Measuring Rates of Return for Lobbying Expenditures: An Empirical Case Study of Tax Breaks for Multinational Corporations
Raquel Meyer Alexander
Washington and Lee University - Department of Accounting
Stephen W. Mazza
University of Kansas - School of Law
University of Kansas - Accounting and Information Systems Area
April 8, 2009
Journal of Law and Politics, Vol. 25, No. 401, 2009
In this paper we use audited corporate tax disclosures relating to a tax holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to examine the return on lobbying. We find firms lobbying for this provision have a return in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are more profitable overall, but surprisingly, profitability is not a predictor of repatriation amount. Rather, industry and firm size are most predictive of repatriation. Cash on hand, a proxy for ability to repatriate, is not associated with the repatriation decision or the repatriation amount. This paper provides compelling evidence that lobbying expenditures have a positive and significant return on investment.
Number of Pages in PDF File: 36
Keywords: Multinational Firms, Corporate Taxation, Repatriation, Lobbying
JEL Classification: F23, H20, H25, K34Accepted Paper Series
Date posted: April 10, 2009 ; Last revised: June 19, 2012
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