Matching grants are a variation on a scheme providing tax relief or tax credits for political donations, see Tax Concessions. Like tax reliefs, matching grants aim to encourage political donations by individuals by providing an extra amount from public funds when individuals make a political contribution. Unlike tax reliefs, matching grants are not dependent upon the tax status of the individual donor. Therefore, matching fund systems are arguably fairer on parties and on candidates whose support comes from members of low income groups who do not pay income tax and who will not benefit from tax reliefs.
In some states within the United States, the regulation systems provide for matching funds. Hawaii and Michigan match donations up to $100, Massachusetts matches donations up to $250, and New Jersey up to $1,500. In most cases the match is 1:1. In Hawaii, the state provides a party with an additional $100 for $100 contributed to the party by an individual donor. In Michigan and New Jersey there is a 2:1 match. For $100 donated to a party in Michigan, the state provides an additional $200.
In addition to matching grants for donations, some systems provide matching grants for campaign expenditures. In Canada, parliamentary candidates are entitled to a reimbursement of a part of their campaign expenses provided they succeed in obtaining 15 percent of the vote.
Administrative Implications
The schemes that have been described are subject to abuse. It would be possible for a party to give $100 to a member, asking the member to return the money as a 'contribution'. The party could then claim the $100 matching grant. Provided that matching grants and tax benefits are restricted to relatively small donations, it is hard to organise such cheating on a large scale without risk of discovery.
Comments
Matching grants and tax reliefs on political donations have proved relatively successful and provide one of the most promising approaches to the regulation of political finance. In particular, they accord with the democratic aim of encouraging party activity and avoiding undue dependence on a few large contributors.
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