundation 1997; Second Edition, 2001; Third Edition 2011). He has written dozens of articles, book reviews, and essays, including a series of papers and a forthcoming book with Minnesota colleague Claire Hill on the personal responsibility of investment bankers.

During the 2014-15 academic year, Professor Painter was on leave as a fellow at Harvard University's Safra Center for Ethics where he worked on a book on campaign finance reform.

John Pudner
Executive Director - Take Back Our Republic

The oldest of 9 children growing up in a 3-bedroom house in inner city Richmond, VA and now the father of 9 children, John Pudner learned at a young age the importance of timing, negotiating and diplomacy. More importantly, he learned how to live on a shoe-string budget.

John's early life lessons helped put him on the national political scene when in the 2014 primaries, he jump-started the campaign of Dave Brat, who unseated US Majority Leader Eric Cantor in one of the most unprecedented upsets in political history. Later in the general election of the same year, John helped defeat a 32-year incumbent state senator in Alabama’s general election. He managed campaigns for almost three decades.

John's strategy of outsmarting instead of outspending the opposition was born out of a hobby of extrapolating statistical data on sports teams. With an affinity for numbers and grassroots initiatives, John became known as the go-to guy to help upstart candidates lacking financial backing.

John earned his BS in political science and journalism at Marquette University.

During his career, he won 3 out of every 4 races in which he was involved. But through all his successes, John Pudner saw first-hand the influence of money on politics—the manipulation of the system and the loopholes that didn’t favor a transparent election— one in which only select major corporate donors and union bosses were the true winners. Wanting to recreate the system instead of circumventing it, John Pudner now leads a team of ex-political wonks to help change the very industry in which they once thrived.

Dan Smith
Democracy Campaign Director - US Public Interest Research Group (US PIRG)

As Democracy Campaign Director for US PIRG, Dan Smith coordinates federal and state level campaigns to curb the corrosive effect of big money on our democracy, including US PIRG’s Democracy for the People campaign to amplify the voices of ordinary citizens through a small donor public financing system. Based in Washington, DC, he develops and provides support for democracy program field campaigns, lobbies elected officials, analyzes policy, and works with the media to promote solutions to the problem of big money in politics.

Smith previously worked as US PIRG’s tax and budget advocate where he organized support both inside and outside of Congress to end special-interest giveaways, increase budget transparency and accountability, eliminate waste, ensure that subsidies and tax breaks serve the public, and close corporate tax loopholes.

As tax and budget advocate, he co-authored several reports including Offshore Shell Games, a study documenting the widespread abuse of tax haven loopholes by many large US companies, Representation without Taxation, exposing companies that spent more to lobby Congress than they paid in taxes, and Toward Common Ground,a report coauthored with the National Taxpayers Union that put forth one trillion dollars’ worth of deficit reduction recommendations that garnered support from across the political spectrum.

His opinions have appeared in the New York Times, Washington Post, Wall Street Journal, CBS News, Bloomberg, Fox Business, and many other news outlets. Smith graduated summa cum laude from Cornell University with a bachelor’s degree in Government.

The Solution

Proposed Actions
Expand all bullets
1. Offer a $100 federal tax credit to individuals for federal political contributionsMORE

Although such a tax credit will not solve our entire campaign finance problem, it represents one positive step to empower American voters and increase their participation in our political system.

Note: If an individual is already owed a tax refund, the refundable credit will be added to the amount of the individual's refund. 

2. Make it easy for people to claim the tax creditMORE

Create a line item on the federal tax form, accompanied by a simple form for filers to submit to collect their tax credit, for federal political contributions up to $100.

3. Ensure all Americans are aware of the tax creditMORE

The government, political candidates and parties need to communicate the value of the small donor tax credit and encourage voters to actively engage in the democratic process and support the candidate or party of their choice.

Expected Results
Expand all bullets
1. The percentage of citizens contributing to political campaigns will increaseMORE

In Minnesota, the state's tax credit program led to the percentage of small donor funding increasing from 34% in 1990 to 69% in 1998.

2. These new "investors" in candidates will follow and talk about the candidates moreMORE

In addition, the acquaintances of these new donors may vote in greater numbers due to hearing more dialogue.

3. Candidates will focus more on their constituents who are giving in greater numbersMORE

As the number of local constituents contributing to their campaigns increases, candidates will turn their attention from out-of-district donors to their constituents.

4. The public will benefit from a wider pool of qualified candidates in political racesMORE

An increase of contributions by small donors will enable candidates who lack access to large donors to participate and compete more effectively. 

5. Politicians' policies would better reflect the American publicMORE

As the percentage of campaign funds contributed by small donors grows, the balance of power will shift from the few to the many.

Budget Impact

Estimated cost: $852 million per election cycle, based on the following numbers and assumptions:

- 142 million registered US voters

- 8% of registered voters take advantage of tax credit (highest rate achieved in Oregon)

- Average contribution: $75 (per Malbin/Campaign Finance Institute)

Net Present Value


The Conversation

4 years ago
What if big donors just respond to more small donor participation with even larger contributions that increase campaign costs even further?
Felicia Obermayer
Head Curator
4 years ago
In 2008 I donated $80 to Barack Obama's campaign. A month later he "personally" e-mailed me again asking for another donation. I contributed $30 more dollars and I received another e-mail 3 weeks later requesting another donation. Small donors will have to run their pockets dry to actually compete against PACs.
3 years ago
I agree. Those 0.5% people have such deep pockets. I don't think small donors can counteract the influence of wealthy people.
Troy Williams
4 years ago
Campaign costs are increasing because big donors are increasing their contributions in elections. Maybe the solution lies not in directly empowering the small donor with expensive tax credits but in further limiting the contributions that PACs and committees can make.

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