Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence

62 Pages Posted: 3 Jan 2018 Last revised: 20 Mar 2018

Marianne Bertrand

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Matilde Bombardini

University of British Columbia (UBC)

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Francesco Trebbi

Vancouver School of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 14, 2018

Abstract

We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms’ political motivations for charitable giving, we show that a member of Congress’s departure leads to a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms filed in accordance to Ethics in Government Act requirements exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a straightforward model of political influence, our estimates imply that 7.1 percent of total U.S. corporate charitable giving is politically motivated, an amount that is economically significant: it is 280 percent larger than annual PAC contributions and about 40 percent of total federal lobbying expenditures. Given the lack of formal electoral or regulatory disclosure requirements, charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is directly subsidized by taxpayers.

Keywords: Special Interests, Corporate Social Responsibility, Charity, Campaign Contributions, Lobbying

JEL Classification: D72, P48, H7

Suggested Citation

Bertrand, Marianne and Bombardini, Matilde and Fisman, Raymond J. and Trebbi, Francesco, Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence (March 14, 2018). Available at SSRN: https://ssrn.com/abstract=3095686 or http://dx.doi.org/10.2139/ssrn.3095686

Marianne Bertrand

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-5943 (Phone)

HOME PAGE: http://gsbwww.uchicago.edu/fac/marianne.bertrand/vita/cv_0604.pdf

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-0341 (Phone)
617-876-2742 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Matilde Bombardini

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

Raymond Fisman

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Francesco Trebbi (Contact Author)

Vancouver School of Economics ( email )

University of British Columbia
6000 Iona Dr.
Vancouver Canada, BC V6T 1L4
Canada

HOME PAGE: http://faculty.arts.ubc.ca/ftrebbi/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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