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

9/9/2004

Executive Summary

Long before voters register their preferences on Election Day, the flow of political money determines which candidates are able to mount viable campaigns for federal office. Providing public incentives for small political contributions could help average Americans play a more meaningful role in influencing who has the resources to run effective campaigns and win public office.

Most modern political campaigns are funded predominantly by a small number of large donors rather than a cross section of the American public. Congressional candidates in 2002, for example, collected more than half of the money they raised from individuals in contributions of at least $1000—from just 0.09% of the voting age public.

Our current campaign finance system grants these contributors disproportionate influence over who runs for office and who wins elections—and thereby who dictates public policy. Grassroots candidates who take positions that do not appeal to wealthy donors have difficulty competing with well-funded opponents.

Finally, many ordinary citizens are alienated from the process as they perceive that their contributions—and even votes—matter less than the large donations that define the political field of play.

Reform advocates frequently discuss setting contribution limits at levels that average Americans can afford to give, establishing spending limits to dampen the fundraising “arms race,” and providing direct public financing of candidate campaigns as potential solutions to the problem of big money dominance in politics. Another solution that has received significantly less scholarly and public attention is providing public incentives to encourage small contributions. By leveraging the power of the Internet and harnessing promising recent fundraising trends, it may be possible to encourage a wave of small contributions that will help balance out the undue influence of large donors.

This paper provides a thorough canvass of existing knowledge about small contribution incentive programs at the federal level and throughout the five states that feature similar initiatives—Arkansas, Minnesota, Ohio, Oregon, and Virginia. Our conclusion is that—especially in the new age of Internet fundraising—a well-designed program can play a significant role in increasing the role of small contributors in our democracy and serve as a helpful tool for grassroots candidates seeking to run campaigns geared towards average voters, not wealthy donors. We make several recommendations about how to best design a contribution incentive program to accomplish these goals. Our most significant findings are outlined below.