Repeal of Political Contribution Tax Credit Favors Big Special Interests

The tax task force is recommending the repeal of a little used tax credit. If you make a political contribution you are entitled to an income tax credit of up to $50 (or $100 for a couple filing jointly).

The task force estimated the tax credit only benefits tax payers by $500,000 per year.  That represents only 10,000 Arkansans. We wonder if the number of people taking advantage of the tax credit will increase on taxes collected this year because gubernatorial candidates Jan Morgan (Republican) and Mark West (Libertarian) relied heavily on small contributions from individuals.

If the tax credit is not having a big impact then why not repeal it? Before you decide, let’s talk about the big picture.

There has been a significant trend by the Arkansas legislature to limit the influence of grass roots groups of voters and to limit the influence of small associations that can’t spend big bucks on lobbyist expenses. The trend also solidifies the power of big special interests (such as Walmart, hospitals, nursing homes, and other Medicaid Providers, insurance companies, and big businesses that rely on state government handouts and grants.)

If a politician does the bidding of the big special interests, as an incumbent the politician is very hard to beat because the politician’s reelection campaign will be well funded by special interests. The money of special interests makes such an incumbent hard to beat but changes at the legislature are making it even harder to challenge this combination.

Lets first talk about the tax credit politicians want to repeal, then we will list other changes that favor the special interests.

The Proposal To Repeal Tax Credit

You can’t win an election if you don’t get the word out.  You can’t get the word out if you don’t have money.

A grassroots campaign has an uphill battle getting the candidate’s message out because it takes money.

Big special interests have the money to spend on electing politicians.  They and their lobbyists raise money for friendly politicians by holding political fund raisers and lining up employees and other donors, and when it comes to sending money to candidates through PACs, the big special interests have more money to donate to more PACs than anyone else.

It takes a lot of $50 and $100 donations from individuals to try to counter the money special interests can pour into campaigns.

No grassroots campaign has effectively gotten out the message – Contribute $50 to my campaign and reduce your state income tax by $50. Special interests fear that could happen.

Did you know the Arkansas income tax credit for political contributions is not just for contributions to candidates? It also applies to contributions to a political party or to a political action committee. (You can only receive one tax credit whether it is to a candidate, political party, or PAC)


Commerce In Action is different from most PACs. Instead of fighting for a slice of the pie like the special interests do, the Commerce in Action PAC fights AGAINST BIG GOVERNMENT INTRUSION AND BIG GOVERNMENT TAXES. Commerce In Action supports candidates who promise to reduce the bloated Arkansas government and its high taxes.

A contribution to Commerce In Action qualifies for the income tax credit for political contributions. A tax credit can be used for the state income tax due this April 15, if the contribution is made before April 15 of this year. A tax credit of up to $50 can be claimed as an individual taxpayer or $100 if filing jointly.

Here is the link to Commerce In Action.

Its interesting that Democrats have been silent on the idea of ending the tax credit for political contributions.  Democrats are the ones who typically call for public funding in elections – something we oppose.  But, getting your money back from the state after making a political contribution is as close to public funding as they will ever get in Arkansas.  Why are they silent? Perhaps because Democrats too, depend on campaign contribution from the same big special interests as Republicans, and because small donor contributions are wild cards that might favor a challenger.

Legislative Actions That Helped Big Special Interests

There have been a number of legislative changes that favor big special interests over individuals.  We are not saying these moves were part of some big plan.  But we can’t help but notice individuals and small associations have been put at a disadvantage over the years.

  1. Lobbyist Gifts – Loophole

In the name of good government, the legislature proposed and the people passed a prohibition against lobbyist gifts to elected officials. We agree lobbyist gifts should be prohibited.

Unfortunately, the legislature also included a huge loophole for their big special interest benefactors.

The loophole was designed to keep perks flowing from big special interests and their lobbyists, while eliminating the competition from smaller lobbying interests (such as small associations).  How so? The loophole allows lobbyists to wine and dine legislators IF they invite all the members of the House of Representatives or all members of the Senate or a legislative committee. Spending big money on meals and drinks for large groups of legislators is no problem when you are a big special interest that stands to make millions or billions off the state. Small associations with less money used to be able to get the ear of a few key legislators over a burger and beer at Does Eat Place. They can’t do that anymore. It should have ended with no exceptions for the big boys.

Is this a big deal?  Well, consider that during a legislative session most meals for the legislature are provided by big special interests and their lobbyists. (Frequently it is all three meals plus a cocktail reception).

From reading the “no lobbyist gifts” legislation, we think it was written to protect the big special interests and the perks legislators get..

The loophole for big lobbyists “events” needs to be repealed. Will your Senators and Representatives try to repeal the loophole?  Are they bold enough to go against the big lobbyists and their colleagues who love the perks?  The effort is not one for a weak-kneed legislator because the effort to repeal the loophole will upset big lobbyists and legislators who like the perks. (Remember you the taxpayer already pay a per diem of $59 a day specifically for their meals and incidentals, whether they spend the money or not.)

  1. Political Contributions By Small Businesses Nixed

One of the “reforms” proposed by the legislature and passed by the people, prohibits businesses from contributing directly to a candidate’s campaign. Good thing, right?  Well, not so quick.  The prohibition affected mom and pop stores or other Arkansas small business but hasn’t had any effect on campaign spending by big business and big special interests.

While the legislature put on a show about stopping businesses from contribution to campaigns, every legislator knew big business was already funneling contributions through political action committees (PACs) and therefore the restriction would not have any impacts on them.

Medicaid providers and other big corporations that making big bucks off of state government were already funneling political contributions into campaigns by donating to multiple political action committees (PACs) that funnel the money into the campaigns.  But politicians only get upset when PACs are used by those who want less government.

In the past a small business might donate to a candidate, but small business owners tend to be reluctant to donate indirectly through a PAC. Fewer donations from small business means a greater voice for the big special interests at the expense of small business owners.

Some small business owners, realizing their voice has been diminished, have trusted Commerce In Action to be their PAC.

  1. Longer Term Limits

In 2014 the legislature used a Trojan Horse to get people to vote for longer term limits. (Sixteen years but could be as much as 22 years in the Senate) Whether you are for are against term limits, the reality is, it is easier for big money lobbying interests to keep a legislator in office than to take chances on picking among candidates where there is no incumbent.

  1. Rule Changes In The House of Representatives That Allow The Deck To Be Stacked

The House of Representatives with 100 members has been a bigger challenge for lobbyists than the Senate with only 35 members. Rules changes in the House have made it much easier for special interests to influence the House. The rules changes have added power to the Speaker of the House.

Chairs and vice chairs. Several years ago, the House Rules were changed to allow the Speaker of the House to appoint the chairs and vice chairs of House committees and subcommittees.  Previously the leadership positions were selected by representatives by seniority.  The seniority system made it difficult for special interests because the next representative in seniority for leadership could be someone who was not inclined to be the vassal of the business interest. Giving the power to appoint chairs and vice chairs to the Speaker gave the big special interests a much better opportunity to influence who would be the chair or vice chair…. especially by influencing who is elected Speaker.

The rule change worked so well for the special interests (especially Medicaid providers) that the next rule change put even more power in the hands of the Speaker.

Committee assignments. A recent House Rule changed how representative get on House committees. Now the Speaker of the House has the authority to make all committee assignments.  Previously, legislators selected their own committee assignments through seniority in their congressional districts. For special interests, the beauty of the committee assignment system is the committees can be stacked with enough friends to ensure the special interests get their way.

Back To The Issue Of Repeal Of The Tax Credit

The income tax credit for political contributions has not had a big impact and few taxpayers take advantage of it.  But for the big special interests, why would they want take a chance that some day the tax credit would help a  grass roots candidate unseat a candidate anointed by special interests.