Contributing to the campaign coffers

With the US presidential campaign well under way, just how big a role has the accounting profession played in terms of financial donations to the political players? asks Holly Yeager

The US presidential campaign has been dominated by debate about the war in Iraq, healthcare, immigration and the environment. While the structure of the tax system comes up occasionally, other important accounting issues such as the Sarbanes-Oxley reforms and international accounting standards rarely get a mention.

But accountants have nonetheless taken an active role in the campaign, evidenced most clearly by their chequebooks. People who work in the profession have so far contributed more than US$3m to presidential candidates, with more to follow before November's general election.

'Hillary Clinton and Mitt Romney were the winners among accountants in 2007,' says Massie Ritsch of the Center for Responsive Politics, a non-partisan group based in Washington that monitors campaign contributions.

The industry's donations to the race so far make it the 18th biggest contributor to this year's presidential contest, which is set to be the most expensive in history. By the end of 2007, the field of presidential hopefuls had already raised US$582.5m and spent US$481.2m, according to the Center.

Clinton, the New York senator and former First Lady who is locked in a tough fight for the Democratic presidential nomination, received US$789,443 last year from accountants and people who work at accounting firms, according to the Center's analysis of Federal Election Commission records.

Romney, the former Massachusetts governor and former chief executive of Bain & Company, a management consultancy, was the top Republican recipient of contributions from the industry, bringing in US$467,664 last year. Romney's departure from the race in early February left John McCain, the Vietnam war hero and Arizona senator, as the likely Republican nominee for president. McCain collected US$209,776 from the industry last year.

Campaign contributions from the accounting industry favoured Democrats over Republicans, 54% to 46%. But in the final quarter of 2007, the most recent period for which data is available, the giving tilted much more heavily towards Democrats, 68% to 32%. Clinton was again the top recipient, followed by Barack Obama, the Illinois senator who is battling her for the Democratic nomination.

Cautious

Ritsch says political contributions, especially those made later in the campaign, often reflect who donors think will win: 'Donors don't go throwing their money around willy nilly on someone who they think won't win. And perhaps accountants are more cautious than others.'

Several other industries also moved more towards Democrats as the year ended. 'But accountants are closer to 50-50 than many industries,' he adds, noting that lawyers, college professors, and people who work in the entertainment business, printing and publishing, and retail sales all lean strongly towards Democrats.

'Accountants are doing what people who work in securities and investment, health professionals, commercial banks and the insurance industry are doing,' says Ritsch. 'They are favouring Democrats slightly, but they still have some significant fondness for Republicans.'

US campaign finance laws allow individuals to contribute up to US$2,300 to a candidate for the primary election campaign and another US$2,300 if that person wins the party nomination and becomes a general election candidate. Direct contributions from companies to candidates are not permitted. But many groups form PACs - political action committees - which can receive up to US$5,000 from an individual each year. PACs may give up to US$5,000 to a candidate for each election.

PACs generally play a small role in presidential campaigns. (Contributions from accounting PACs made up just over 1% of the industry's giving in this cycle.) Instead, such groups, often affiliated with business or labour interests, tend to focus their campaign giving on members of Congress, who frequently cast votes, conduct hearings and help shape public opinion.

'At this point, there is not much that these presidential candidates can do for an industry or a company other than cast a vote when they're in Washington on the Senate floor,' says Ritsch. 'But there are members of Congress who aren't running for president who are able to make life better or worse for the industry through their regulations and lawmaking.'

'The congressional races certainly have a more immediate impact,' says John G Ams, Executive Vice President of the National Society of Accountants, which represents individual practitioners and partners in small firms. 'In one sense, the presidential race is a bit distant, and you can think, "What sort of impact can one possibly have?"'

But, Ams continued: 'If you look at it more closely, it's not just the president you're electing, it's the type of people his administration will attract. What kind of nominations or appointments will he make to key posts, like the PCAOB [Public Company Accounting Oversight Board]? What kind of people will he put in at the Treasury Department, in important tax positions?

'In terms of regulation, and having an immediate impact, it's the Treasury Department and various offices in that department that really tend to matter.'

Why donate?

Of course, it is by no means clear that those who work in the accounting industry, or any other, make their decisions about politics based purely on professional concerns.

'I wish at the same time they were telling us where they worked they told us why they were making this donation,' says Ritsch. 'It could be economic self-interest, for the good of their business or industry. But they may be donating based on some ideological affinity for the candidate. They may have gone to college with them, or they might live down the street from them. There are a lot of possible reasons, and we're not able to say for sure.'

Geography could be a factor this year. The Big Four auditing firms all have their US headquarters in New York, perhaps explaining Clinton's strength in the industry. Rudy Giuliani, the former New York mayor, also did well among accountants before dropping out of the race for the Republican nomination in January.

Ernst & Young was among the most active corporations last year. Its employees' contributions to presidential candidates placed the group 11th among corporate contributors, according to the Center. Individuals associated with the firm gave US$584,515 to presidential candidates, with 58% going to Republicans - and almost all of that going to Giuliani.

PwC was especially active late in the year. Employees at the firm, including its consulting arm, gave US$112,914 in the fourth quarter of 2007, with 86% of that going to Democrats. The two firms did not return calls seeking comment about their contributions.

'Some firms just have a culture of making contributions,' says Ams.

Ritsch agrees. 'Firms have political leanings,' he says. 'You can tell something about the culture of a firm by the breakdown of its political contributions... If you were a Republican who wanted to feel comfortable on Wall Street, you would probably want to work at Merrill before you wanted to work at Goldman Sachs.'

But policies surely matter as well.

Clinton has called for lowering taxes on middle-class families and raising income tax rates for wealthy Americans to levels they were at before George W Bush took office. Obama favours simplifying tax filing and providing tax credits for millions of working Americans.

McCain has vowed to extend the tax cuts on income, dividends and capital gains enacted under Bush. Mike Huckabee, the Baptist minister and former Arkansas governor who has vowed to fight McCain until the bitter end for the Republican nomination, often talks about his 'fair tax' proposal, which would replace the Internal Revenue Service code with a consumption tax.

'I really do look forward to nailing a "Going Out of Business" sign on the front door of the IRS,' Huckabee often says on the campaign trail. He collected just US$11,656 from accountants last year.

Holly Yeager is a freelance writer based in Washington DC.