Futility and Free-Riding: Corporate Political Participation and Taxation Rates in the United States

Drope Jeffrey M and Hansen Wendy L
Additional contact information
Drope Jeffrey M: Marquette University
Hansen Wendy L: University of New Mexico

Business and Politics, 2009, vol. 10, issue 3, 1-25

Abstract: While there is a strong theoretical foundation for the relationship between business sectors' political spending and the policy benefits that they receive, the empirical support for it is mixed. We use the logic of this exchange to examine a policy area that directly and significantly affects all businesses, and is thus a most likely case, taxation. Using principally firm-level tax rates of a large random sample of U.S. corporations for the 1998-2005 time period, we determine whether lobbying has measurable effects on firm-level tax rates. Contrary perhaps to popular belief, or at least anecdotal illustration, we find after controlling for firm size and industry-level tax rates, among other controls, that there is no discernible effect of political spending on firm-level taxation: firms that spend more in an effort to affect policy generally or tax policy specifically are no more likely to benefit from lower tax rates. We also examine the possibility that firms in the same industry coordinate efforts to affect tax rates. While we find limited evidence that firms occasionally coordinate within industries - or at least lobby simultaneously - to affect tax rates, perhaps more importantly, we determine that free-riding by smaller firms at the expense of the largest firms is rampant.

Date: 2009
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2202/1469-3569.1238 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:buspol:v:10:y:2009:i:3:n:2

Ordering information: This journal article can be ordered from
https://www.cambridg ... usiness-and-politics

DOI: 10.2202/1469-3569.1238

Access Statistics for this article

Business and Politics is currently edited by Vinod K. Aggarwal

More articles in Business and Politics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().