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Proposal: Counter Big Donor Influence with Small Donor Tax Credits

Our campaign finance system makes fundraising skills and connections to Big Donors – not good policy ideas, desire for public service, or strong connections to constituents – the most important qualification for being elected. If you think that’s bad for American democracy, then explore one way to help solve the problem.

The Issue

Problem Defined

Our campaign finance system skews public policy outcomes by serving Big Donors at the expense of regular citizens.  

Increasing campaign costs cause members of Congress to spend more time fundraising than serving the interests of their constituents and to focus their fundraising on a tiny slice of voters. Many people don't get involved with political campaigns because they feel they can't make an impact – 42% of eligible Americans voted in a Congressional election in 2014, but only 13% contributed to political campaigns.* The current system also discourages qualified candidates who lack access to Big Donors from running.

* Sources: US Census Data, Pew Research Center 

Expand all bullets
1. Fewer than 0.5% of eligible voters accounted for 65% of individual campaign contributions in 2014MORE

The most efficient way for candidates to raise the multi-million dollar war chests needed to win an election is to focus on Big Donors.

* Sources: US Census Data, Pew Research Center

2. Incumbents have a huge advantage over challengers in raising moneyMORE

Incumbent Senate candidates raised $9.8 million on average to the challenger's $1.4 million. Incumbent House candidates raised $1.6 million on average to the challenger's $0.3 million.

Incumbent politicians have built relationships with wealthy donors and special interest groups and are in a position to deliver the results they want.

3. 90% of Congressional incumbents were re-elected in 2014 despite Congress' 14% approval ratingMORE

4. Fundraising is a barrier to entry for potentially great new candidatesMORE

Our current system makes fundraising skills – rather than a desire for public service, qualifications, or the right solutions for the people of their district – the primary factor to win an election. 

Incumbents' ability to raise money cements their existing advantages, making it difficult for anyone without money to mount a successful challenge.

5. Our campaign finance system results in skewed policy outcomesMORE

Big Donors – individuals, corporations, unions and special interest groups – disproportionately influence which candidates run for office. 

Candidates who spend the bulk of their time raising money from Big Donors get a narrow – and often distorted – view of the general public's priorities. 

In addition to campaign contributions to elected officials and candidates, companies, labor unions, and other organizations spend billions of dollars each year to lobby Congress and federal agencies, further skewing political outcomes. Lobbying spending has more than doubled in the last 15 years, from $1.4 billion in 1999 to $3.2 billion in 2014.*

Once in office, lawmakers spend more than 50% of their time fundraising. So, who's doing the "work of the people?" 

Source: Center for Responsive Politics

6. There is federal and state precedent for giving tax credits for political contributionsMORE

7. Key campaign finance definitions and court rulingsMORE

Citizens United v. Federal Election Commission: This 2010 Supreme Court decision repealed certain sections of the Bipartisan Campaign Finance Reform Act of 2002 that forbade independent expenditures on candidates and ads that named candidates with the intent of swaying voters 60 days before an election. Citizens United allows corporations and unions to spend unlimited amounts of money on elections provided that they are made "independently" from a candidate's campaign itself (e.g., through Super PACs)

Political Action Committee (PAC): An organization that pools campaign contributions from members and donors and then gives that money to politicians' campaigns. PACs cannot take donations from corporations or unions and have limits on how much they can contribute to parties and candidates. PACs act as extra fundraisers for candidates.

Super PACs were created by the Federal Election Committee (FEC) following the Supreme Court's ruling in Citizens United v. FEC (see above). The key difference between a Super PAC and a PAC is that Super PACs are independent expenditure-only committees. They cannot give money to any candidate or party directly. They can, however, raise unlimited contributions from any person or organization (e.g., corporations and unions).

McCutcheon v. Federal Election Commission: This 2014 Supreme Court decision eliminated the aggregate limit of $123,000 on individual contributions to national party and federal candidate committees during a 2-year campaign cycle that was established by the Federal Election Campaign Act (FECA) of 1971. Individuals are still limited to giving:

  • $2,600 per candidate per race
  • $5,200 total for an individual candidate's primary and general election campaigns
  • $5,000 per year to a PAC
  • but there is no longer an aggregate giving cap limiting the total an individual can give to multiple candidates or committees during an election cycle
Go deeper

Adam Lioz, Karen Shanton, Emma Boorboor, Michael Russo and Dan Smith - PIRG Report (2015)


Analysis of the cost of running a competitive race in the 2014 Congressional elections and the source of these funds. Authors profile seemingly qualified candidates from both major parties who are not serving in DC today in part due to having been out-raised by their opponents.

Taxes and Political Contributions

Take Back Our Republic - Take Back Our Republic Educational Paper (2015)


Recommends tax credits for political contributions as a way to encourage more people to become involved in the political process and at the same time remind candidates that the source of their power is the people.

Toward a Small Donor Democracy: The Past and Future of Incentives for Small Political Contributions

Thom Cmar - PIRG Report (2004)


The report discusses money's impact on elections and recommends providing public incentives for small political contributions to help average Americans play a more meaningful role in growing the pool of individuals with resources to get elected. 

Affluence and Influence: Economic Inequality and Political Power in America

Martin Gilens - Affluence and Influence: Economic Inequality and Political Power in America (2013)


Affluence and Influence, written by a professor of politics at Princeton, explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. The book won the 2013 Woodrow Wilson Foundation Award.

Political Action Committees

Center for Responsive Politics - (2015)



Expert Authors

US PIRG (PUBLIC INTEREST RESEARCH GROUP) protects American consumers by standing up to powerful interest groups when they threaten our health and safety, our financial security, or our right to participate fully in our democratic society.  Since 1971, PIRG has worked to counter the influence of big banks, insurers, chemical manufacturers and other powerful special interests. PIRG's researchers uncover the facts; their staff brings the findings to the public; and their advocates bring the voice of the public to the halls of power.

TAKE BACK OUR REPUBLIC believes that individual participation in the American political system is the best way to preserve and strengthen our liberty. They engage in research, education, and advocacy about returning political power to individuals and ending the system of escalating campaign contributions by corporations, labor unions and special interests that fuels government spending. Take Back believes politicians should be responsible to the people, not to self-serving, moneyed interests seeking government subsidies and special treatment at taxpayers 'expense.

Andre Delattre
Executive Director - US Public Interest Research Group

A resident of Chicago, Andre Delattre has served as Executive Director of US PIRG since 2007; he also heads the US PIRG Education Fund and is the National Campus Director for the Student PIRGs.

Previously, Mr. Delattre served as the National Campus Director for the Student PIRGs. During his tenure, the campus program grew in both scope and impact. Ninety staff currently work with more than 1,200 student interns and 12,500 volunteers on more than 100 campuses. Since 1997, the PIRGs have added chapters at nine campuses, increased funding for the program through student membership dues, and attracted grant support from such foundations as The Pew Charitable Trusts, the Carnegie Corporation of New York and the Open Society Institute.

Under Mr. Delattre’s leadership, PIRG campus chapters have also launched several new initiatives, including the New Voters Project, Make Textbooks Affordable campaign, the Affordable Higher Education campaign, and the Energy Service Corps. The New Voters Project alone has achieved enormous success, resulting in 3.4 million new young voters in 2008. Intensive follow-up studies confirm that the Project also helped boost young voter turnout.



Richard Painter
Professor - University of Minnesota Law School

Richard W. Painter is a member of the board of directors of Take Back Our Republic.

He received his BA summa cum laude in history from Harvard University and his JD from Yale University, where he was an editor of the Yale Journal on Regulation. Following law school, he clerked for Judge John T. Noonan Jr., of the US Court of Appeals for the Ninth Circuit and later practiced at Sullivan & Cromwell in New York City and Finn Dixon & Herling in Stamford, Connecticut.

He has served as a tenured member of the law faculty at the University of Oregon School of Law and the University of Illinois College of Law, where he was the Guy Raymond and Mildred Van Voorhis Jones Professor of Law from 2002 to 2005.

From February 2005 to July 2007, he was Associate Counsel to the President in the White House Counsel's office, serving as the chief ethics lawyer for the President, White House employees and senior nominees to Senate-confirmed positions in the Executive Branch. He is a member of the American Law Institute and is an advisor for the new ALI Principles of Government Ethics. He has also been active in the Professional Responsibility Section of the American Bar Association.

Professor Painter has also been active in law reform efforts aimed at deterring securities fraud and improving ethics of corporate managers and lawyers. A key provision of the Sarbanes-Oxley Act of 2002 requiring the SEC to issue rules of professional responsibility for securities lawyers was based on earlier proposals Professor Painter made in law review articles and to the ABA and the SEC. He has given dozens of lectures on the Sarbanes-Oxley Act to law schools, bar associations, and learned societies, such as the American Academy of Arts and Sciences. Professor Painter has on four separate occasions provided invited testimony before committees of the US House of Representatives or the US Senate on securities litigation and/or the role of attorneys in corporate governance.

His book, Getting the Government America Deserves: How Ethics Reform Can Make a Difference, was published by Oxford University Press in January 2009. He has written op-eds on government ethics for various publications including the New York Times, the Washington Post and the Los Angeles Times, and he has been interviewed several times on government ethics and corporate ethics by national news organizations, including appearances on Lawrence O'Donnell (MSNBC), Anderson Cooper 360 (CNN), CNN News, Fox News, National Public Radio All Things Considered, and Minnesota Public Radio News. In 2011, he testified before the U.S. House Government Oversight Committee on partisan political activity by government officials and reform of the Hatch Act. Professor Painter has also given expert testimony in cases involving securities transactions and the professional responsibility of lawyers. He testified as a defense witness in SEC. v. The Reserve Money Market Fund (SDNY, November 2012), a jury trial of an SEC enforcement action against the founders of the world's oldest money market fund that ended with a defense verdict on all of the fraud counts.

Professor Painter is the author of two casebooks: Securities Litigation and Enforcement (with Margaret Sachs and Donna Nagy; West 2003; Second Edition, 2007; Third Edition 2011) and Professional and Personal Responsibilities of the Lawyer (with Judge John T. Noonan Jr.; Foundation 1997; Second Edition, 2001; Third Edition 2011). He has written dozens of articles, book reviews, and essays, including a series of papers and a forthcoming book with Minnesota colleague Claire Hill on the personal responsibility of investment bankers.

During the 2014-15 academic year, Professor Painter was on leave as a fellow at Harvard University's Safra Center for Ethics where he worked on a book on campaign finance reform.

John Pudner
Executive Director - Take Back Our Republic

The oldest of 9 children growing up in a 3-bedroom house in inner city Richmond, VA and now the father of 9 children, John Pudner learned at a young age the importance of timing, negotiating and diplomacy. More importantly, he learned how to live on a shoe-string budget.

John's early life lessons helped put him on the national political scene when in the 2014 primaries, he jump-started the campaign of Dave Brat, who unseated US Majority Leader Eric Cantor in one of the most unprecedented upsets in political history. Later in the general election of the same year, John helped defeat a 32-year incumbent state senator in Alabama’s general election. He managed campaigns for almost three decades.

John's strategy of outsmarting instead of outspending the opposition was born out of a hobby of extrapolating statistical data on sports teams. With an affinity for numbers and grassroots initiatives, John became known as the go-to guy to help upstart candidates lacking financial backing.

John earned his BS in political science and journalism at Marquette University.

During his career, he won 3 out of every 4 races in which he was involved. But through all his successes, John Pudner saw first-hand the influence of money on politics—the manipulation of the system and the loopholes that didn’t favor a transparent election— one in which only select major corporate donors and union bosses were the true winners. Wanting to recreate the system instead of circumventing it, John Pudner now leads a team of ex-political wonks to help change the very industry in which they once thrived.

Dan Smith
Democracy Campaign Director - US Public Interest Research Group (US PIRG)

As Democracy Campaign Director for US PIRG, Dan Smith coordinates federal and state level campaigns to curb the corrosive effect of big money on our democracy, including US PIRG’s Democracy for the People campaign to amplify the voices of ordinary citizens through a small donor public financing system. Based in Washington, DC, he develops and provides support for democracy program field campaigns, lobbies elected officials, analyzes policy, and works with the media to promote solutions to the problem of big money in politics.




The Solution

Proposed Actions
Expand all bullets
1. Offer a $100 federal tax credit to individuals for federal political contributionsMORE

Although such a tax credit will not solve our entire campaign finance problem, it represents one positive step to empower American voters and increase their participation in our political system.

Note: If an individual is already owed a tax refund, the refundable credit will be added to the amount of the individual's refund. 

2. Make it easy for people to claim the tax creditMORE

Create a line item on the federal tax form, accompanied by a simple form for filers to submit to collect their tax credit, for federal political contributions up to $100.

3. Ensure all Americans are aware of the tax creditMORE

The government, political candidates and parties need to communicate the value of the small donor tax credit and encourage voters to actively engage in the democratic process and support the candidate or party of their choice.

Expected Results
Expand all bullets
1. The percentage of citizens contributing to political campaigns will increaseMORE

In Minnesota, the state's tax credit program led to the percentage of small donor funding increasing from 34% in 1990 to 69% in 1998.

2. These new "investors" in candidates will follow and talk about the candidates moreMORE

In addition, the acquaintances of these new donors may vote in greater numbers due to hearing more dialogue.

3. Candidates will focus more on their constituents who are giving in greater numbersMORE

As the number of local constituents contributing to their campaigns increases, candidates will turn their attention from out-of-district donors to their constituents.

4. The public will benefit from a wider pool of qualified candidates in political racesMORE

An increase of contributions by small donors will enable candidates who lack access to large donors to participate and compete more effectively. 

5. Politicians' policies would better reflect the American publicMORE

As the percentage of campaign funds contributed by small donors grows, the balance of power will shift from the few to the many.

Budget Impact

Estimated cost: $852 million per election cycle, based on the following numbers and assumptions:

- 142 million registered US voters

- 8% of registered voters take advantage of tax credit (highest rate achieved in Oregon)

- Average contribution: $75 (per Malbin/Campaign Finance Institute)

Net Present Value


The Conversation

7 months ago
I small tax credit would definitely get more people to want to vote
7 months ago
7 months ago
What excatly is a SUPERPAC? and what benefits or downfalls does it bring to the table?
7 months ago
I completely agree with you. I think this could be one positive step in the right direction.
7 months ago
I think that offering the $100 tax credit gives people the incentive that they might need to contribute. It will be something for them to look forward to and not think they are doing everything for nothing. I think this is a step in the right direction.
7 months ago
Social media is a way to spread knowledge quickly.
7 months ago
Why do you feel that there should be a fixed time when donating is allowed?
7 months ago
Why is that no difference
7 months ago
I don't think we should increase tax credits.
7 months ago
Find out how we can educate people how donations or voicing their opinions can help
7 months ago
I feel like the small tax credit would get the american people more into politics, whether it'd be donating or just staying involved in politics today.
Sarah Anderson
Security at the US-Mexican Border
7 months ago
Make a fixed time of year that people can donate to campaigns and don't make a specific amount of money that can be donated. If all this happens, then more voters can donate and not just upper-class people.
Sarah Anderson
Security at the US-Mexican Border
7 months ago
If there is fixed time period each year, then more voters can donate to the campaigns.
7 months ago
Offer a tax credit to individuals who make a contribution. Although such a tax credit will not solve our entire campaign finance problem, it represents one positive step to empower American voters and increase their participation in our political system. If an individual is already owed a tax refund, the refundable credit will be added to the amount of the individual's refund.
7 months ago
Donors normally take in contributions from those people and companies that are very rich, and with all that wealth comes power. The Campaigns are going to support the interest of the people and companies that contributed the most, making the middle class citizens voice not heard.
7 months ago
It seems like a weird solution because it is pretty much like the government is funding the campaigns and not the people. They are just letting the people make the choice of who the money goes to.
7 months ago
Rich donors who have the means to contribute high amounts of money to the campaign of their choice, are generally then, putting themselves in a position of power. The campaign often feels obligated then, to support the wishes of the rich when they get into office. The middle class citizens who are financially unable to make large contributions to the campaign of their choice are not as well represented in their wishes as the rich.
7 months ago
9 months ago
Although smaller iterative changes like a $100 campaign donation tax credit are easier to accomplish, will they really change the game much? Would it be wiser to put in the hard work to establish a public campaign finance approach that uses our tax dollars to finance candidates. The approach could eliminate outside funding altogether, cap the amount spent on a campaign, provide incentives for first time candidates, etc. to create a level playing field for a wider variety of candidates.
a year ago
This is interesting. What if federal office holders were only allowed to receive donations during a fixed one-month period each year?
2 years ago
Representatives should be required to spend a majority of their time working for their constituents and not raising money. Limit not just the amount, but the time they can spend raising money and "meeting" with donors who are not their constituents. A representative should only represent the people who can vote for them and not those outside their electoral area and not corporations.
2 years ago
We should absolutely take corporate money out of politics. If offering a tax credit would help regular people contribute to politicians/causes they believe in I would be in favor of that.
2 years ago
As a person who lives on SSDI, I am not required to file a tax return and I have not for several years. I believe this proposal would leave out the poorest and most vulnerable in the US.
David Fridley
2 years ago
Even if people could get a tax credit of $100 and they knew about it, and it was easy to get, it's won't make a difference. Elected federal representatives need to raise so much money that they focus their time on those who can go much much higher.

We need a bigger, more innovative solutions:

What if we required the candidates to only raise money from their constituents
What if we put in term limits (like 1 or 2). After representatives have reached the limit, they don't have to worry about raising money any more, and then they wouldn't need to focus their time listening to big donors.
What if we put in limits on when representatives could collect contributions to XX months before the election.
What if we made a rule where candidates couldn't spend money trying to get elected - everything had to be volunteer or through free social media.

I'm not saying any of these are good ideas, but I'm saying we should engage the innovative juices of America in finding solutions that will make much more difference. $100 is too small to make a difference, lets think outside the box.

George Schramm
Outreach Marketing
2 years ago
Is there a reason the Senate and House have such a varied level of finance support, other than Senate seats being rarer?
2 years ago
Based on the precedents, offering tax credits seems like an effective way to encourage small donors. But why is there only a few precedents?
2 years ago
I agree. Those 0.5% people have such deep pockets. I don't think small donors can counteract the influence of wealthy people.
Claire Kopsky
College Student
2 years ago
What about a percentage of the donation as the tax credit?
Claire Kopsky
College Student
2 years ago
Offering the tax credit is a step and a decent incentive for the American people, as we live in a world that oftentimes requires an incentive to act. To make the tax credit effective in the goal of helping the visibility of candidates, the communication of the tax credit in a fair and even way across all demographics of our country is crucial. If the communication is prioritized, the tax credit might be effective.
3 years ago
Agreed. If candidates spend so much time on the amount of money they spend then how will they ever have time to think of the people and base decisions on what's best for the people.
3 years ago
This issue is important and shows the need to why more and more individuals need to be informed and engage in local political figures no matter how small or big a place it.
Deborah Devedjian
Founder & Chief Citizens' Officer
3 years ago
Definitely the body politic! Ironically, and in general, constituents will say that their particular member of Congress performs far better than Congress as a whole.
3 years ago
What is the most challenging aspect of running against the incumbent state representative?
3 years ago
A key problem outlined is that the incumbent tends to outspend the challenger. I think there should be a donation cap for out-of-district donors and big entities, and an overall spending cap for campaigns. Elections are supposed to be about a candidate's platform, integrity, and intellectual ability; not the amount of money spent on a campaign.
David Wolfson
Retired Engineer. Travel Agency Owner
3 years ago
As noted, we've been through the tax credit idea before and it was stopped. Regrets aside we need to be doing something different than further complicating the tax system. We should be simplifying,not complicating. Also this solution nibbles at the symptom rather than get at the core issue. The reason why candidates need so much money in the first place needs to be addressed. I'd be in favor of limiting the time advertising or advocating for a candidate or party - similar to how it works in Britain.
Tseren Zurganov
Junior Policy Analyst
3 years ago
The 14% approval rating figure assesses the performance of Congress as one political body.

3 years ago
It's interesting concept. This actually makes the tax credit even more progressive. Even redistributive -- as wealthier folks contribute more to Super PACs, more is made available to those on the lower end of the income spectrum.
3 years ago
Why does it seem like the small donors have had much more influence than the large donors and the super PACs this primary season? Has Citizen United really created as much influence for the super wealthy as I feared it would?
4 years ago
This visibly demonstrates to each citizen that their contributions, their voices can play a role in deciding who gets to be elected. It's a very grassroots idea!
John Pudner
Executive Director
4 years ago
It was part of the budget deal that threw out all kinds of credits. Some who were there said most regretted this one being removed since it encouraged participation, not preferential treatment for certain groups like some tax credits, but to get the deal done they signed off.
Ruth Melian
Community Volunteer
4 years ago
We have to start somewhere. This should be the beginning of many more steps to be taken. Plus, you can't make huge changes at one time because it won't be palatable to the general public.
Andrea Meyers
4 years ago
Perhaps we could tax Super PACs on the contributions they receive and use those funds to finance the tax credits.
Andrew Guthridge
Board Chairman
4 years ago
Can something more be done against Super PACs? Small donor contributions will not be able to match the power of Super PACs even after the tax credit incentives are enacted.
4 years ago
What if big donors just respond to more small donor participation with even larger contributions that increase campaign costs even further?
Maria Anderson
Executive Director
4 years ago
Many incumbents receive generous donations from big donors even when they're running unopposed. I think this has to be outlawed as much of that money is spent on opulent lifestyles.
John Pudner
Executive Director
4 years ago
You can only use it once per year. In states like Oregon that have it now, there is a big rush by candidates and causes to see if like minded constituents will give to them first after the new year starts, since that is the only tax deductible one unless you break it into several $10 donations.
Zack Mercer
4 years ago
In 2004 I voted for George Bush, but my union donated hundreds of thousands of dollars to John Kerry. I wish there was something we could do to keep our union leadership from going against our individual political interests?
4 years ago
Congress might have a 14% approval rating, but is that the average approval rating of those congressmen individually or as one political body?
Charlie Fort
Senior Vice President of Production
4 years ago
How about a constitutional amendment to overturn the Supreme Court's Citizen United decision instead of waiting for new Supreme Court judges who will be committed to its repeal? A tax credit for small donors simply won't be enough.
Lisa Goldman Forgang
Chief Policy Officer
4 years ago
Why did the federal government stop offering the tax credit in 1986?
4 years ago
If I donate to a single campaign over a 2 year period, will I receive one lump-sum refund?
Stephanie Luster
Lead Architect
4 years ago
Citizens United allows corporations and unions to spend unlimited amounts of money on elections provided that they are made "independently" from a candidate's campaign itself. In a way, don't many union contributions consist of small donors anyway? Small donors could contribute to a candidate indirectly, through union memberships, and directly, through a donation that will be refunded.
Jackie Sanders
Kindergarten Teacher
4 years ago
I live in a small rural town where we don't have publicly financed elections at any level. I tried to challenge our state representative, but I couldn't even get 10% of votes in my own district because voters weren't familiar with my name. He ended up winning in my district even though he has a very low approval rating.
Troy Williams
4 years ago
Campaign costs are increasing because big donors are increasing their contributions in elections. Maybe the solution lies not in directly empowering the small donor with expensive tax credits but in further limiting the contributions that PACs and committees can make.
4 years ago
In my state, the NRA continues to support John McCain even though he switched stances on gun rights and restrictions. He received over $500,000 from them between 1989 and 2012. If that's not a case of special interest groups preferring incumbents then I don't know what is. I'm a gun rights advocate by the way.
Felicia Obermayer
Head Curator
4 years ago
In 2008 I donated $80 to Barack Obama's campaign. A month later he "personally" e-mailed me again asking for another donation. I contributed $30 more dollars and I received another e-mail 3 weeks later requesting another donation. Small donors will have to run their pockets dry to actually compete against PACs.
4 years ago
I remember tax credits in the 1980s. I donated $80 to Reagan's campaign and received a $40 refund. It really helped citizens like me beat PATCO!
4 years ago
I don't think a $100 tax credit will be enough to entice voters to donate. Maybe we could increase the tax credits?

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