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roots, with an across-the-board stimulation of political interest, and activity.

The fact that the voucher plan is as readily adaptable to congressional as to presidential elections means that neither branch will be neglected, and that our system can be kept in balance. It also avoids the ludicrous possibility that we might wind up with two different systems of Federal assistance operating at once.

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Above all, the Metcalf plan would not restructure power within the parties. All the national level, State, and local organizations now in-., volved in fundraising would also be active in youcher collections-as would candidates' own campaign committees and citizens groups, As I understand it, the Senator's bill limits redemption of the vouchers to authorized committees, but does not prevent others from participating in the collection efforts.

Certain questions remain to be answered, shall vouchers be sent only to taxpayers who check their returns, as in Senator Metcalf's bill, to all people who pay taxes, which might be simpler to administer, to all people with social security numbers, as Senator Long has suggested, or to all registered voters? I doubt that it would make much difference and suggest that ease of administration should be the controlling factor.

How much money would a voucher system really provide? Only trial will tell. If the amount proves insufficient, the value of the vouchers could be increased for subsequent campaigns. On the other. hand, to guard against the possibility that everyone would use his voucher and thus flood a campaign with money, a simple formula could be applied that would reduce the value of all vouchers presented for redemption beyond a number representing a certain proportion of the electorate in the particular constituency. For example, vouchers might be redeemable for the full amount only to the number of 50 percent of the registered voters in a given district,, and for half the amount beyond that.

Finally, there are three additional points: a voucher system could be operated with the same kinds of limitations of authorized expenditures as envisioned in the administration's bill, although I do not tures as envisionations as necessary, a believe such limitations would be as necessary; a voucher system could operate smoothly side by side with continued solicitation of cash contributions, and might even stimulate them, and yet it would provide opportunity for limiting the size of allowable contributions; and a voucher system would be readily adaptable to primary elections when and if that were desired.

In summary, Mr. Chairman, I believe that the administration's bill and others like it would impose unwarranted and, in many cases, unworkable limitation on our political system, that tax deductions and tax credits are better in principle but would be only marginally useful, and that a voucher system would probably be the best way to provide significant amounts of public funds for campaign purposes with least distortion of our political institutions and practices. Thank you for your attention and courtesy.

Senator METCALF. Thank you very much, Mr. Agree.
Senator Long?

The CHAIRMAN. Well, the voucher suggestion is a very interesting idea. I have found a lot of appeal to it, as I have indicated. We may have some difficulty in finding congressional agreement just because

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a lot of Members of Congress may be reluctant to make it so easy for an opponent to finance himself against them. But there is no doubt about it that it does provide a very democratic way to finance elections, because people may hear a man make his speech and say what he believes in and this voucher sent to them by the Secretary of the Treasury for $1 to help a fellow keep it up, maybe put him back on the air so they can hear him again.

It does have one disadvantage in that the candidates may not estimate the accuracy of the vouchers that they may receive. They may just guess at it. But I think the major party candidates could very well rely on a fairly substantial amount, perhaps as much as 30 percent of what was mailed in.

Mr. AGREE. I think you are right about that, Senator Long. I think for the other candidates or for candidates for lesser office, it still might be as predictable as the amount of cash contributions. One does not know that in advance, either. But there would be a pretty fair idea, with pretty fair predictability.

On the point of Members of Congress being concerned about stimulating opposition, I think that this need not be. Perhaps it ought to be something to be feared, but I do not think it needs to be feared if you have a constituency in which a member normally wins by a very large margin. I think he can well expect that his opponent is not going to get a great many vouchers, no more than he can get a great many dollars. The proportions would be about the same. The CHAIRMAN. Right.

Thank you very much.

I think you have made a very fine statement.

Senator METCALF. Thank you very much, Mr. Agree. I am not going to comment, except that you made a very eloquent defense of my proposal, and I am not going to ask you any questions about it. But I will quote it and plagiarize it a good deal in the course of the discussions, and I think that you raise some questions that are involved. I think you pointed out the advantages of the flexibility of this proposal, and I hope that during further discussions, we do ascertain whether or not it should be distributed to registered voters or taxpayers.

But as you point out, that does not make a great deal of difference. The principle of the thing is that here is the broadest possible base for the encouragement of political contributions with a Federal subsidy. I think you have made a significant contribution to this hearing.

Thank you very much.

Mr. AGREE. Thank you, Senator.

Senator METCALF. The committee will be in recess until 10 o'clock tomorrow.

(Whereupon, at 1:25 p.m., the hearing recessed until the following day, June 8, 1967, at 10 a.m.)

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POLITICAL CAMPAIGN FINANCING PROPOSALS

THURSDAY, JUNE 8, 1967

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, D.C.

The committee met, pursuant to notice, at 10:05 a.m., in room: 2221, New Senate Office Building, Senator Clinton P. Anderson presiding.

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Present: Senators Long, (chairman), Anderson, Gore, Hartke, Metcalf, Harris, Williams, Carlson, and Dirksen.

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Senator ANDERSON. The hearing will come to order.

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Today, the committee continues to receive testimony regarding the important question of political campaign financing. Our first witness this morning is the Honorable Howard W. Cannon, U.S. Senator from the State of Nevada. Senator Cannon is the chairman of the Subcommittee on Privileges and Elections of the Senate Committee on Rules and is a former member of the Democratic Senatorial Campaign Committee. Senator Cannon has long been concerned with matters relating to political campaigns and is the author of S. 1880 which embodies several recommendations submitted to the Congress by the President. His bill has been previously described to this committee as a companion measure to S. 1883 which reflects the political campaign financing recommendations of the President. Senator Cannon, we recall the fine statement you made here last August on this question. I know the testimony you bring to us today will aid us in our work. You are recognized.

STATEMENT OF HON. HOWARD W. CANNON, A U.S. SENATOR FROM THE STATE OF NEVADA

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Senator CANNON. Thank you, Mr. Chairman.

I thank you for this opportunity to testify at this hearing.

For several years the Congress has been wrestling with the problem of discovering better ways to finance political campaigns in order to permit all qualified candidates and parties to compete without relyingtoo heavily upon a small number of contributors who can afford to make large donations to or expenditures in their behalf.

Everyone recognizes the inadequacies of existing law and each year an increasing number of legislative proposals are submitted to the Congress by administrations or introduced by members of the Senate and the House of Representatives.

For one reason or another none of the earlier measures has received a preponderance of support from either House of the Congress and the country is left in an obsolete and confused maze of jumbled laws; and regulations.

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Everyone also recognizes the fact that some form of financial assistance must be given to candidates and political parties-both in presidential races and in congressional campaigns as well.

The form of financial assistance is proving to be a hard nut to crack. Some advocate the reimbursement of political parties supporting presidential candidates for expenses incurred during the course of a campaign.

Others support a direct appropriation of money to defray the cost of certain programs properly scheduled during presidential campaigns, Both proposals would require the adoption of specific guidelines and limitations.

Both proposals are meritorious because they seek to avoid dependence upon huge contributions from a relatively small percentage of the population of the United States. That is a noble goal because it would relieve candidates and national parties from the constant pressure of paying off debts and raising more money to meet new commitments in order to present their platforms to the people. Those proposals would also be subject to the continuous scrutiny of a national authority and disclosure of the amounts and uses of funds to the public.

There are some factors, direct or indirect, in those proposals that are of dubious value.

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The receipt of great sums of money, gratis, may tend to destroy initiative and determination to seek the support of the average citizen in the formulation of policies and the raising of funds to carry out those policies.

A candidate or political party required to look to Mr. and Mrs. Average American for understanding and support will work very hard to earn that help and, in return, the average citizen who feels that his help is needed and appreciated will feel closer to his party and his candidates and will involve himself more fully in the campaign.

I am aware of the serious study that has gone into presidential campaign fund measures, and fully appreciate the advantages to be enjoyed under such. However, I fear that the very fact that candidates for the Congress and their political committees would still be forced to seek political financing by separate means plus the additional fact that independent groups or associations or political.committes would continue to function in raising funds from private sources and spending in behalf of whatever candidate or political party they chose, might have a demoralizing and shattering effect upon the public financing system. Nothing could prevent ad hoc groups from seeking to influence elections on all levels with money received from sources other than the Government subsidy, it of 2767 2015 is com

If constitutional controls could be imposed to prevent a candidate or political party from benefitting, directly or indirectly, knowingly or unknowingly, by receiving financial support both from the U.S. Treasury and from independent groups, then I would be more favorably inclined to give my support to measures such as are now before. this committee.

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Public financing, shackled by private committees moving in another direction, seems unworkable to me. von བན་མ

For several years tax incentives in the form of tax credits or tax deductions, or both, have been presented on both sides of the Congress. I am of the opinion, Mr. Chairman, that the American public, fully informed of a right to claim a tax benefit for a political contri

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bution, would respond enthusiastically and in sufficient numbers to elieve political parties and candidates not only of a substantial porion of their financial worries and burdens, but also of the potential hreat to their political independence occasioned by the acceptance of arger contributions from a small number of donors.

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I also hold the belief that any tax incentive should be reasonably modest so that all of the burden would not be shifted from parties and candidates to the Federal Government through the loss of tax revenues.

I would like to make my position clear, Mr. Chairman, with respect to my preference for a tax credit over a tax deduction.

My position now is the same as it was when I previously testified before your committee on this subject in 1966.

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A tax deduction is an allowance granted from gross income before - actual computation of tax liability. In effect, it operates on a sliding scale according to the taxpayer's net income bracket. As the income bracket rises, less of the contribution is actually made by the taxI payer, and more of it is borne by the Government. Thus, the higher a contributor's income, the more a given deduction will save him in taxes. The effects of the proposals for allowing deductions for political contributions of up to $100, let's say, both as to cost to the contributor and revenue loss to the Government, would be determined by, the tax brackets of those take the deduction.

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A tax credit, on the other hand, is an allowance taken from the final tax liability itself. It operates in such fashion that every taxpayer, large or small, would derive the same benefit for the same amount of contribution. The revenue loss to the Government would be related to the number of contributions made and credits sought on tax returns not to income levels or tax brackets. If a $10 tax credit were allowed, for example, every contributor, large or small, regardless of income, would be entitled to subtract up to the credited amount from his final tax bill.

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A tax credit, in my judgment, is more equitable and would be more appealing to the average citizen,

Two of my bills S. 2426, passed by the Senate in 1961, and S. 2541, reported to the Senate in 1966 contained provisions, as reported, calling for a tax credit of one half of the amount of a political contribution but not to exceed $10. Alternative proposals suggest a tax deduction not to exceed $100 in a calendar year.

Tax credits and tax deductions have been attacked on the grounds that a tax credit would be of real benefit only to the low-income wage earner; that a tax deduction would benefit the large wage earner more; that both types of incentives would be too costly or difficult to administer, et cetera.

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Also, there is the problem of giving the benefit of a tax incentive to those who owe no tax, et cetera.

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However, almost every wage earner must file a return whether he pays a tax or not, and some method could be devised to afford him a credit against taxes or even a partial refund. There are problems, very real problems, as we all know, in finding new and better methods for financing political campaigns. Existing, outmoded ceilings and limitations must be disposed of; reporting requirements must be broadened and made more detailed; the entire Corrupt Practices Act should

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