Close the 527 Loophole

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Wednesday, April 5, 2006

THE HOUSE PLANS to take up legislation today that would close the biggest remaining loophole in the campaign finance system. It would require the political groups known as 527s to play by the same rules as other committees that aim to influence federal elections. The House ought to pass the measure, sponsored by Reps. Christopher Shays (R-Conn.) and Martin T. Meehan (D-Mass.), and shut down the kind of 527 "soft money" operation that flourished during the 2004 campaign, like Democrats' America Coming Together and Republicans' Swift Boat Veterans for Truth.

These committees, named after the section of the tax code under which they're established, are by definition "organized and operated primarily" to influence elections. When those elections are for federal office, it makes no sense to let such groups collect six-, seven- and even eight-figure checks to elect or defeat candidates, while candidates, political parties and political action committees are limited to receiving contributions a small fraction of that size. Similarly, corporations and labor unions -- barred by law from contributing directly to federal candidates or parties -- shouldn't be allowed to write checks to 527s, which exist for the same purpose.

The usual politics of campaign finance reform -- Democrats for (at least publicly), Republicans against -- are upside down this time around. The reason is that Republicans do better than Democrats at raising the (relatively) small donations known as "hard money," while Democrats took the lead in the past election cycle in raising soft money for 527 groups. Connoisseurs of hypocrisy should enjoy this spectacle, but the partisan calculations are probably overstated. Democrats, with the rise of the Internet, have been improving their hard-money fundraising. Republicans are bound to draw even in the 527 race if it continues.

There are concerns that regulating money to 527s would drive spending further into the shadows, to nonprofit groups and trade associations that, unlike 527s, don't even have to disclose their donors and spending. But there are restrictions on the partisan activity of such groups, and if a problem develops with the misuse of such organizations, that could be addressed in future legislation. It's not a reason for inaction now.


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