Writing recently in the Daily Beast, John Pudner of Take Back Our Republic, a conservative reform group, offered an interesting proposal for improving our campaign finance system. He suggested that each political donor receive a tax credit worth up to $200:
The nonpartisan group Represent.Us has endorsed a similar tax credit, which is worth considering. It might be a way to reduce the bad effects of money in politics without trampling on the First Amendment or doubling down on the failed campaign finance reforms of the last century.
Campaign finance has been a problem since the initiation of party politics. When Thomas Jefferson and James Madison resolved to oppose the Washington administration, they enlisted poet Philip Freneau to publish the National Gazette. Jefferson financed Freneau’s operation by securing him a job at the State Department. Surely there is no better illustration of the ethical problems inherent in campaign finance: Freneau was hired by President Washington’s secretary of state for the express purpose of attacking the Washington administration, all on the taxpayer’s dime!
Party politics was firmly en–trenched by the 1830s, and parties had to find a way to fund their efforts. So they expanded upon and systematized the relationship between Jefferson and Freneau. Thus was born the patronage regime, which governed campaign finance from the 1830s until the 1880s. Patronage, aka the spoils system, was essentially public financing of campaigns, with party bosses directing government largesse to their most active supporters.
The griminess of 19th-century patronage offends modern sensibilities, but it was a solution to a real problem the political class faced—a Gilded Age prisoner’s dilemma. As George Washington Plunkitt of Tammany Hall once asked:
Behind Plunkitt’s bombast and exaggeration is a legitimate point. By the middle of the 19th century, electoral politics was an expensive affair. The presidential election of 1860 already spanned the continent, requiring the concerted efforts of thousands of far-flung campaign operatives. Yet only Abraham Lincoln (who, incidentally, did not himself campaign) got to take the oath of office. How to motivate people to contribute? The answer: patronage. By winning the election, Lincoln acquired the authority to dispense jobs, contracts, and grants to his loyal supporters.
The patronage regime was a breeding ground for inefficiency and graft, and it was outlawed at the federal level in 1883 by the Pendleton Civil Service Reform Act. Yet the laws of political economy cannot be repealed, so politicians had to find another way to deal with the dilemma that Plunkitt described so colorfully.
Thus was born the modern system, which in many respects is worse than the patronage system it replaced. Today, parties and candidates, especially in Congress, depend heavily on private individuals to fund their political operations. While many political contributions are public-spirited, many more are self-interested. Therein lies the problem. In exchange for campaign contributions and other benefits, politicians write laws to benefit their donors.
Usually, the quid pro quo is not explicit; otherwise, the Department of Justice swoops in to indict the participants, as it did recently with New Jersey senator Bob Menendez. But political scientists and policy experts have noticed an unmistakable pattern over the years: Campaign contributions, lobbying, and the general lavishing of resources on members of Congress do influence policy-making, often to a remarkable degree. On the federal level, the locus of this systematic conflict of interest is the congressional committee system. Committees have extraordinary authority over their policy domains, and special interests direct their contributions accordingly. The range of policies up for sale is breathtaking. From Medicare to taxes to farm subsidies to housing to infrastructure and more, policy is designed to benefit the highest bidders.
This is an embarrassment to our republic. Occasionally, some outrageous scandal manages to shame even our impudent Congress, which hastily passes some campaign finance “reform” to deflect public outrage. In those instances, legislators repeat the mistake of Pendleton: They outlaw certain financing practices without providing alternative ways to raise funds. Thus, progressives outlawed business contributions with the Tillman Act of 1907; many businesses ignored it, and presidents enforced it poorly. Conservatives outlawed labor contributions with the Taft-Hartley Act of 1947; labor responded by creating the first political action committee (PAC), an artifice to circumvent the law. When a federal court ruled that labor’s PAC was illegal, the unions leaned on Congress to pass the Federal Elections Campaign Act (FECA) of 1971, with various amendments to follow in the course of the decade. In total, FECA eliminated whatever limits Tillman and Taft-Hartley had maintained; business and labor PACs proliferated, while interest groups found all sorts of workarounds to the restrictions that it imposed. Most recently, the Bipartisan Campaign Reform Act of 2002 was so draconian that the Supreme Court invalidated swaths of it on First Amendment grounds.
The verdict of a century’s worth of failed reform is that it is not enough to limit the flow of money. Campaign finance, after all, is essential to democratic politics. Money in politics is like water flowing downhill. It cannot be stopped; rather, it must be redirected in a socially beneficial way.
This is why Pudner’s idea is so intriguing. It would not reform campaign finance by restricting political giving, even by those looking for a quid pro quo; it would impose no new limits on political giving. Instead, it would try to overwhelm shady transactions by subsidizing public-spirited giving. Even a small tax credit, something on the order of $200 per return, could go a long way. According to Pudner, there were on average 10,000 small donors per congressional district in the last cycle. If each gave $200 in tax-refundable political contributions, that would total $2 million per district. Most campaigns for federal office cost a lot more than this, but it would be a great start. And who is to say that a tax refund would not encourage more political giving? According to the Tax Policy Foundation, about 100 million tax returns were filed in 2013 by those who paid taxes. If a tax credit enticed just a tenth of these filers to contribute $200 to politics for the first time, it would generate $2 billion in campaign contributions. That could significantly reduce the influence of special interest money.
Such a tax credit would be a novel twist on some old ideas. It could be the foundation of a privately directed system of public finance. Millions of citizens could use the credit to support parties, candidates, and causes they believed in. After more than a century of bad campaign finance laws, it is worth a shot.
Jay Cost is a staff writer at The Weekly Standard and the author of A Republic No More: Big Government and the Rise of American Political Corruption.
