Tax Credits for Political Giving

July 8, 2002

Should Congress give Americans a tax credit if they donate to a political party or candidate? That idea is on the table as yet another way to clean up the campaign-finance system.

Like a proposal to provide free TV airtime to candidates, this approach is intriguing – but debatable.

Under the plan, a citizen could give, say, $100-$200 to a party or a candidate of their choice, and claim the money back on a tax return. Sen. Byron Dorgan (D) of North Dakota plans to introduce such legislation soon; his counterpart in the House, Rep. Thomas Petri (R) of Wisconsin, already has.

Important details remain to be worked out, such as how to define a political party or a candidate. Should the money go only to candidates in a taxpayer's state?

Then there's the reduction in the federal tax take. One estimate is that about $3 billion in potential revenue would not be collected. Still, offering a credit for campaign contributions would give Americans a stake in the political system. And it could broaden the number and type of contributors.

The idea is better than the present check-off system on tax forms to give money to fund presidential campaigns. It would allow individuals to select exactly which party and/or candidate they want to support, and get money back for their donation.

Generally, tax policy as social policy has been overdone. But this form of limited public financing, if it takes hold, could provide a useful counterweight even to wealthy, self-financed candidates. And ultimately, it could provide a big incentive to political parties to go after smaller donors.