Campaign finance reform in the United States has been a contentious political issue since the early days of the Union. The most recent major federal law affecting campaign finance was the Bipartisan Campaign Reform Act (BCRA) of 2002, also known as "McCain–Feingold". Key provisions of the law prohibited unregulated contributions (commonly referred to as "soft money") to national political parties and limited the use of corporate and union money to fund ads discussing political issues within 60 days of a general election or 30 days of a primary election; However, provisions of BCRA limiting corporate and union expenditures for issue advertising were later overturned by the Supreme Court in Federal Election Commission v. Wisconsin Right to Life.
Contributions, donations or payments to politicians or political parties, including a campaign committee, newsletter fund, advertisements in convention bulletins, admission to dinners or programs that benefit a political party or political candidate and a political action committee (PAC), are not tax-deductible from income taxes."Are Political Contributions Tax Deductible?" Turbotax.
History
First attempts
To gain votes from recently enfranchised, unpropertied voters, Andrew Jackson launched his campaign for the 1828 election through a network of partisan newspapers across the nation. After his election, Jackson began a political patronage system that rewarded political party operatives, which had a profound effect on future elections. Eventually, appointees were expected to contribute portions of their pay back to the political party. During the Jacksonian era, some of the first attempts were made by corporations to influence politicians. Jackson claimed that his charter battle against the Second Bank of the United States was one of the great struggles between democracy and the money power. While it was rumored that The Bank of the United States spent over $40,000 from 1830 to 1832 in an effort to stop Jackson's re-election, Chairman Biddle of the BUS only spent "tens of thousands to distribute information favorable to the bank." This expenditure can be conceived as being spent "against" Jackson, because of the competing ideals of the Bank and Jackson's anti-bank platform..
After the Civil War, parties increasingly relied on wealthy individuals for support, including Jay Cooke, the Vanderbilts, and the Astors. In the absence of a civil service system, parties also continued to rely heavily on financial support from government employees, including assessments of a portion of their federal pay. The first federal campaign finance law, passed in 1867, was a Naval Appropriations Bill which prohibited officers and government employees from soliciting contributions from Navy yard workers. Later, the Pendleton Civil Service Reform Act of 1883 established the civil service and extended the protections of the Naval Appropriations Bill to all federal civil service workers. However, this loss of a major funding source increased pressure on parties to solicit funding from corporate and individual wealth.
In the campaign of 1872, a group of wealthy New York Democrats pledged $10,000 each to pay for the costs of promoting the election. On the Republican side, one Ulysses S. Grant supporter alone contributed one fourth of the total finances. One historian said that never before was a candidate under such a great obligation to men of wealth. Vote buying and voter coercion were common in this era. After more standardized ballots were introduced, these practices continued, applying methods such as requiring voters to use carbon paper to record their vote publicly in order to be paid.
Boies Penrose mastered post-Pendleton Act corporate funding through extortionist tactics, such as squeeze bills (legislation threatening to tax or regulate business unless funds were contributed.) During his successful 1896 U.S. Senate campaign, he raised a quarter million dollars within 48 hours. He allegedly told supporters that they should send him to Congress to enable them to make even more money.
In 1896, a wealthy Ohio industrialist, shipping magnate and political operative, Mark Hanna became Chairman of the Republican National Committee. Hanna directly contributed $100,000 to the nomination campaign of fellow Ohioan William McKinley, but recognized that more would be needed to fund the general election campaign. Hanna systematized fund-raising from the business community. He assessed banks 0.25% of their capital, and corporations were assessed in relation to their profitability and perceived stake in the prosperity of the country. McKinley's run became the prototype of the modern commercial advertising campaign, putting the President-to-be's image on buttons, billboards, posters, and so on. Business supporters, determined to defeat the Democratic-populist William Jennings Bryan, were more than happy to give, and Hanna actually refunded or turned down what he considered to be "excessive" contributions that exceeded a business's assessment.
Twentieth-century Progressive advocates, together with journalists and political satirists, argued to the general public that the policies of vote buying and excessive corporate and moneyed influence were abandoning the interests of millions of taxpayers. They advocated strong antitrust laws, restricting corporate lobbying and campaign contributions, and greater citizen participation and control, including standardized secret ballots, strict voter registration and women's suffrage.
In his first term, President Theodore Roosevelt, following President McKinley's assassination of 1901, began trust-busting and anti-corporate-influence activities, but fearing defeat, turned to bankers and industrialists for support in what turned out to be his 1904 landslide campaign. Roosevelt was embarrassed by his corporate financing and was unable to clear a suspicion of a quid pro quo exchange with E.H. Harriman for what was an eventually unfulfilled ambassador nomination. There was a resulting national call for reform, but Roosevelt claimed that it was legitimate to accept large contributions if there were no implied obligation. However, in his 1905 message to Congress following the election, he proposed that "contributions by corporations to any political committee or for any political purpose should be forbidden by law." The proposal, however, included no restrictions on campaign contributions from the private individuals who owned and ran corporations. Roosevelt also called for public financing of federal candidates via their political parties. The movement for a national law to require disclosure of campaign expenditures, begun by the National Publicity Law Association, was supported by Roosevelt but delayed by Congress for a decade.
Tillman Act of 1907 This first effort at wide-ranging reform was the Tillman Act of 1907 which prohibited corporations and nationally chartered (interstate) banks from making direct monetary contributions to federal candidates. However, weak enforcement mechanisms made the Act ineffective.
Disclosure requirements and spending limits for House and Senate candidates followed in 1910 and 1911. General contribution limits were enacted in the Federal Corrupt Practices Act (1925). An amendment to the Hatch Act of 1939 set an annual ceiling of $3 million for political parties' campaign expenditures and $5,000 for individual campaign contributions. The Smith–Connally Act (1943) and Taft–Hartley Act (1947) extended the corporate ban to labor unions.
Federal Elections Campaign Act and the Watergate Amendments All of these efforts were largely ineffective, easily circumvented and rarely enforced. In 1971, however, Congress passed the Federal Election Campaign Act, known as FECA, requiring broad disclosure of campaign finance. In 1974, fueled by public reaction to the Watergate Scandal, Congress passed amendments to the Act establishing a comprehensive system of regulation and enforcement, including public financing of presidential campaigns and creation of a central enforcement agency, the Federal Election Commission. Other provisions included limits on contributions to campaigns and expenditures by campaigns, individuals, corporations and other political groups.
The 1976 decision of the US Supreme Court in Buckley v. Valeo struck down various FECA limits on spending as unconstitutional violations of free speech. Among other changes, this removed limits on candidate expenditures unless the candidate accepts public financing.
Reforms of the 1980s and 1990s In 1986, several bills were killed in the U.S. Senate by bipartisan maneuvers which did not allow the bills to come up for a vote. The bill would impose strict controls for campaign fund raising. Later in 1988, legislative and legal setbacks on proposals designed to limit overall campaign spending by candidates were shelved after a Republican filibuster. In addition, a constitutional amendment to override a Supreme Court decision failed to get off the ground.
In 1994, Senate Democrats had more bills blocked by Republicans including a bill setting spending limits and authorizing partial public financing of congressional elections. In 1996, bipartisan legislation for voluntary spending limits which rewards those who bare soft money was killed by a Republican filibuster.
In 1997, Senators McCain (R-AZ) and Feingold (D-WI) sought to eliminate soft money and TV advertising expenditures, but the legislation was defeated by a Republican filibuster. Several different proposals were made in 1999 by both parties. The Campaign Integrity Act (H.R. 1867), proposed by Asa Hutchinson (R-AR), would have banned soft money, which was not yet regulated and could be spent on ads that did not petition for the election or defeat of a specific candidate, and raised limits on hard money. The Citizen Legislature & Political Act sponsored by Rep. John Doolittle (R-CA) would have repealed all federal freedom act contribution limits and expedited and expanded disclosure (H.R. 1922 in 1999, the 106th Congress, and reintroduced with different numbers through 2007, the 110th Congress). The Shays–Meehan Campaign Reform Act (H.R. 417) evolved into the McCain–Feingold Bipartisan Campaign Reform Act of 2002.
Political Reform Act (Proposition 9)