Lobbying and Taxes

TLDR

Lobbying dominates corporate political spending, but comprehensive studies of the benefits accrued are scarce. The study investigates the tax benefits obtained from lobbying by analyzing all U.S. firms with publicly available financial statements. The authors use this dataset to examine the relationship between lobbying expenditures and subsequent effective tax rates.

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.