Buddy, Can You Spare a Tax Break?

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Whenever I hear stories like the ones today about the deal reached to preserve a tax break for investors, I think back to a statistic that I once compiled at the Center for Responsive Politics, when it was my full-time job to track money in American politics.

When you stare, day in and day out, at databases that document the names and occupations of Americans who’ve given $1,000 or more to political candidates, PACs and parties, you tend to slip into the mindset that everybody gives, that you’re looking at a cross-section of the general population.

In fact, according to the latest figures compiled by CRP, the percentage of Americans who have given $200 or more this election cycle – enough to be listed in the FEC database – is 0.14%. If you look at those giving $2,000 or more – the maximum allowed to federal candidates – the percentage drops to 0.03%.

Now if you haven’t gotten into the habit of writing four-figure checks to politicians, you’re probably not in the right tax bracket to worry about things like investor tax breaks. A chart in today’s Washington Post (supplied by the Tax Policy Center) shows why.

People who earn $40,000 – $50,000 a year will save $46 on their taxes under the new bill. If you earn $75,000 – $100,000, you’ll save $403. If you earn more than a million your annual savings will come to $41,977.

When you’re in that kind of tax bracket, a few thousand every year to your local congressman and senators – or even out-of-staters if they’re on the tax-writing committees – seems like a prudent investment indeed.

To the politicians receiving the checks, maintaining the goodwill of those top-dollar constituents is – understandably – a top priority. Without them, their campaign coffers would take an enormous hit, as seen best in a pie chart in CRP’s Big Picture section.

As that chart shows, in the 2004 election cycle House members collected about 45% of their campaign cash from individuals giving $200 or more (the great majority of that coming from $1,000+ contributions). Senators have higher reelection budgets; they collected about 58% of the necessary cash from those deep-pocketed donors. Those averages, by the way, are almost identical for Democrats and Republicans.

All of which helps explain why you’ll see a lot more stories in the local newspaper about politicos flying in for a $1,000-a-plate fundraiser than you’ll see about upcoming spaghetti feeds for the small donors.

In fact, small donors don’t amount for much these days on Capitol Hill – about 10% of the campaign budgets for House members and around 15% in the Senate.

But the difference between the big donors and the small donors – let alone the huge majority of Americans who give not a penny to politicians – is much greater than simply the width of the slice in a pie chart.

It’s the difference between the players on the field and the spectators in the stands, between “consumers” who have only a collective voice – once every two years on Election Day – and “entrepreneurs” whose participation in politics is ongoing, highly valued, and regularly rewarded.