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NORTH CAROLINA’S SOFT MONEY CONNECTION

Big Benefits for Some, High Costs for Others; 7 Companies Give Half the $8.4 Million Total

As the U.S. Senate continues its debate over restricting the unlimited political donations known as “soft money,” a new study shows how that money impacts the daily lives of North Carolinians.

“The concerns people have about prescription drug prices or unfair taxes, about kids getting hooked on cigarettes or sick from dirty air – those are all problems directly tied to the soft money that comes from North Carolina,” said Pete MacDowell, executive director of Democracy South, the campaign finance watchdog group based in Carrboro. “Soft money is a way for very wealthy donors in North Carolina to push their problems and their bills onto the rest of us.”

In the last four years, North Carolina businesses and individuals sent $8.4 million in soft money donations to the national parties, according to Democracy South’s analysis of Federal Election Commission records. Despite the state’s Democratic tilt, 77% of the money went to the Republicans.

Banks, utilities, tobacco firms, and a pharmaceutical company gave the lion’s share – 54% of the total. “Given their resources, soft money is a cheap price to pay to get the access they need to shape national policy,” MacDowell said. The Democracy South report includes details on the top donors:

¬® R. J. Reynolds Tobacco Co. gave $1.6 million from 1997 through 2000, with 88% going to Republicans. Lorillard Tobacco in Greensboro gave $282,630. They joined Philip Morris – the nation’s top corporate soft-money donor – and other tobacco firms to block efforts by the Clinton White House and some Congressional leaders to regulate nicotine and substantially raise taxes on cigarettes.

¨ Glaxo Wellcome, now Glaxo Smith Kline, made soft-money contributions totaling $1.1 million in the four-year period, with 93% benefiting Republicans. Last year, while defending its patents against low-cost generic drugs, Glaxo helped kill a bill in Congress that would require drug companies to sell pharmacies medicine for Medicare beneficiaries at a steep discount.

¨ First Union and Bank America donated a total of $1.2 million, with 86% helping the GOP. After years of debate, the banking industry won new privileges to sell stocks and insurance and, in separate legislation passed this year, new barriers against debtors filing for bankruptcy protection.

¬® Duke Power, now Duke Energy, and Carolina Power & Light, now Progress Energy, gave a combined total of $365,500 and 77% went to Republicans. They are two of the big winners in President Bush’s recent retreat on carbon dioxide standards, and have won numerous delays in cutting their output of pollutants that regulators say cause smog, acid rain, and depletion of the ozone layer.

MacDowell pointed out that some prominent North Carolina businesses, such as First Citizens Bank, have a corporate policy against donating soft money. A national organization of business and¬†academic leaders called the Committee for Economic Development [see contact at end], strongly advocates for a ban on soft money. One of its board members, John H. Bryan, chief executive officer of the Sara Lee Corporation, refers to soft money donations as “legalized bribery.” Sara Lee has extensive operations in the state, including its Hanes hosiery division based in Winston-Salem.

Other North Carolina donors of soft money include two individuals active in their respective parties: Christopher H. Wege of Boone gave $319,700 to the Natural Law Party, and Andres Reyes, a Democratic Party official in Charlotte, gave $190,000 to national Democratic committees.

The Eastern Band of Cherokees became a soft-money donor for the first time, with four donations to Democrats in 2000 totaling $140,000. They have a major interest in federal and state regulation of casino gambling on Indian property and the granting of federal recognition to new Indian tribes, such as the Lumbees, which could reduce their share of limited federal funds.

In addition to its influence on national policies that impact people’s daily lives, the Democracy South report focused on two other ways that soft money affects North Carolina.

· State Tax Loopholes. The top corporate soft-money donors are also the beneficiaries of large tax breaks now being discussed by a commission appointed by Governor Mike Easley. State banks enjoy a special deduction on expenses tied to their tax-exempt income, which saves them about $100 million a year in state taxes. R. J. Reynolds initiated a change in how the state taxes multi-state corporations, which saves those firms $56 million a year. Reynolds, Glaxo, and other manufacturers also enjoy a cap on sales taxes paid on new machinery, which saves businesses $178.5 million a year.

¬∑ Money Laundering. The report provides several examples of how “soft money has turned political parties into money-laundering machines, where huge amounts of corporate or union money get filtered into activities they are banned from financing directly.” For example, a N.C. furniture company sent $100,000 to the Republican Party at the request of state GOP leaders, and a check for a similar amount came back to North Carolina to help Republican state House candidates. In the 2000 election, several legislative leaders sent checks of up to $100,000 from their campaigns to the national parties, and they got up to twice as much back to help their party’s legislative candidates.

Democracy South calculates that $9 million was sent into North Carolina in soft money to influence elections here, and less than 5 percent came from North Carolina donors.

“You can quantify the cost of soft money at no less than $335 million a year to North Carolina taxpayers,” said MacDowell. “That’s just three of the tax loopholes. The greater, but intangible cost is the way soft money has taken elections out of the hands of North Carolina voters and given control to the biggest donors the national parties can find. This is the corruption that can destroy a democracy.”

While supporting the McCain-Feingold bill, MacDowell says he’s worried that if it passes, the big checks will just come directly to North Carolina’s parties, because there is no limit on the size of donations they can accept. “The national debate points up two important needs,” he said. “We need state-party limits to stop our own brand of soft money inside the state, and we need a voluntary form of voter-financed elections to rescue candidates from this corruption and put voters in charge.”