"Small Business" in Missouri

In Wednesday's presidential debate, President Obama and Candidate Romney disagreed sharply on the effect that Clinton-era tax rates would have on "small businesses" taxed at the individual rate instead of the corporate rate.

President Obama argued:

Under my plan, 97% of small businesses would not see their income taxes go up. Governor Romney says, well, those top 3%, they're the job creators, they'd be burdened.  But under Governor Romney's definition, there are a whole bunch of millionaires and billionaires who are small businesses. Donald Trump is a small business. Now, I know Donald Trump doesn't like to think of himself as small anything, but that's how you define small businesses if you're getting business income.

To which Candidate Romney responded:

Mr. President, you're absolutely right, which is that, with regards to 97% of the businesses are not taxed at the 35% tax rate, they're taxed at a lower rate. But those businesses that are in the last 3% of businesses happen to employ half of all the people who work in small business. Those are the businesses that employ one-quarter of all the workers in America. And your plan is to take their tax rate from 35% to 40%.

Their debate centers on "free-flow enterprises," businesses that are not taxed at the corporate rate but whose profits appear on their owners' individual income statements.  These profits are taxed once, at the shareholder’s individual tax rate for ordinary income, for which the top rate is currently 35%.

The numbers Mitt Romney cited originate with a controversial paper by Ernst & Young's Drs. Robert Carroll and Gerald Prante, which claims flow-through businesses accounted for nearly 95% of all business entities and employed 54% of the workforce in 2008.  Romney argues the top 3% of these flow-through businesses will fall under Obama's tax increase and hire fewer workers.

Should Missouri worry?  On the IRS list of states' adjusted gross income, Missouri came in #21 with flow-through business (s-corps & partnerships) as a little under 5% of the income reported in the state.

 

 Although Missouri is not at the top of the list in AGI made up by flow-through businesses, New York's AGI is composed of 6.4% flow-through business, and Ed Gerrish of TaxFoundation.org notes,"... Allowing the Bush tax cuts to expire would disproportionally draw more tax dollars from these states than others."

Dialing for Dollars - Rebecca McClanahan's Fundraising Strategy

Rebecca McClanahan, candidate for State Representative in District 3, is facing an uphill battle when it comes to fundraising. In every election since 2006, she's been out-raised by her opponent - sometimes by three times as much. This election season is no different. 

The key to winning despite this deficit, however, is in the small donations. 

"I treasure the small donations," said McClanahan. "Online fundraising has given a place of honor to small donations." 

McClanahan cites this as an attitudinal difference between Democrats and Republicans. Seeking out these "small donors" forces her to do more grassroots fundraising while, in her opinion, Republicans neglect retail politics because they receive larger individual donations. 

The focus on small contributions doesn't mean McClanahan is only fundraising at the grassroots level. She also seeks out PACs and lobbyists with legislative goals in line with hers. These organizations are not always in a giving mood however. 

Rebecca cites two reasons for her difficulties securing funding from outside groups - the economy and plain old politics.

The Recession has put a strain on PACs and large donors, forcing them to choose where to contribute based solely on the demographic statistics of the district. McClanahan is at a disadvantage by the numbers because District 3 is seen as primarily Republican. 

Politics also plays a role in her fundraising stress because large donors see the race as a risky investment due to the absence of an incumbent. In addition, changes in district lines after the 2010 Census have made the District even more strongly Republican. For more information on the redistricting rulings, see the video below. 

Click Here.

Rebecca and her campaign staff do have some suggestions for aspiring politicians raising funds in difficult districts. 

First, ask the people around you. McClanahan said that you know you're ready to run when "you can turn to the person on your right and ask them for money and turn to the person on your left and ask them for money." Family and friends are great people to ask to throw a dinner or coffee on your behalf. 

She also suggests asking for professional help. While most local candidates can't afford an experienced campaign manager, there are other means of learning how to fundraise. Seeking consultation and training will lead to more comfortable fundraising.

A third suggestion is to use technology to your advantage. Her campaign uses a service called ActBlue to collect funds through her website. The agency takes a small percentage of the donation as a service charge and in return presents the campaign with metrics and the necessary information for MEC filing, a bargain in McClanahan's mind. 

McClanahan also suggests "just doing it." Using the phrase "ask and you will receive," she said the best way to get comfortable asking for contributions is to just start asking. It may take some time, but eventually it stops feeling like you're asking for money for yourself because the campaign becomes a cause, a higher purpose. 

Campaign manager Zach Buckler suggests "dialing for dollars" in the morning and then knocking on doors in the afternoon to pursue an "all of the above" approach. 

Check back next Thursday for Rebecca's thoughts on campaign contribution limits and an in-depth look at Missouri's position as only one of four states who currently impose no limits on donations. 

Citizens United and Missouri

Although the Citizens United decision was handed down in 2010, the full effects are only beginning to be felt across the country.  Recently, major media outlets have cast a spotlight on Montana as Citizens United "dismantles" their political system, which was based on a general ban on corporate funds in politics.

Montana's ban had stood since 1912, when it was created to bar the flood of dollars from the booming copper industry.  The ban has been overturned by the Citizens decision, prompting a backlash from Montana citizens, the press, and even Montana Governor Brian Schweitzer and Lieutenant Governor John Bohlinger.

 

What about Missouri?  Does Citizens impact any of our existing state laws? The simple answer is "no."  Even prior to Citizens, Missouri's state laws imposed no cap on campaign contributions from any source.

In addition, the federal campaign restrictions of the Bipartisan Campaign Reform Act, which were overturned in the Citizens decision, "do not apply if the person is a candidate for state or local office and the fundraising or spending refers only to that state or local candidate or any other candidate for that same state or local office, or both."

So, even from the start, Missouri has lacked the caps on campaign contributions that Montana is so sore to lose.  Has the lack of limits damaged democracy in our state?

In a recent KCUR interview, Missouri State University political science professor George Connor said, “There's been a Pandora's box opened up with respect to spending,” but he also points out that the lid to the box was "always a bit ajar."  Connor points to donations topping $750,000, but argues that more legislation is not the answer.

Missouri is rural and "public-spirited" as Connor points out; we're not known to be a cesspool of corruption.  How the increasingly rapid growth in contributions and significant changes in legislation affect our democracy is an issue with no clear answer.  Perhaps, in the future, we will find ourselves "standing with Montanans," or we may look back, glad to see the restrictions disappearing,

The Cost of a Campaign

How much does a campaign cost, anyway? 

Direct mail is a must for local candidates. 

Benjamin Katz, blogger for CompleteCampaigns.com, says the going rate for winning a campaign is about $3 per voter. "Many campaign professionals recommend communicating with each potential voter six times," said Katz, meaning each contact costs 50 cents.

Candidates can reach out to voters in several ways, but the most effective are usually direct mail and door-to-door outreach. Each requires some printed material for voters, which adds up over time.

Yard signs are another expensive tool. 

Another big expense for campaigns is yard signs. Ben Donahower, author of Everything You Know About Campaign Signs Is Wrong, suggests multiplying the number of voters by the voter turnout and then dividing that number by eight to estimate the number of signs needed for the campaign.

To give you an idea of how much campaign materials cost at the local level, consider the two bloggers' equations for Adair County.

Adair County had a voter turnout in the last presidential election of 68% - which leaves us with an estimated 12,000 voters for this election. That means that at $3 per voter, a candidate hoping to reach every single voter would need to raise $36,000.

Of course, candidates realize they don't need to contact each and every voter. This number just gives us a rough idea of how much a campaign can potentially cost.

Thoughts or questions about these numbers? Let us know by leaving a comment below!

Adair County Economic Profile

Understanding the economic background of the electorate is an integral part of a campaign in any region.  The businesses present in the region include not only a large number of voters, but also monied interests that can bolster or smother any campaign.

  Adair County, part of Missouri’s 9th District, is a rural county that is both poorer and less racially diverse than Missouri as a whole.


Common jobs data for Adair County is included in nonmetropolitan North Missouri data, where these top five occupations account for almost 55% of jobs.

Over the past 15 years, Adair has seen a 16% dip in the number of citizens participating in the labor force, meaning that, although the number of residents has stayed fairly constant, the number of Adair county residents working or searching for a job has declined significantly.

Since 2009, the Adair population has increased from 25,125 to 25,552 while the labor force, those working or looking for a job, has decrease from 13,704 to 12,611.

*Graph constructed from FRED Labor Force Participation and FRED Resident Population data.

While labor unions or social interest groups might require the spotlight in more metropolitan areas, the economic interests of Adair County center around large Missouri employers like Walmart, as well as small, local businesses.

Valuable Resources: Missouri Election Commission

Before candidates can raise funds in Missouri, they have to know the rules they’re playing by.

The Missouri Ethics Commission is the governing body that manages candidate and campaign fundraising. They do a great job of providing candidates with all of the pertinent information for running a campaign within Missouri’s election parameters.

The MEC tries its hardest to simplify its rules and regulations for the people running. Since a lot of local candidates are first-timers, they provide tons of online tutorials, simplified brochures, and calendars to keep everyone on track. 

One of my favorite resources on the MEC website is the fundraising brochure. It breaks down the requirements for fundraising "activities" and provides an example of how to report money collected at fundraisers, as shown below. 

An example of fundraising record-keeping.

The Commission also provides email and phone support for confused candidates. When I emailed the MEC with questions about where to find campaign finance reports for a specific candidate, they responded within two hours. What great service!

In the coming weeks, we'll talk to candidates about how useful they find the MEC's resources to be and how they navigate the complicated system that is campaign finance reform.

Welcome!

Hello from Beg and Borrow

This year's election cycle will be the most expensive in America's history. With $5.8 million in play for the presidential election alone, it's hard to imagine how local candidates can even begin to compete with the overwhelming $30 million of campaign spending on the federal level. 

Federal campaigns have spent almost $30 million in Missouri.  

Beg and Borrow was created as part of a Political Communication course at Truman State University. 
When we first started considering potential topics, we found two interests guided our suggestions.

First, we knew we wanted to learn about some aspect of campaign finance. Between the impact of the 2010 Citizens United case and the record-breaking fundraising of the 2012 presidential election, we wanted to take a hard look at what it takes to get a candidate elected. 

We also considered the lack of analysis at the local level of campaigning and thought a focus on the races that most directly impact Missouri residents would be more interesting than on national-level fundraising.

Thus, Beg and Borrow was born.

Throughout the next few weeks, we will provide an in-depth look at how local candidates raise funds in Missouri. We will interview candidates to learn more about how "real" people raise money to run for local office as well as conduct our own research to provide suggestions and product reviews for future campaigns.

You can follow our progress through the coming weeks on Twitter.