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A Tax on Large Campaign Contributions?

by Travis Pantin
Tue, 11 Dec 2007 at 7:37 PM

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The anonymous economics blogger at Blue Matter presents a novel answer to the question of how best to regulate campaign finance: "why not tax 'unwanted' or 'undesirable' contributions and spending proportionately to the degree of their undesirability rather than ban them outright?"

As he sees it, the problem is that rich individuals and corporations are able to gain influence over political agendas and government decisions through their ability to make large campaign contributions.

Moreover, "the bulk of campaign spending is socially wasteful, closely resembling an arms race. If there was a way to bring total spending down in a universally accepted manner, everyone would be better off."

He proposes instituting "the Undue Influence Tax (UIT), to be introduced as part of the 'Invigorating Democracy Act' and waged on individual donations (and to give it an extra bit of harmless spin, it should be paid by the political parties rather than the donors). It will start at 0% of the value of the contribution, jumping to 30% after the first $5,000 or so, 50% after $10,000 and reaching 95% beyond $50,000."

That way, small contributions, which promote wider participation in the political process, would be encouraged, while big contributions would be rendered practically ineffectual.

"This will make 'buying' political influence much more expensive — and as we know, when the price of a good rises, quantity falls. It will increase the relative value of small contributions, making candidates reach more to 'the people,' rather than the wealthy and large corporations. Suitably calibrated, it can rectify all the actual and perceived ills of the current campaign finance framework," the blogger writes.

"It could become the most popular tax in history, as it only affects a small number of citizens, while clearly contributing towards a greater public good — 'giving power to the people,'" he continues. "The revenue obtained should allow for cuts elsewhere in the tax system or increased spending on public services."

The Economics of Terrorism
On VoxEU, two economists from Universidade Nova de Lisboa, Fernanda, present a survey of the many ways economic tools have been used to better understand the causes and effects of terrorism.

They make the case that much more stands to be learned about terrorism and terrorists through the application of economic reasoning.

"Terrorists, as evidenced by much of the existing research, are rational actors that organize and make decisions in pursuit of given objectives. They substitute between means, targets and over time, in response to the costs imposed on them by counter-terrorist measures," the authors write.

"The 'utility cost' of terrorism, recognized to be well above a simple 'rational,' expected value estimate, can and should be assessed directly through careful individual surveys."

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