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Can lower tax rates be bought? Business rent-seeking and tax competition among U.S.States

Bob Chirinko () and Daniel Wilson ()

No 2010/2, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. We depart from this assumption by allowing policymakers to be influenced by the rent-seeking behavior of businesses. Campaign contributions may affect tax competition and enhance or retard the mobility of capital across jurisdictions. Based on a panel of 48 U.S. states and unique data on business campaign contributions, we find that contributions have a significant direct effect on tax policy, the economic value of a $1 business campaign contribution is nearly $4, the slope of the tax reaction function is negative, and the empirical results are sensitive to state effects.

Keywords: Campaign contributions; business taxation; state tax competition (search for similar items in EconPapers)
JEL-codes: H71 H73 H25 (search for similar items in EconPapers)
Date: 2010
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Related works:
Journal Article: Can Lower Tax Rates Be Bought? Business Rent-Seeking and Tax Competition Among U.S. States (2010) Downloads
Working Paper: Can Lower Tax Rates be Bought? Business Rent-Seeking and Tax Competition among U.S. States (2010) Downloads
Working Paper: Can lower tax rates be bought? Business rent-seeking and tax competition among U.S. states (2009) Downloads
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