The Major Sources of Political Contributions: Types, Donors, and the Supposed Limits on Each

Abstract

This research provides an overview of the major sources of campaign contributions in our political system. The research explores the organizations that provide contributions to political campaigns, the limitations that are enforced on them, and how those limitations can be bypassed. As well, a listing is provided of the top three donors for each of the categories of campaign contributions, which is used to illustrate how big-dollar donors have greater power to purchase influence with increasing levels of anonymity.

The Major Sources of Political Contributions: Types, Donors, and the Supposed Limits on Each

In order to run an effective campaign for higher political office in the United States, it is necessary to have large sums of money for expenditures such as staffing, campaign planning, analytics, travel, and – of course – the necessary media presence for messaging and building public awareness. For most candidates, some of the funding comes from personal wealth; most campaign expenditures, however, are paid for through political contributions. Whether contributions come from the individual donations of concerned citizens or from committees with deep pockets, the political reality is that a candidate’s best shot at an election victory is to amass as many donors as possible. This gives the contributor a great deal of influence in a political campaign, and in the ensuing policy if their candidate is elected. By understanding the types of political contributions, the limitations on each, and the amounts given by the top contributors, it is possible to see how individuals and organizations gain the ability to impact those we put into office.

Types of Donations

There are many ways available for an individual or organization to make contributions to a political campaign. The simplest method is for an individual to make a small contribution. Also, there are campaign committees, Political Action Committees (PACs), and non-profit 501(c)s which are organized to provide methods for individuals and larger entities to make sizable donations. Each method of donation has specific regulations, responsibilities, and level of donor disclosure. To make this information as relevant as possible this paper will use figures and donors from the 2018 midterm election.

Individual Contributions

At the most basic level is the small individual contribution. Small contributions are the most direct method for Americans to contribute money to a candidate or party. These contributions, known as “hard money”, have many limitations for individuals: “$2,800 per election for a political committee; $5,000 per year for PACs; $10,000 per year for state level party contributions and $35,500 for federal level (Contribution limits).” Any monetary contribution of over $50 requires full disclosure of the contributor to the Federal Election Commission (FEC).

There are many other methods for individual donors to contribute larger amounts. Though there are strict limitations on individual contributions to political campaigns, there is no limit on the amount of “soft money”, or donations of services and material such as funding political buttons or stickers. As well, there are less limitations on contributions given to outside entities, such as Political Action Committees, and no limit to how many of these organizations a donor can utilize.  This, in many ways, sidesteps the individual limitations, though all contributions still need to be presented to the FEC, meaning that all contributors are recorded, unless the donation is to certain 501(c) non-profit organizations (more on this later). The top individual contributors in 2018 were: “Adelson, Sheldon G. & Miriam O. Las Vegas Sands/Adelson Drug Clinic, $123,224,400 to Republican and Conservatives; Bloomberg, Michael R. City of New York, $95,098,168 to Democrats and Liberals; Steyer, Thomas & F. & Kathryn Ann, Fahr LLC/Tom Steyer, San Francisco, $73,819,973 also to Democrats and Liberals” (Top Individual Contributors: All Federal Contributions).

Campaign Committees

Campaign committees are the official organizations that run political campaigns; the decisions made by the committee are by the candidate and are often funded through individual contributions and self-financing. A campaign committee, like an individual contributor, has strict limitations on how much it can contribute to other campaigns: “$2,800 per election for other candidate committee; $5,000 per year for an unassociated PAC; $10,000 per year for state level party contributions and $35,500 for federal level (Contribution limits).”

Likewise, campaign committees have options to augment their contributions. The committees have the same freedom to donate to an unlimited number of PACs as do individuals. As well, committees have no restrictions on the amount of money contributed to party committees on a state and national level, effectively creating a vehicle for a candidate to obtain incredible influence inside of the party system: the more a candidate contributes, the more dependent the political party becomes on that candidate. All contributions from Campaign Committees must be disclosed. The top campaign contributors in 2018 were: “Fahr LLC, $13,587,678 to Democrats and Liberals; Paloma Partners, $7,756,226 to Democrats and Liberals; Uline Inc., $7,165,192, $2,224 to Democrats and Liberals, $7,162,968 to Republicans and Conservatives (Top Organization Contributors).”

PACs

Political Action Committees are 527 non-profit organizations built specifically to influence party selections, nominations, and targeted attacks on opposing candidates. PACs are special committees established by corporations, labor unions, membership organizations, and trade unions that function to “pool campaign contributions from group members and donate the money to candidates for political office (Janda, Berry, & Goldman, 2013).” This gives PACs great buying power to influence the candidates they support. PACs have similar limitations on how much money they can directly contribute to a campaign: “$2,800 per election for a candidate committee, $5,000 per year for an unassociated PAC, $10,000 per year for state level party contributions and $35,500 for federal level (Contribution limits).” But those are limitations are per member, meaning that the higher membership PACs can contribute considerable amounts of money. PAC member donations must have full disclosure. The top PAC contributions in 2017-2018 were: “the National Assn of Realtors, $3,444,276, 51% for democrats and 48% for Republicans; the National Beer Wholesalers Assn, $3,433,500, 48% for Democrats and 52% for Republicans; AT&T Inc., $3,116,700, 40% for Democrats and 60% for Republicans (Top 20 PAC Contributors to Candidates, 2017-2018).”

Super PACs, established in 2010 through Citizens United v. Federal Election Commission, expand on the influence of PACs as they “can accept unlimited contributions from corporations, labor unions and individuals (John Dunbar, Center for Public Integrity, 2016).” Although Super PACs are effectively barred from any direct association with a campaign, they can coordinate strategies. Super PACs have the freedom to spend unlimited amounts on political influence, typically through the purchase of various forms of media. Effectively, Super PACs are the primary vehicle in creating a dominating media presence either for or against a candidate or political issue. Contributions to Super PACs must be disclosed to the FEC.

Recently a new type of PAC, the Hybrid PAC has come into being. These Hybrid PACs combine the power of both PACs and Super PACs as they can:

 “raise unlimited amounts of money to advocate for and against candidates like a super PAC — and at the same time collect limited amounts of cash to give directly to candidates. Hybrid PACs must maintain separate accounts for the two streams of money. But they also have the benefit of employing one set of staffers to handle both functions (John Dunbar, Center for Public Integrity, 2016).”

The top three spending Super PACs in 2018 were: “Congressional Leadership Fund. $138,305,427, Conservative; Senate Majority PAC, $111,587,750, Liberal; Senate Leadership Fund,               $95,054,78, Conservative (Super PACs).”

501(c)s

501(c)s are non-profit organizations that are exempt from taxation and should be free of any direct political association. However, there are three types that actively participate in political campaigns: 501(c)(3)s, 501(c)(4)s, and 501(c)(6)s. 501(c)(3)s consist of charities, hospitals, universities and educational groups. These organizations are the most restricted of the three 501(c)s regarding their ability to contribute directly to a campaign. They can engage in voter registration and a small amount of lobbying; any direct contributions are illegal. Some examples of 501(c)(3)s are the “NAACP, the Center for American Progress, and the Natural Resources Defense Council (Dark Money Basics).”

501(c)(4)s are organizations that are granted tax free status by the Internal Revenue Service (IRS) by promoting social welfare and neighborhood associations. Due to vague IRS guidelines, 501(c)(4)s have been able to contribute directly to political campaigns if the contributions don’t exceed 49.9% of the organization’s expenditures; also, 501(c)(4)s are not required to disclose the names of its donors. This freedom has allowed great amounts of “dark money”, or untraceable money, to be given directly to a candidate. Some examples of these organizations are “The National Rifle Association, Planned Parenthood, and the Sierra Club (Dark Money Basics).”

501(c)(6)s are business leagues which are granted the same type of freedoms as are given to 501(c)(4)s as to how contributions can be disbursed to political campaigns.  These organizations aren’t as active in moving “dark money” donations through them, they do have the ability. Examples of these organizations are: “The US Chamber of Commerce, The American Medical Association, and PhRMA (Dark Money Basics).”

Conclusion

Out of the major sources for political contributions, the small individual contribution has the least power of influence in political campaigns. This is concerning because this is the most accessible way for average American citizens to contribute to their preferred political campaigns. Small individual contributions have strict financial limits, much more than compared to other methods of donating. There are alternatives: any American has the right to contribute to committees, non-profits, or to form their own committees. But in truth, very few Americans have the time, resources, or connections to pursue these options.

The reality is that there is currently a system in place that allows those that possess incredible wealth, be it from the individuals, businesses, or other institutions, the greatest amount of financial influence on our political system; there are almost no limitations on their ability to pressure political campaigns or platforms. For instance, President Trump has shown solid hardline support for Israel since he took office – a major foreign policy shift from the prior administration – with his insistence to move the U.S Embassy in Israel. Though no quid-pro-quo is being implied, it is interesting to note that prior to President Trump’s decision to unilaterally move the embassy, his top donor, Sheldon Adelson of the Las Vegas Sands Corp, stated he was “disappointed in Trump’s failure to keep a campaign pledge to move the U.S. Embassy (Trump’s top donors: Where are they now?).” Or when Nancy Pelosi helped engineer the passing of the minimum wage increase to $15 per hour, is it any surprise one of her top PAC donors was the United Food & Commercial Workers Union with $111,505?

At least there is a level of transparency in those examples as the influence is well documented. The concern is that due to recent court decisions and vague policy from our representatives and government institutions, there is now very little way to see who is buying what. Large contributions through 501(c)s of “dark money” have secured greater, anonymous buying power – with even larger influence than PACs. We have allowed a system to take place that tightly regulates the average citizen but allows anonymous interests to buy incredible political power with no paper trail. The answer to who now holds financial influence of our elected officials and candidates has quantifiably become: who knows?

Bibliography

• Contribution limits. (n.d.). Retrieved December 2, 2019, from https://www.fec.gov/.
• Dark Money Basics. (n.d.). Retrieved December 2, 2019, from https://www.opensecrets.org/: https://www.opensecrets.org/dark-money/basics
• Janda, K., Berry, J. M., & Goldman, J. (2013). The Challenge of Democracy: American Government in a Global World (10 ed.). Boston.
• John Dunbar, Center for Public Integrity. (2016, April 7). What's a Super PAC? A Campaign Finance Glossary. Retrieved November 27, 2019, from nbcnews: https://www.nbcnews.com/news/investigations/what-s-super-pac-campaign-finance-glossary-n552036
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