Report: Reclaiming Our Democracy

Funding Clean Elections

Released by: U.S. PIRG Education Fund

The spiraling cost of campaigns, high-profile scandals and voter distrust of Congress have fueled an effort for fundamental reform of the way we fund congressional campaigns. As a result, many federal decision-makers have been working on proposals to create a Clean Elections model for publicly financing congressional campaigns. As a part of the effort to build support both within the Democratic caucus and across party lines, it is important to know how much the program will cost and options to pay for that cost. This briefing paper looks at options to pay for a federal Clean Elections program.

The goal of public financing is to reduce the power wealthy donors exert in campaigns and elections. It may or may not reduce the cost of running for office in the United States. Candidates in the 2006 election raised and spent approximately $1.4 billion over the two-year election cycle. For the purposes of this paper, we will start with the cost of the 2006 election as a benchmark for the cost of the public financing program. To be conservative in our cost estimate, we will assume a cost of $1 billion per year ($2 billion per election cycle) to account for any potential differences in the cost of Senate races from cycle to cycle.

In states and now at the federal level, policy-makers have asked how we pay for such a program. To answer this question, U.S. PIRG Education Fund reviewed public financing programs at the state and local level to identify successful funding mechanisms that we could adapt at the federal level. We looked for opportunities to generate new federal revenue and/or offset the estimated $1 billion per year cost. We chose the new revenues and offsets listed in this paper because they would limit or reverse tax subsidies or other spending on programs benefiting the entities that aggressively participate in the current pay-to-play system. A variety of government and private nonprofit watchdog organizations, including Taxpayers for Common Sense, Citizens for Tax Justice, The Heritage Foundation, and the Government Accountability Office, have raised concerns about the fiscal responsibility of the programs listed here.

Our review of funding sources used by various state and municipal programs, potential federal offsets, and possibilities for dedicated sources found the following:

1. Successful programs at the state level have dedicated funding sources that bypass the annual appropriations process. This is important to avoid both the real and perceived ability of incumbents to game the system. Dedicated funding streams also remove any possibility of partisanship from the funding equation.

2. The cost of publicly funding campaigns is just a few hundredths of a percent of this year’s federal budget and relatively small when contrasted with the $52 billion in earmarked funds in last year’s budget.

3. Dedicated revenue sources provide the opportunity for consistent and unbiased funding for the reasons listed above. We could generate this revenue by levying small surcharges on those who benefit from our current pay-to-play system. We could generate new revenue for public financing by:

- Placing a 0.5% surcharge on the booktax difference in corporate profit reports;
- Placing a 0.33% surcharge on taxes paid by both U.S. controlled corporations and foreign corporations operating in the United States;
- Establish a spectrum use fee based on all broadcast advertising revenues; or
- Placing a 0.25% surcharge on government contracts.

4. Although a dedicated source of funding is ideal, we can pay for a Clean Elections system by eliminating some of the tax breaks and giveaways to the powerful interests that have benefited from the pay-to-play system. In Maine, the Governor made $2 million in administrative cuts to provide the initial money for the state’s Clean Elections program. For the federal program, we could offset the annual cost of the public financing program by:
- Capping earmarks as a percentage of discretionary spending;
- Repealing the tax giveaways in the FSC/ETI corporate tax bill;
- Eliminating the Commerce Department’s Advanced Technology Program; or
- Eliminating some of the giveaways in the 2005 Highway Bill.

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