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

69 Pages Posted: 3 Jul 2018

See all articles by Marianne Bertrand

Marianne Bertrand

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

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Matilde Bombardini

University of British Columbia (UBC)

Francesco Trebbi

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

Multiple version iconThere are 3 versions of this paper

Date Written: June 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 fled 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 7.2 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.

Suggested Citation

Bertrand, Marianne and Fisman, Raymond and Bombardini, Matilde and Trebbi, Francesco, Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence (June 2018). CEPR Discussion Paper No. DP13025. Available at SSRN: https://ssrn.com/abstract=3206791

Marianne Bertrand (Contact Author)

University of Chicago - Booth School of Business ( email )

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

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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Raymond Fisman

National Bureau of Economic Research (NBER)

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Boston University ( email )

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Matilde Bombardini

University of British Columbia (UBC) ( email )

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Canada

Francesco Trebbi

Vancouver School of Economics ( email )

University of British Columbia
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Vancouver Canada, BC V6T 1L4
Canada

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

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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