Business Tax Lobbying
AbstractThis paper investigates the effects of business tax lobbying in the presence of investments that are sunk or costly to adjust in the short run. We show that industries which rely more heavily on sunk capital are generally more successful in obtaining tax breaks through lobbying; this reverses the usual logic of 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 politicians give more weight to lobbyists' preferences, taxes fall on average and investment rises. But investment is misallocated among industries, so that welfare may fall. Thus restrictions on business lobbyists may be desirable. Dans ce texte, nous étudions le lobbying des sociétés visant à réduire leurs impôts lorsque le capital qu'elles utilisent est irrécupérable ou coûteux à ajuster à court terme. Il est démontré que grâce au lobbying, les industries utilisant un capital relativement coûteux à ajuster obtiennent les baisses d'impôt les plus substantielles. Néanmoins, ces industries investissent moins à long terme que celles utilisant un capital plus flexible. Nous étudions également l'effet d'une libéralisation des règles encadrant le lobbying des sociétés. Lorsque les politiciens attachent plus d'importance aux préférences des lobbies, le niveau moyen de taxation diminue et l'investissement augmente. Le bien-être peut cependant diminuer à cause de la mauvaise répartition de l'investissement entre les industries. Un certain encadrement du lobbying des sociétés peut donc être désirable.
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Bibliographic InfoPaper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 102.
Length: 22 pages
Date of creation: Jan 2000
Date of revision:
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More information through EDIRC
Lobbying; Business taxation; Investment;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-24 (All new papers)
- NEP-PBE-2000-01-24 (Public Economics)
- NEP-POL-2000-01-24 (Positive Political Economics)
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.:
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