Assessing Group Incentives, Independent Spending, and Campaign Finance Law by Comparing the States

Abstract

Independent expenditures (IEs) in U.S. elections have increased substantially at nearly all levels of government over the past decade, but judicial decisions are only a partial explanation for this growth. Using a descriptive difference-indifferences approach, we show that the growth has been uneven across types of elections and spenders under different legal regimes. This finding highlights the importance of disaggregating spenders, elections, and laws in order to explain IEs more fully. This article analyzes IEs in state gubernatorial and legislative elections from 2006 through 2018 across states with differing campaign finance laws and political contexts. It uses an original and detailed classification of spenders, along with data on IEs from the National Institute on Money in Politics, the Campaign Finance Institute's historical database of state campaign finance laws, and other sources. The legal variations on which the article focuses are the various states' laws limiting contributions to candidates and political parties. It concentrates on these because of an oft-stated expectation that removing contribution limits will sharply reduce the level of IEs. In addition to contribution limits, we also assess partisan competition as a primary explanation for the level of IEs in various states, and across the sectors of spenders. We find, using multi-variate analysis, that increased partisan competition (at both the candidate level and chamber level) is in most cases a significant driver of IEs. In contrast, the associations between IEs and contribution limits are inconsistent and generally not significant. Importantly for ongoing policy debates, ideological and issue-driven spending appears to have weak association (or none) with contribution limits. Therefore, if the recent increase in IEs is in fact a normative problem, the solution may be more elusive than once thought.

Campaign Finance Regulations and Public Policy

“…First, we look at states' corporate income tax rate (or, for the few states with graduated corporate income taxes, the top marginal rate). 5 We expect that this policy will have the broadest and strongest association 2 These figures are based on the 15 states with consistent reporting requirements for IEs over this period (see Hunt et al 2020;Malbin et al 2018, Table 2) and reflect average expenditures for 2006 and 2008 election cycles compared with 2012 through 2016. Data are from the Campaign Finance Institute https://www.followthemoney.org/ Accessed July 3, 2019.…”

“…First, we look at states' corporate income tax rate (or, for the few states with graduated corporate income taxes, the top marginal rate). 5 We expect that this policy will have the broadest and strongest association 2 These figures are based on the 15 states with consistent reporting requirements for IEs over this period (see Hunt et al 2020;Malbin et al 2018, Malbin et al (2018) further coded the sources of these IEs into business, labor, and other categories (e.g., political parties, issue advocacy groups). We are grateful to Michael Malbin for making these data available.…”