Can Lower Tax Rates Be Bought? Business Rent-Seeking and Tax Competition Among U.S. States

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.JEL Codes: H71, H73, H25

Tobacco Politics and Electoral Accountability in the United States

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Corporate lobbying and political contributions and their effects on tax avoidance

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The Globar War: The EU’s Apple Tax Case

“…posed by the BBC on 30 July 2015 17 ;the best response is probably that "no major state" really wants them to be eradicated … maybe due to their mastering in the art of grey. them to be eradicated 18 … maybe due to their mastering in the art of grey.…”

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