INTRODUCTION
Money is the lifeblood of electoral politics. A political campaign is almost never successful unless its resources are comparable to those of its opponents--and the most important of these resources is money. As Alexander Heard described it, political money "is a universal, transferable unit infinitely more flexible in its uses than the time, or ideas, or talent, or influence, or controlled votes that also constitute contributions to politics." (1)
Money has always been crucial to political success, but for modern campaigns it has taken on a singular, overriding importance. In the 2002 congressional elections, 94% of the candidates who raised the most money won their races. (2) Winners out-raised losers approximately four to one. (3) The overwhelming correlation between fundraising success and electoral victory exists even in primary elections, where the partisan makeup of the district does not give any candidate an inherent advantage. The biggest fundraisers won primary elections in 2002 more than 90% of the time. (4) Incumbency plays an important role in these statistics: 92.7% of House incumbents and 85.7% of Senate incumbents who ran in 2002 won reelection. (5) The high re-election rate of incumbents, however, is due in no small part to their ability to raise large sums of money; in 2002, the average incumbent out-raised his or her opponent by a ratio of 4.5-to-1. (6)
The primacy of television advertising as a modern campaign tactic has increased the importance of money. Federal candidates, parties, and political action committees ("PACs") spent more than $1 billion on television advertising in 2002. (7) More than any other factor, television spending has contributed to an "arms race" mentality within political campaigns, steadily escalating from election cycle to election cycle without regard to the ads' consequences for democracy. (8) Rather than being a testament to the value of free speech, the modern campaign practice of raising millions of dollars in contributions from the privately wealthy and spending most of them on a large number of short, repetitive television advertisements undermines the societal interest in open and informed debate that is protected by the First Amendment. (9)
Voters collectively decide who represents them in elected office. The nature of the voters' decision, however, is determined by innumerable smaller decisions that precede it. These decisions--such as which candidates decide to run in the first place, and which candidates receive the opportunity to communicate their messages effectively to the electorate--are heavily influenced by the flow of political money. (10) By essentially determining which candidates are able to make it onto a given primary or general election ballot, donors help to define the field of possibility in American politics.
Despite the importance of monetary participation to the viability of political campaigns, the current federal system of campaign finance regulation creates huge obstacles to the equal participation of grassroots candidates of all parties and ideologies and the small donors who might otherwise support them. The 2004 presidential campaign showed that, in an election perceived to be of great historical significance, campaigns' growing use of the Internet to reach out to small donors can result in large numbers of small contributions to political campaigns. (11) In most successful political campaigns for federal office, however, small donors play only a marginal role. (12) Although congressional election campaigns reported more than $1 billion in total receipts for the 2002 election cycle, (13) only 24% of the money raised from individuals came in contributions under $200, accounting for less than 14% of candidates' total receipts. (14) By contrast, 55.5% of the money raised from individuals came in contributions of $1000 or more. (15) These large contributions came from only approximately 202,245 donors--less than 0.09% of the U.S. population. (16)
In these races, it is the wealthy who are making the crucial early-stage choices of which candidates will receive the resources they need to run viable campaigns. Wealthy donors have political preferences and concerns that are distinct from those of other Americans, (17) yet generally only those candidates who appeal to wealthy donors' concerns are able to amass sufficient resources to compete effectively. Because current federal campaign finance laws allow individual contributions to candidates of up to $2100 per election, (18) candidates who could potentially have broad popular appeal but are unable to attract the support of wealthy donors find it very difficult to compete. (19) Meanwhile, those Americans who cannot afford to participate are marginalized in this "wealth primary," robbing them of the opportunity to have the same voice as wealthy donors in choosing which candidates are able to build a successful campaign and ultimately to win their elections. (20)
The wealth primary takes place in the early stages of the American political process, where political agendas are set and candidates first decide to run for office. The disproportionate level of influence and access that large-dollar contributors acquire through the wealth primary is partly responsible for wealthy Americans being more likely to make their voices heard in government and to have their interests represented there. (21) Meanwhile, over the last forty years, voter turnout in federal elections has significantly decreased. (22) Because the wealth primary prevents average Americans from having an equal say in who represents them in government, Americans feel less and less invested in the democratic process. (23)
When federal campaign contribution limits allow the wealthiest Americans to give far more money than most potential donors can afford, many candidates, parties, and PACs lack compelling reasons to pursue small-dollar contributions--and in the absence of a contest that is perceived to be of such singular importance as the 2004 presidential race, most Americans lack sufficient incentive to give them. (24) In the absence of such a particularly important and/or closely-fought election, it is only rational for the average American to perceive that his or her small contribution does not count for much against the contributions of wealthy donors who can afford to give thousands of dollars. (25)
Two measures of campaign finance reform prominently advocated in recent years address the problem of political inequality in privately financed elections: low contribution limits and public financing. Lowering campaign contribution limits makes sense as a matter of basic fairness: contribution limits should be set at a level that average Americans can afford so that wealthy donors are not allowed to systematically outspend average Americans and buy for themselves a greater say in which candidates are able to run successful campaigns. Public financing addresses a related concern, giving qualified candidates a source of funding that is independent of donations made from the private wealth of individuals. Ideally, these two reforms would be established alongside one another, reducing the influence of wealthy donors while ensuring that candidates are able to run their campaigns on a level playing field.
A third campaign finance reform approach that addresses the problem of political inequality in privately financed elections is the creation of government-sponsored incentive programs to promote small political contributions. Proposals for such programs typically call for the creation of a tax credit for political contributions, but they could also involve means outside of the tax code such as a contribution refund or campaign finance voucher program. Although the concept of political contribution incentives has been around for decades, the programs have been subject to surprisingly little scholarly study.
Proponents of political contribution incentives argue that they will bring into the political process new, small-dollar contributors who would otherwise not be able to afford to contribute. Political contribution incentives would also open up the "wealth primary" by giving small donors a stronger voice in the American political process and rewarding candidates who conduct grassroots, issue-driven campaigns. Moreover, political campaigns' growing use of the Internet as a cost-effective means to reach out to small donors makes political contribution incentives more viable today than ever before.
Opponents of political contribution incentives object chiefly on the grounds that experience with the programs has shown that they do not live up to their promise. (26) The federal government offered a tax credit (and, briefly, a tax deduction) for small political contributions from 1972 to 1986. (27) This tax credit program enjoyed modest success but did not bring about large increases in small-dollar contributions. (28) Several states currently maintain political contribution incentive programs, allowing for the study of how different credit programs operate in different legal contexts. (29) Some of the state tax credit programs that have operated in tandem with different campaign finance laws than the federal program have enjoyed greater success.
A careful study of experiences at both the state and federal levels reveals that the structure of a contribution incentive program plays a significant role in determining its success. (30) State programs structured similarly to the federal tax credit program have largely replicated the federal experience. (31) Meanwhile, more successful state programs have made it easier for people to claim the incentives and made them available for contributions to a wider variety of political actors, including candidates, parties, and PACs. (32) Moreover, the structure of other laws that regulate campaign fundraising has important effects on the success of an incentive program. (33) A...
