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How Burger King Can Save U.S. Politics

Are foreign-owned corporations the solution to U.S. campaign finance reform?

October 30, 2000

Are foreign-owned corporations the solution to U.S. campaign finance reform?

Our story begins with an intriguing fact. Some hamburger flippers across the nation are more hampered in unfolding their political activities than others. This discrimination occurs not along the lines of race, gender or income, but rather is based on their choice of employer. What that means is that while McDonald’s employees can contribute to employer-sponsored political action committees (PACs), Burger King employees cannot.

The reason for this is that Burger King is owned by the British holding company Diageo, which — as a foreign corporation — is not allowed to make campaign contributions in the United States.

While the employees of foreign-owned corporations can maintain PACs, there are a number of restrictions. Most notably, foreign corporations are prohibited from offering their employees financial incentives to contribute to company PACs, as is common practice among U.S. corporations.

Moreover, the PAC must be administered and funded by U.S. citizens, without direction from the foreign company. The first stipulation greatly reduces the likely amount that a corporation will be able to raise for political purposes, while the second makes the PAC more difficult to control. As such, foreign-owned corporations are less likely to participate in financing political candidates to the degree that their U.S. counterparts do.

Foreign-owned companies can allow the PACs of U.S. companies they acquire to continue operating. Germany’s Daimler-Benz did this when it acquired Chrysler. But U.S. law makes it less likely that foreign companies will set up PACs after the acquisition. Still, U.S. corporations are largely unfettered in how they can fund political activities.

This is a notable because campaign contributions by corporations and special interest groups have been the principal focus of calls to overhaul campaign finance laws. Why? Because less than 5% of Americans contribute to political campaigns directly — and less than one-quarter of 1% give $200 or more. (Most Americans contribute to campaign finance by directing on their personal income tax returns that $3 of their taxes go into funding the presidential campaign.) These small amounts stand in sharp contrast to the $3 billion that the Federal Election Commission estimates will be spent on this year’s presidential and congressional races.

There are scores of ways to contribute to political campaigns, the most notorious of which are PACs. The first such committee was formed in 1944 by the Congress of Industrial Organizations, a forerunner of the AFL-CIO, to support the re-election of President Roosevelt. Large corporations have dominated PACs, raising millions of dollars ever since.

Organized for the purpose of raising and spending money to elect and defeat candidates, PACs can give $5,000 to a candidate committee per election, $5,000 annually to another PAC, and up to $15,000 annually to any national party.

Yet although these spending limits are relatively low, there are no limits on so-called “independent expenditures,” which is money spent by PACs independently of a candidate on advocating that candidate’s election or defeat.

This is where the current discrimination against some members of the fast-food industry may indeed be a good indication for a way to escape the dreary — and unending — debate on campaign finance reform and all its well-designed loopholes. If every U.S. company were owned by a holding company based outside the United States, the nation would finally get rid of the scourge of campaign finance contributions.

Just imagine …