Can lower tax rates be bought? Business rent-seeking and tax competition among U.S.States
AbstractThe 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.
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Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/2.
Length: 44 pages
Date of creation: 2010
Date of revision:
Campaign contributions; business taxation; state tax competition;
Other versions of this item:
- Robert S. Chirinko & Daniel J. Wilson, 2010. "Can Lower Tax Rates be Bought? Business Rent-Seeking and Tax Competition among U.S. States," CESifo Working Paper Series 3121, CESifo Group Munich.
- Robert S. Chirinko & Daniel J. Wilson, 2009. "Can lower tax rates be bought? Business rent-seeking and tax competition among U.S. states," Working Paper Series 2009-29, Federal Reserve Bank of San Francisco.
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-05-02 (Accounting & Auditing)
- NEP-ALL-2010-05-02 (All new papers)
- NEP-PBE-2010-05-02 (Public Economics)
- NEP-PUB-2010-05-02 (Public Finance)
- NEP-URE-2010-05-02 (Urban & Real Estate Economics)
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