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Corporate Lobbying and Commitment Failure in Capital Taxation

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Author Info
Marceau, Nicolas
Smart, Michael

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Abstract

This paper investigates the effects of lobbying by corporations when investments are irreversible and government cannot commit to tax policies. We show that industries which rely more heavily on sunk capital lobby more vigorously and are generally more successful in obtaining tax breaks. Thus lobbying can mitigate the capital levy problem. Nevertheless, these industries invest less in long-run equilibrium than more flexible ones. We then consider the effects of relaxing legal restrictions on corporate lobbying. When the deadweight costs of lobbying fall, taxes on sunk capital tend to fall, but political contributions may rise, as lobbyists compete more intensively for political favors. On balance, a ban of lobbying may therefore cause investment to rise or fall.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 676.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_676

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Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Besley, Timothy & Coate, Stephen, 2001. "Lobbying and Welfare in a Representative Democracy," Review of Economic Studies, Blackwell Publishing, vol. 68(1), pages 67-82, January.
  2. Nicolas Marceau & Michael Smart, 2000. "Business Tax Lobbying," Cahiers de recherche CREFE / CREFE Working Papers 102, CREFE, Université du Québec à Montréal. [Downloadable!]
  3. Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September. [Downloadable!] (restricted)
  4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  5. Michelle R. Garfinkel & Jaewoo Lee, 2000. "Political Influence and the Dynamic Consistency of Policy," American Economic Review, American Economic Association, vol. 90(3), pages 649-666, June. [Downloadable!] (restricted)
  6. Eckhard Janeba, 2000. "Tax Competition When Governments Lack Commitment: Excess Capacity as a Countervailing Threat," American Economic Review, American Economic Association, vol. 90(5), pages 1508-1519, December. [Downloadable!] (restricted)
  7. Kotlikoff, Laurence J & Persson, Torsten & Svensson, Lars E O, 1988. "Social Contracts as Assets: A Possible Solution to the Time-Consistency Problem," American Economic Review, American Economic Association, vol. 78(4), pages 662-77, September. [Downloadable!] (restricted)
  8. Laussel, Didier & Le Breton, Michel, 2001. "Conflict and Cooperation: The Structure of Equilibrium Payoffs in Common Agency," Journal of Economic Theory, Elsevier, vol. 100(1), pages 93-128, September. [Downloadable!] (restricted)
  9. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
  10. Stephen Coate & Stephen Morris, . "Policy Persistence," CARESS Working Papres 97-2, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences. [Downloadable!]
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  11. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Börner, Kira, 2004. "Political Economy Reasons for Government Inertia: The Role of Interest Groups in the Case of Access to Medicines," Discussion Papers in Economics 313, University of Munich, Department of Economics. [Downloadable!]
  2. Timothy Besley & Maitreesh Ghatak, 2009. "Property Rights and EconomicDevelopment," STICERD - Economic Organisation and Public Policy Discussion Papers Series 006, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  3. Robin Boadway & Jean-Francois Tremblay, 2003. "Public Economics and Startup Entrepreneurs," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Dino Falaschetti, 2004. "Can Voting Reduce Welfare? Evidence from the US Telecommunications Sector," Public Economics 0401009, EconWPA. [Downloadable!]
  5. Stanley L. Winer & Walter Hettich, 2002. "The Political Economy of Taxation: Positive and Normative Analysis when Collective Choice Matters," Carleton Economic Papers 02-11, Carleton University, Department of Economics. [Downloadable!]
  6. Kelly Edmiston & Shannon Mudd & Neven Valev, 2004. "Incentive Targeting, Influence Peddling, and Foreign Direct Investment," Asia-Pacific Financial Markets, Springer, vol. 11(5), pages 647-660, September. [Downloadable!] (restricted)
    Other versions:
  7. David E. Wildasin, 2005. "Global Competition for Mobile Resources: Implications for Equity, Efficiency, and Political Economy," Working Papers 2005-08, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
    Other versions:
  8. John A. List & Daniel M. Sturm, 2004. "How Elections Matter: Theory and Evidence from Environmental Policy," NBER Working Papers 10609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Dino Falaschetti, 2003. "Voter Turnout, Regulatory Commitment, and Capital Accumulation: Evidence from the US Telecommunications Sector," Microeconomics 0311002, EconWPA. [Downloadable!]
  10. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," CEP Discussion Papers dp0791, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  11. Boerner, Kira, 2005. "Having Everyone in the Boat May Sink it - Interest Group Involvement and Policy Reforms," Discussion Papers in Economics 730, University of Munich, Department of Economics. [Downloadable!]
  12. Dino Falaschetti, 2004. "Can Voting Reduce Welfare? Evidence from the US Telecommunications Sector," Public Economics 0401006, EconWPA. [Downloadable!]
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