HOW DO CORPORATE POLITICAL CONTRIBUTION STRATEGIES IMPACT FIRMS’ TAX BURDENS?

Abstract

This study explores the impact of various firm political action committee (PAC) contribution strategies on the value of political activity. Specifically, I examine how candidate characteristics, contribution timing, and other factors influence a firms’ tax rates. Unlike other studies that examine similar variables, I include these strategies in a single regression, allowing me to determine which are effective while controlling for all the others. I find that firms that focus their contributions on party leadership and those who contribute early pay more taxes than other politically active firms, while those who focus on tax committee members and members of a single party have lower tax rates. Overall, my findings imply that firms should spread their resources broadly, but also target legislators with a direct influence over the desired outcome rather than generally influential legislators.