Taxing Campaign Contributions

Bananaman strongly believes in public financing for political campaigns. The current "system" of donation-funded campaigns only magnifies the influence of wealthy donors. Unfortunately, the American public would never support "welfare for politicians." How might we create a more equitable campaign financing system within the limits created by U.S. political culture and the "corporations are people" doctrine that holds sway among a majority of current Supreme Court justices?

One idea is to tax campaign contributions and use the revenue to support a system of partial public funding. This would neither eliminate the disproportionate influence of wealthy contributors nor create a level playing field for underfunded candidates, but it potentially could tilt the balance in a more positive direction. 

Of course, any revenue from taxing campaign contributions is really just revenue and could be used for any purpose, and perhaps we do have more important needs than the need to publicly fund political campaigns. Nevertheless, like using a gasoline tax to fund road construction, this idea has an underlying symmetry that could justify a policy that would be, in ordinary circumstances, tremendously unpopular. And, the system could easily fund itself.

The details would need to be worked out, but Bananaman envisions a system of progressive taxation of contributions. The revenue would be placed in a fund and distributed to all candidates (or perhaps all candidates who adhere to a system of spending limits) based on the number of votes received by their party's candidate for the same office in the most recent general election.

What are the problems with this idea? Well, an article from 2004 (Gamage, David, "Taxing Political Donations: The Case for Corrective Taxes in Campaign Finance, 113 Yale Law Journal, 1283) considered this question in detail. Gamage concluded that such a system would probably withstand court challenges. He worries, however, that this might magnify the influence of the superrich (who would be willing to pay large taxes) at the expense of the merely wealthy. Of course, it would have little or no impact on small donors as long as the tax was progressive. However, his model seems to imply that the tax would completely replace current limits on individual donations - essentially allowing unlimited (but heavily taxed) contributions. Admittedly, this model makes sense from a market-based perspective and would have the added benefit of maximizing the tax revenues. Still, Bananaman doesn't see why a cap of donations could not remain in place - though Gamage correctly concludes that even the current limits probably only channel money away from candidates and parties and into the coffers of third-party groups. Bananaman would be inclined to significantly increase (but not eliminate) the current limits.

Let's tweak the recipe and make a delicious banana creme pie from this idea! 4 bananas!