Lobbying and Taxes

Abstract

Lobbying dominates corporate political spending, but comprehensive studies of the benefits accrued are scarce. Using a dataset of all U.S. firms with publicly available financial statements, we delve into the tax benefits obtained from lobbying. Firms that spend more on lobbying in a given year pay lower effective tax rates in the next year. Increasing registered lobbying expenditures by 1% appears to lower effective tax rates by somewhere in the range of 0.5 to 1.6 percentage points for the average firm that lobbies. While individual firms amass considerable benefits, the costs of lobbying-induced tax breaks appear modest for the government.

Tacit Lobbying Agreements: An Experimental Study

“…Interestingly, in support of the external validity of our experimental results, we observe some similarities in the findings between the observational study of Richter, Samphantharak, and Timmons (2009) analysis mainly on the profitability of lobbying. In addition to profitability, our lobbying game and experiment allows us to examine the decision-making process underlying the formation of tacit lobbying agreements.…”

“…For example, De Figueiredo and Silverman (2006) find that a 10% increase in lobbying by a university represented in a House or Senate Appropriations Committee increases the university's earmarks by 3.5%. In another example, Richter, Samphantharak, and Timmons (2009) use data available from the Center for Responsive Politics and report that for an average corporate firm spending 1% 6 In the words of Milyo, Primo, and Groseclose: "In the absence of such [enforceable] contracts, it is difficult to understand how a 'spot market' for political favors can exist. In a simple one-period model (absent of perfectly simultaneous exchange) either contributors or legislators will surely renege on the deal, so no deals are ever made" (2000,80).…”

The Role Political Connections Play in Access to Finance: Evidence from Cross-Listing

“…Several researchers, in the growing literature on the outcomes firms obtain through political influence, document ways firms benefit other than through coercion of local bankers, including: allocating rights to scarce resources (such as TV or radio frequencies), helping firms secure favorable regulation (Agrawal and Knoeber 2001), winning firm-specific tax breaks (Richter et al 2009),ensuring that entities win government appropriations (Roberts 1990;de Figueiredo and Silverman 2006;Goldman, Rocholl, and So 2008), and being more likely to be bailed out in times of financial distress (Faccio, Masulis, and McConnell 2006).To the extent that these benefits (obtained by manipulating the property rights system) stabilize firms' operations over the long run, they should reduce firms' risk premiums-in which case, financiers, both domestic and foreign, would rationally choose to offer connected firms better financing terms, irrespective of political pleas.…”

Corporate funding and ideological polarization about climate change

“…Indeed, many scholars have examined climate change discourse in media coverage of climate change (16-21), but because of data constraints and the difficulty of gathering such complex and furtive data, we still lack a comprehensive data-driven understanding about the actual content and source of contrarian messages, as well as the complex organizational and financial networks within which they are produced. This study presents such an approach, and examines how the production of an alternative discourse is embedded within a particular social structure and how the content itself is influenced by particular funding sources.Important to this approach is the fact that in the United States, there are a growing number of grassroots lobbying firms who work on behalf of corporations, industry groups, and associations (22,23). Along with this growth in corporate lobbying, other social and political opportunities have opened the door for movements like climate change contrarianism to flourish, such as weakening restrictions on political finance (24) and the concentration of corporate wealth more generally (25,26).…”

“…Important to this approach is the fact that in the United States, there are a growing number of grassroots lobbying firms who work on behalf of corporations, industry groups, and associations (22,23). Along with this growth in corporate lobbying, other social and political opportunities have opened the door for movements like climate change contrarianism to flourish, such as weakening restrictions on political finance (24) and the concentration of corporate wealth more generally (25,26).…”