CAN LOWER TAX RATES BE BOUGHT? BUSINESS RENT-SEEKING AND TAX COMPETITION AMONG U.S. STATES

By Robert S. Chirinko, Daniel J. Wilson. National tax journal, 2009

128 citations recorded by the source corpus.

The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. We depart from this assumption by allowing for the possibility that policymakers are influenced by the rent-seeking (lobbying) behavior of businesses. This extension implies that business campaign contributions may affect not only the levels of equilibrium tax rates, but also the slope of the tax reaction function between jurisdictions, thus enhancing or retarding capital mobility. With panel data for 48 U.S. states and unique data on business campaign contributions, we document, among other results, a significant direct effect of contributions on tax policy; the economic value of a $1 contribution in terms of lower state corporate taxes is approximately $6.65.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/216ac4bd9a257312e0aa64f766c8336482d10e3a

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1. C. Slattery
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3. Michael P. Devereux
4. Simon Loretz
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In Economics and Econometrics

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Citations in the corpus

• Evaluating State and Local Business Tax Incentives (2020, methodology): “Data on state union shares come from the work of Hirsch, Barry and Macpherson, David and Vroman, Wayne (1964-2018), while campaign contributions come from Chirinko and Wilson (2010).”
• WHAT DO WE KNOW ABOUT CORPORATE TAX COMPETITION? (2013, background): “In contrast Chirinko and Wilson (2008, 2010) find a negative slope for the reaction function which is at odds with the standard tax competition theory.”
• International Tax Competition and Coordination (2014, unknown): “Chirinko and Wilson (2010) report evidence suggesting that business campaign contributions may indeed affect the tax reaction function and so influence tax policy.”