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Regulation of Political Contributions . REGULATION !< F l:' t.f2/.~ t 'f'"'l ."~ of .. , t--' ~ \"::, 1.~,::.. " /! POLITICAL CONTRIBUTIONS I I I SEP 2 "( 1972 SUTE Of UAWAU Roger Y. Dewa Assistant Researcher Report No.6, 1968 LEGISLATIVE REFERENCE BUREAU UNIVERSITY OF HAWAII Honolulu, Hawaii 96822 Price $2.50 FOREWORD This report on "Regulation of Political contributions" describes and analyzes the dilemma confronting legislators ••• on the one hand, attempting to regulate participation of corporations and business interests that may exercise too great an influence on the political process by large campaign contributions; and on the other hand, attempting to increase public participation. This study is the Bureau's response to House Resolution No. 276 (General Session of 1967) which requested the Legislative Reference Bureau to study" .•. the prohibitive, permissive and incentive legislation by the States relating to political contributions by corporations and businessmen •••• " The Resolution also expressed special concern that " ••• State legislation should promote and encourage political participation by all sectors of the community. " Therefore, this study deals primarily with federal and state legis­ lation regulating political contributions, but it also examines the· difficult problem involved in achieving the goal of broad based participation in the political process. We are especially grateful to those who assisted in the prepara­ tion of this report and particularly in its review: Dr. Allan F. Saunders, Senior Professor Emeritus of Political Science, University of Hawaii; Mr. Wayne K. Minami and Mr. Patrick A. Stanley of the University of Hawaii; Mr. Robert C. Oshiro, State Chairman, Democratic Party of Hawaii; and Mr. Edward E. Johnston, State Chairman, Repub­ lican Party of Hawaii. We also wish to thank Miss Hanako Kobayashi for ordering and editing the footnotes, Mrs. May Tamura for assisting in the collection of materials, and to Miss Carol Nakamura who prepared the report for printing. Herman S. Doi Director April 1968 ii TABLE OF CONTENTS FOREWORD ii I. CAMPAIGN FINANCING: AN OVERVIEW 1 The Resolution. 1 Regulation of Campaign Contributions. 4 Political Contributions by Corporations . 6 Political Participation • • 9 Registration . • • 11 Type of Election 12 Demographic Characteristics. 13 Motivational Factors . 14 Sociological Factors • 14 Political Parties. 15 II. REGULATION OF CAMPAIGN CONTRIBUTIONS 20 Federal Regulation. 20 State Regulation. 27 Disclosure and Publicity . 28 Enforcement. 29 Limitations on Expenditures .. 30 Internal Financial Controls •. 31 Prohibitions and Restrictions on Sources of Contributions • 32 III. APPROACHES TO REGULATION . • . 33 The Establishment of Goals. 33 Control of Money • . • 33 Encouraging Citizen Participation. 34 Some Alternatives in Controlling Campaign Financing 35 Control of Money . • • • • • • • • . 35 Presidential Election Campaign Fund Act of 1966 . 38 Presidential Message to Congress 1967 . 41 State Direct Subsidies .•••.. 43 Endowment Funds . • • • . 45 Bipartisan Political Fund Raising 46 Tax Incentives ..... 47 Short Campaign Periods .. 49 iii Recounts . • • • . • • • • 49 Transition Costs . • . • • • 49 Encouraging Citizen Participation • 49 The Florida Approach • • • • 50 National Municipal League Model Law. 52 Registration System. • • • . • . 52 Sta te Surmnaries. • • . • • • . • . • • . 53 Publicity Pamphlets and Newspaper Advertising. • 53 Television and Radio • • • • • • • • • • 53 Registration and Voting Participation. 54 Adequate Salaries for Legislators •• 56 Liberalizing the Hatch Acts. 56 IV. CONCLUSION. 57 FOOTNOTES •. 60 Appendices A. Chapter 270, Corporate Contributions for Political Purposes 65 B. Limitations on Campaign Expenditures in the States .. 66 C. Act 157 (Session Laws of Hawaii 1967) . 74 D. The 1967 Connecticut Campaign Finances--Disclosure Act. 75 E. Senate Bill No. 1880 (90th Congress, 1st Session) • • • . 85 F. Foreign Investors Tax Act; Title III--Presidential Election Campa ign Fund Ac t • . • • • . • • • • . • • . • • . • 111 G. Election Fund for Political Parties; Regulation of Contributions.. 115 H. Minnesota Election Laws and Income Tax Credits for Political Contributions • 120 1. Act 91 (Session Laws of Hawaii 1963) •.••••.••••• 123 J. Florida Campaign Expense Law; Election Code; Violations; Penalties • • . • • • • • • . • • • • • . • • . • . 124 K. Model State Campaign Contributions and Expenditures Reporting Law . • . • • • . • . • • . • • . • . • • . • . • . 134 L. The 1966 Kentucky Election Law on Campaign Financing (S.B. 265) 142 M. California Residency Requirements for Presidential Elections •• 150 N. Affidavit on Application for Registration • • • • • • • • • • • 157 iv Chapter I CAMPAIGN FINANCING: AN OVERVIEW The Resolution The Hawaii House of Representatives during the 1967 General Session adopted House Resolution 276, requesting the Legislative Reference Bureau to conduct " ... a study of the prohibitive, permissive and incentive legislation by the States relating to political contri­ butions by corporations and businessmen." The Resolution also expressed special concern that "State legislation should promote and encourage political participation by all sectors of the community." Thus, while the request deals primarily with legislation regulating poli­ tical contributions, it also addresses itself to the broader problem of achieving the democratic ideal of widespread effective voluntary participation in the political process. l The Resolution expresses the legislator's concern with a dual problem. On the one hand, he wishes to regulate the participation of corporations and business interests that may exercise too great an influence on the political process by large campaign contributions; and on the other hand, he wishes to increase public participation in the political process. Large political contributions by corporations have been assumed to exert a disproportionate influence on candidates and political parties in elections, and result in the overrepresentation of special economic interests to the detriment of the general public interest. Attempts to achieve participation of all persons and groups compris­ ing the public interest have taken the form of prohibiting political contributions by corporations, or limiting the size of such contribu­ tions by individuals. However, attempts which have concentrated solely on regulating political contributions have been unsuccessful and have resulted in a search for new approaches. The approach which attempts to regulate contributions and also to increase public parti­ cipation assumes that all segments of the community which form the public interest, including citizens who do not make monetary contribu­ tions, can be effectively represented by several other means such as working in support of candidates in campaign activities and by voting for such candidates. Increased public participation in the political process is, therefore, intended to result in the representation of all citizens. The desirability of encouraging citizen participation in the political process was emphasized by the President's bipartisan Commission on Campaign Costs in the following statement: 1 REGULATION OF POLITICAL CONTRIBUTIONS Active, widespread political participation is the key to successful democracy in the United States and voluntary effort is the great sus­ taining force of our political parties. 2 These expressed and implied concerns of the Resolution arise from our democratic view of the nature of man, society, and politics and their underlying principles of equality, individualism, progress, and majority rule and the freedom of dissent. 3 These principles form a general pattern of ideas that pervade our society and serve to guide us and to help us to understand, explain and interpret our political system. Therefore, in order to obtain a proper perspective of the problem of regulating political contributions with which this study will be concerned, it will be helpful to examine traditional democratic principles which are employed to explain and justify our reasons for seeking the goal of widespread, voluntary citizen par­ ticipation in the political process. We rely upon democratic political theory, its beliefs and prin­ ciples, as a model of what politics ought to be like and against which we may assess our present practices and political institutions, and evaluate such practices and institutions in terms of how good a job they do in promoting these principles. American politics can, therefore, be more easily understood by placing it within the context of ideas that shape our society. The following statement by Gunnar Myrdal, the Swedish political economist, is perhaps the most explicit statement made in recognition of the unique system of beliefs that have become interwoven in the fabric of American life: When the American Creed is once detected, the cacophony becomes a melody. The further observation then becomes apparent; that America, compared to every other country in Western civilization, large or small, has the most explicitly expressed system of general ideals in reference to human interrelations. This body of ideals is more widely understood and appreciated than similar ideals are anywhere else. The American Creed is not merely--as in some other countries--the implicit background of the nation's political and judicial order as it functions. To be sure, the political creed of America is not very satisfactorily effec­ tuated in actual social life. But as principles which ought to rule, the Creed has been made
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