in the hands of party chairpersons.4
The income tax checkoff has been a fixture on federal income tax returns since 1972. Anyone with at least $1 in income tax liability is permitted to designate that amount ($2 on joint returns) to the Presidential Election Campaign Fund. (See “Presidential Campaigns” section of “Issues for the 1980s” for a discussion of declining taxpayer participation in the checkoff.)
The Revenue Act of 1971 also provided for a tax credit and tax deduction to encourage political contributions. However, these incentives turned out to be short lived. The deduction was raised in 1974 from $50 to $100 ($200 on a joint return) but was then repealed by the Revenue Act of 1978. Meanwhile, the tax credit for one-half the amount of contributions up to a limit of $12.50 was raised to $25 ($50 on a joint return) in 1974 and then to $50 ($100 on a joint return) in 1978 to counterbalance the repeal of the deduction. But the credit was repealed when Congress overhauled the federal income tax system in 1986. There have since been numerous calls to reinstate the credit as a means of encouraging small donations from individual contributors, much as the Canadian system seeks to accomplish this by providing tax deductions for donations of less than $500 Canadian.
FECA Amendments of 1974
The Watergate scandal brought passage of the Federal Election Campaign Act Amendments of 1974, which represented the most sweeping change imposed on the interaction between money and politics since the creation of the American Republic almost 200 years earlier. The 1974 law continues to have a profound impact on the ways in which today’s federal election campaigns are conducted.
In July 1973, the Senate passed a bill that put a ceiling on campaign spending, limited individual contributions and created an independent election commission. But, once again, the measure stalled in the House.
In the spring of 1974, after shutting off a filibuster by southern Democrats and conservative Republicans, the Senate passed a second reform bill that combined its 1973 measure with a call for public funding of congressional as well as presidential elections. Finally, just hours before Nixon announced his resignation from the presidency on 8 August 1974, the House overwhelmingly passed campaign reform legislation. But it differed markedly from the Senate bill in that it provided public financing only for presidential elections. After an often bitter standoff between House and Senate negotiators that lasted for weeks, the Senate conceded, and the final bill, signed by President Gerald R. Ford on 15 October 1974, contained public funding only for presidential elections.
However, the FECA Amendments of 1974 greatly expanded upon the Revenue Act of 1971, which had provided grants to presidential candidates for the general election only. Included were public matching funds for small private donations raised during the prenomination period, flat grants to political parties for their national nominating conventions, and large grants to major party presidential nominees to provide full public financing of general election campaigns. This structure also contained spending limits on presidential candidates in both the pre- and post-nomination periods. Coincidentally, the Canadian system of spending ceilings and public funding for political parties was enacted the same year. (See “Presidential Campaigns” in the next section for a description of the U.S. public funding structure.)
The presidential financing system, which has operated in the last four presidential elections beginning in 1976, is one of three major provisions of the FECA Amendments of 1974 still in force today. An independent regulatory agency, the Federal Election Commission (FEC),was formed to collect disclosure reports, administer public financing and enforce election statutes. But from the outset, some members of Congress clearly did not want the commission to exercise much independence when it came to regulating congressional elections. The FEC was structured originally so that four of its six members were appointees of the House and Senate. When this scheme was rejected by the Supreme Court (see the following section on Buckley v. Valeo), Congress responded by further circumscribing the FEC’s power.
The other major part of the 1974 law still in effect sharply curtailed the role of that long-time fixture of American politics - the large contributor. In contrast to the millions of dollars contributed by men such as insurance magnate Clement Stone and the hundreds of thousands by General Motors heir Stewart Mott during the 1972 campaign, individuals were barred from giving a presidential or congressional candidate more than $1 000 per election. They also were not permitted to exceed an annual aggregate ceiling of $25 000 for contributions to all federal candidates and committees (see table 1.1).
If the FECA Amendments of 1974 shut off one major source of campaign cash, they spurred the growth of another: the political action committee, or PAC. In that respect, the 1974 law provides an example of campaign reform’s law of unforeseen consequences: Given the pluralistic and dynamic nature of the U.S. political system, efforts to solve one set of problems plaguing the system almost invariably give rise to another set of problems. As noted earlier, PACs have served to increase the role of special interests in the political process and have become as controversial as the individual “fat cats” of yesteryear; however, the institutionalization of contributions raised through PAC solicitation systems and PAC special interest pleading linked to lobbying causes more concern than did the individualistic large contributor of earlier years.
Table 1.1 Contribution limits
(in dollars)
Source: Federal Election Commission.
aFor purposes of this limit, each of the following is considered a national party committee: a party’s national committee, the Senate Campaign committees and the National Congressional committees, provided they are not authorized by any candidate.
bCalendar year extends from January 1 through December 31. Individual contributions made or earmarked to influence a specific election of a clearly identified candidate are counted as if made during the year in which the election is held.
cEach of the following elections is considered a separate election: primary election, general election, run-off election, special election and party caucus or convention which has authority to select the nominee.
dA multicandidate committee is any committee with more than 50 contributors which has been registered for at least six months and, with the exception of state party committees, has made contributions to five or more federal candidates.
eLimit depends on whether or not party committee is a multicandidate committee.
fRepublican and Democratic Senatorial Campaign committees are subject to all other limits applicable to a multicandidate committee.
gGroup includes an organization, partnership or group of persons.
N/A = not applicable.
PACs were legal prior to the passage of the 1974 law. But, traditionally, they were utilized primarily by labour unions, which collected voluntary political contributions from members and funnelled them to favoured candidates. While the FECA of 1971 legitimized PACs, the blossoming of the corporate PAC can be traced to the 1974 FECA amendments, in which Congress repealed the provision of the 1939-40 Hatch Act barring corporations and unions that held federal contracts from forming PACs.
Ironically, it was organized labour that took the lead in lobbying for the repeal: unions with government contracts to train workers were concerned that they would have to abolish their PACs unless the law was changed. But the far more significant impact was to allow many large corporations with defence contracts to establish
