Disclosure’s Costs: Grassroots Speech and Campaign-Finance Laws

Freedom of political speech won a major victory this week when the 10th Circuit struck down the Colorado campaign finance laws that had forced a small band of neighbors to register with and detail their activities to the government just to speak out about a ballot issue.

The ruling is the latest in a string of court victories vindicating the right to speak about politics and striking down so-called campaign-finance laws. It marks the first such victory to strike down a disclosure law for ballot issues and to recognize that disclosure places real burdens on speakers with little or no benefit to the public.

This is a big deal. For advocates of campaign-finance regulation, disclosure is the thin edge of the wedge — a seemingly benign, feel-good justification for ever greater regulation of political speech.

Take the proposed DISCLOSE Act in Congress, which is regulation advocates’ response to the Citizens United ruling. As indicated by the clumsy acronym title, proponents claimed that the bill was “merely” about requiring the disclosure of the financial backers of political ads, when in reality the bill would do much more to regulate and limit speech.

Moreover, there is nothing “mere” about government-forced disclosure. As the 10th Circuit recognized, disclosure has real-world consequences and does real harm to the First Amendment.

Start with what was really going on in the 10th Circuit case. A group of neighbors outside Denver banded together to oppose the annexation of their neighborhood into a nearby town. They walked the streets talking to other neighbors, posted in online community forums, and planted yard signs. This got them sued by annexation proponents, who said the group violated Colorado’s campaign-finance laws.

Under those laws, if a group of people spends more than $200 advocating one side of an issue on the ballot, they must register with the government before they speak and then report in mind-numbing detail their ongoing activities. At least 24 states have similar laws.

The 10th Circuit found Colorado’s law to be an unacceptable burden on the First Amendment right of free speech. As Judge Harris L. Hartz wrote, “The average citizen cannot be expected to master on his or her own the many campaign financial-disclosure requirements set forth in Colorado’s constitution, the Campaign Act, and the Secretary of State’s Rules Concerning Campaign and Political Finance.”

Recent research backs up Judge Hartz. University of Missouri economist and campaign finance expert Jeffrey Milyo asked 255 such average citizens to fill out the ballot issue disclosure forms from Colorado, Missouri and California. Milyo provided all the publicly available rules and guidance, as well as financial incentives for performance. Not one person filled out the forms correctly. The average correct score was just 41 percent.

Participants called the process “Worse than the IRS!” And in real life, each of the 255 would face fines or other legal penalties for their mistakes.

The 10th Circuit also rejected the feel-good “informational interest” in disclosure, the idea that disclosure makes voters better informed. Here again, research supports the court’s ruling.

Institute for Justice director of strategic research Dick Carpenter polled citizens in six states with laws like Colorado’s and found that most people — about 60 percent — do not even know where to find contributor information, nor do they seek it out before voting. He also surveyed secondary sources like news media and websites, and found that only 4.5 percent pass such information along to voters. It is hard for voters to be better informed by disclosed information if they never see it.

In fact, the court countered, mandatory disclosure encourages ad hominem attacks rather than a discussion of the issues. Instead, wrote Judge Hartz, “Nondisclosure could require the debate to actually be about the merits of the proposition on the ballot.”

The 10th Circuit’s ruling is a welcome recognition that mandatory disclosure laws for ballot issues serve no purpose other than to make political advocacy more difficult, particularly for grassroots groups. And the First Amendment does not tolerate laws that place such a burden on political speech.

Lisa Knepper is a director of strategic research at the Institute for Justice, which challenged Colorado’s laws.

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