Tax credits as a mechanism for political party funding in Aotearoa New Zealand: an exploratory study

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This article explores tax credits for political party funding in Aotearoa New Zealand (NZ). Participation in the democratic process is low and declining in NZ, as political party membership drops and parties increasingly focus their attention on small numbers of large donors. Advantages of tax credits include incentivising parties to engage with society to attract donations, encouraging individuals to participate in the democratic process and potentially providing greater financial support to parties. The primary disadvantage is that tax credits require at least a small financial contribution from a donor, which will not be possible for everyone. For a relatively low cost of approximately NZ$2.35 per voter, large donations could be eliminated from the NZ political funding system, along with the concomitant potential for undue influence. Using the Canadian model for comparison, a similar system in NZ may result in greater public political engagement and better funded political parties.

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This article considers the data on donations to New Zealand political parties collected by the Electoral Commission. The purpose is to address who gets what, and why. Relatively small amounts are donated. A little may buy considerable influence. There is limited evidence of strong upward trends in political donations, suggesting a systemic equilibrium. The plurality of donations is received by unsuccessful parties, suggesting that money is insufficient for political success. Most donations come from individuals (mostly men) or families. Cross-political spectrum donations are mostly from businesses and to the two dominant parties, suggesting that businesses are trying to buy the ear of the major power in government.
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We report the results of three field experiments that provided nonpartisan information about municipal- and state-level incentives for making political contributions to potential donors. Our experiments examine two types of contribution incentive programs, public matching funds and tax credits, in three different jurisdictions: New York City, Virginia, and Ohio. We find that providing information about matching funds and tax credits has negligible effects on both the probability that an individual will make a contribution and the amount that an individual donates. Our findings suggest that publicizing contribution incentive programs using nonpartisan messages does little to enhance the pool of new donors. Our research leaves open the possibility that contribution incentive programs, and donation matching programs in particular, may nonetheless affect campaign behavior and encourage campaigns to pursue more small donors.
We recently published a comprehensive report on political party funding in Aotearoa New Zealand (Rashbrooke and Marriott, 2022). This article documents some of the issues we discovered in the process of writing that report and some of the solutions we propose to address these issues. We recommend stronger donation regulation: capping annual donations at $15,000 and donor identification for donations above $1,500. We also recommend increased state funding: for approximately $2 per voter per annum, ‘big money’ can be eliminated from the political finance arena. This improves transparency and – crucially – can significantly reduce the perception of influence from large donations.
What is the impact of campaign spending on votes? Does it vary across election types, political parties or electoral settings? Estimating these effects requires comprehensive data on spending across candidates, parties and elections, as well as identification strategies that handle the endogenous and strategic nature of campaign spending in multiparty systems. This paper provides novel contributions in both of these areas. We build a new comprehensive dataset of all French legislative and UK general elections over the 1993–2017 period. We propose new empirical specifications, including a new instrument that relies on the fact that candidates are differentially affected by regulation on the source of funding on which they depend the most. We find that an increase in spending per voter consistently improves candidates’ vote share, both at British and French elections, and that the effect is heterogeneous depending on candidates’ party. In particular, we show that spending by radical and extreme parties has much lower returns than spending by mainstream parties, and that this can be partly explained by the social stigma attached to extreme voting. Our findings help reconcile the conflicting results of the existing literature, and improve our understanding of why campaigns matter.
New Zealand’s system of government is vulnerable to undue influence and distortion by private wealth. Our legal framework contains no limits on domestic political donations (including donations from corporations and lobbyists), weak disclosure standards for political financing, no political expenditure limits outside the election period, insufficient regulations on lobbying and the revolving door between public and private employment, and few meaningful regulations on conflicts of interest. Given the nation’s high level of wealth concentration, these vulnerabilities pose a critical threat. Comprehensive electoral reforms are required to prevent economic inequality from becoming politically entrenched and representative democracy from being undermined.
The nexus between money and politics creates particular problems for liberal democracies like New Zealand. Events during the last parliamentary term put our present system of regulating this issue under some stress. With two cases relating to political fundraising now before the courts and other matters still under investigation by the Serious Fraud Office, this is the right time to consider whether reform of the law is needed and what such reform ought to look like.
This article uses detailed, transaction-level data on candidate disbursements and panel survey data to estimate the effect of candidate spending. Transaction-level data allow me to isolate only spending that is being used on messages to voters, while panel survey data enable me to control for unobserved candidate characteristics. I find that spending on messages to voters has a statistically significant effect on voter support for candidates. Spending is especially effective in changing the composition of voters, instead of convincing potential voters to switch their vote. Not all voters are equally affected by spending; low-information voters, members of a political party and the economically dissatisfied respond strongly to candidate spending. Finally, I provide evidence that the most commonly used measure of candidate spending overestimates the amount of money that candidates use on their own campaigns, and regressions using this measure are less likely to find a statistically significant effect of spending. © 2020 by the Southern Political Science Association. All rights reserved.
This article compares the Australian and New Zealand electoral finance regimes, with a particular focus on political contributions. Three specific areas are examined: disclosure of contributions; limits on contributions; and regulating the sale of access and influence. This examination is underpinned by what I see as the key purposes of democratic political finance regimes (Tham, 2010, ch.1): protecting the integrity of representative government, an aim which encompasses the prevention of corruption; promoting fairness in politics, especially in elections; supporting parties to discharge their functions; respecting political freedoms, in particular freedom of political expression and freedom of political association.
One of the activities corporations should be accountable for is their level of political donations. This paper examines two mandatory corporate political donation disclosure regimes in Australia and identifies three important lessons. First, our review confirms that although few citizens may care enough to scrutinise donation disclosure, there are people interested in such information and we should take political donation disclosure regimes seriously. Second, a well-funded entity must be made responsible not just for administering the disclosure system, but also for reviewing and recommending updates to the system. One disclosure regime examined in this paper was never updated to reflect the existence of the internet until 2007, because no-one was responsible for monitoring the regime and suggesting necessary updates. Finally, details concerning the ultimate source of donations should be provided.
Over the past 30 years, research on government contracting has identified three major influences that help explain variation in contracting decisions—managerial, organizational, and political. This study looks to advance the political influence literature by introducing a factor that has received limited attention—vendor influence. This study specifically focuses on contract transactions at the U.S. federal government to determine if vendors influence the contract award. Traditionally, political influence is studied at the macro or meso levels. This study shifts the unit of analysis to the micro level which requires a change in measurement of political influence. The study uses vendor campaign contributions to capture political influence on this new level of focus.
This article discusses political contribution tax credits, a campaign finance reform that seeks to encourage participation. Several states provide citizens with tax credits for part or all of their contributions to state or local candidates. Although a fewstudies have tried to estimate the budgetary impact of such programs, none has analyzed the effects of these tax credits on the propensity of citizens to contribute. We discuss the results of two surveys in one state with tax credits, Ohio— one survey each of the general public and of campaign contributors. Our results indicate that if citizens are made aware of the tax credits, they have the potential to attract donors who are more similar to the general public than the current pool of campaign contributors. Tax credits have the greatest effect on small contributors, on younger adults, and on less partisan individuals.
We live in a very unequal society, but are inequalities of political party funding a major influence on this? Moreover, does 'money buy elections'? The answers to these questions have important implications for the state's regulation of political activity. This article evaluates different sources of political party funding, its influence on New Zealand parliamentary politics, and cautions against taking for granted some of the common understandings of political finance in New Zealand. While business interests have been able to exert an incredibly strong influence over politics during the last 25 years, this leverage is better understood by a structural analysis of economic power than by arguments about the direct influence of the wealthy over political parties. The political power of wealth does not exert itself effectively via the direct purchase of political influence in the party system, but by the structural role of business in the national economy. To the extent that money is directly important in the party system, it is actually backdoor parliamentary state funding that is having the most influence on political configurations.
The 2005 general election campaign was notable not only for its close-fought nature, but also for a range of deeply concerning, and in some cases undoubtedly unlawful, behaviour by various electoral participants. The Labour Party exceeded the statutory maximum on its ‘election expenses’ by at least $418,603, primarily due to the costs associated with producing and distributing its pledge card to voters. Furthermore, the use of parliamentary funding to pay for this campaign material prompted a post-election review by the auditor-general, which revealed widespread misuse of this source of funds by a range of parties and individual MPs (Auditor-General, 2006). The National Party’s negligence in failing to account for GST when booking election broadcast time meant that it was able to screen some $112,000 more in campaign advertising than the law allowed. Both National and Labour, and to a lesser degree some smaller parties, used anonymous donations and trusts to shield the identity of their major donors, allowing hundreds of thousands of dollars to flow into their campaign coffers from hidden sources.
This article argues that the cartel party thesis is not supported by empirical evidence in the Canadian case. Even though Canadian parties at the federal level colluded to provide themselves with funding and to hinder the entry of new parties into the system, they were not transformed into cartel patties. Canadian parties have not become primarily reliant on state resources, and the specific formulas for delivery of public funding do not remove or greatly diminish parties' incentives to solicit support from the public. Parties' ties to civil society consequently remain intact. There is little evidence for the consequent diminution of party competition or increased interpenetration of state and society posited by the cartel thesis. The article argues that the cartel model is largely inapplicable to anglo-american political systems because it fails to take into account the effect of specific forms of state funding.
"To what extent can market participants affect the outcomes of regulatory policy? In this paper, we study the effects of one potential source of influence-campaign contributions-from competing interests in the local telecommunications industry, on regulatory policy decisions of state public utility commissions. Our work is unique in that we test the effects of campaign contributions on measurable policy outcomes. This stands in stark relief against most of the existing literature, which examines potentially noisier measures of policy outcomes-such as the roll-call votes of legislators, to examine how private money may influence public policy. By moving to more direct measures of policy effects, and using a unique new dataset, we find, in contrast to much of the literature on campaign contributions, that there is a significant effect of private money on regulatory outcomes. This result is robust to numerous alternative model specifications. We also assess the extent of omitted variable bias that would have to exist to obviate the estimated result. We find that for our result to be spurious, omitted variables would have to explain more than five times the variation in the mix of private money as is explained by the variables included in our analysis. We consider this to be very unlikely." Copyright 2007, The Author(s) Journal Compilation (c) 2007 Blackwell Publishing.
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