Business Political Power: The Case of Taxation

We examine contending views about the forms and mechanisms of business power in U.S. politics by estimating time series models explaining taxation and redistribution. Taxation and redistribution constitute strong cases for theories about business and class power, since all firms have an interest in reducing taxation. We find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship, with Democratic administrations increasing the tax burden on firms and their owners. How far corporations engage in electoral financing—measured through the establishment of corporate political action committees—is also influential. The models show some evidence consistent with the understanding of class power conceptualized by Bowles, Gordon, and Weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power.