Is lobbying Congress a good investment?
This is normally a nearly impossible question to answer, but a unique set of circumstances allowed researchers to conclude that Corporate lobbying for a tax amnesty provision in the 2004 American Jobs Creation Act(AJCA) yielded a 22,000% return. Yea, I would say it was worth it.
One reason why the question can’t normally be answered is that the financial information needed to answer the question can almost only be found on Corporate tax returns. All tax returns are confidential and only the IRS can see them. But a unique opportunity to study this question presented itself through a tax amnesty provision in the AJCA.
The University of Kansas School of Business ceased the opportunity. Researchers found that they were able, in this unique situation, to publicly obtain all the information need to analyze the return on lobbying expenditures. As stated in this study, “This is the first study to provide actual values of the financial savings arising from tax law changes, and the first to use data that has been audited by independent accounting firms.”
Cudos to the authors, Alexander, Mazza and Scholtz, and to the University of Kansas School of Business for this important piece of research.
Measuring Rates of Return for Lobbying Expenditures: An Empirical Analysis under the American Jobs Creation Act
Raquel Meyer Alexander
University of Kansas – School of Business
Stephen W. Mazza
University of Kansas – School of Law
Susan Scholz
University of Kansas – Accounting and Information Systems Area
April 8, 2009
Abstract:
The lobbying industry has experienced exponential growth within the past decade. The general public, the media, and special interest groups perceive lobbying to be a powerful mechanism affecting public policy. However, academic research finds inconclusive results when quantifying the rate of return on political lobbying expenditures. In this paper we use audited corporate tax disclosures relating to a tax holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to examine the return on lobbying. We find firms lobbying for this provision have a return in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are more profitable overall, but surprisingly, profitability is not a predictor of repatriation amount. Rather, industry and firm size are most predictive of repatriation. Cash on hand, a proxy for ability to repatriate, is not associated with the repatriation decision or the repatriation amount. This paper provides compelling evidence that lobbying expenditures have a positive and significant return on investment.
Working Paper Series
GO TO THE WEBSITE AND DOWNLOAD THE FULL REPORT HERE http://bit.ly/Abj1Or
From the report:
|
[Top 20] Companies Repatriating $500M or More
(105 companies total1)
|
||||
|
Amount
|
Amount Repatriated/
|
|||
|
Rank
|
Company
|
Repatriated
|
Total Assets2
|
Revenue2
|
|
1
|
PFIZER
|
37,000
|
30%
|
70%
|
|
2
|
MERCK & CO
|
15,900
|
37%
|
68%
|
|
3
|
HEWLETT PACKARD
|
14,500
|
19%
|
18%
|
|
4
|
JOHNSON & JOHNSON
|
10,800
|
20%
|
23%
|
|
5
|
IBM
|
9,500
|
9%
|
10%
|
|
6
|
SCHERING-PLOUGH
|
9,400
|
59%
|
114%
|
|
7
|
DU PONT
|
9,100
|
26%
|
33%
|
|
8
|
BRISTOL-MYERS SQUIBB
|
9,000
|
30%
|
46%
|
|
9
|
ELI LILLY & CO
|
8,000
|
32%
|
58%
|
|
10
|
PEPSICO
|
7,500
|
27%
|
26%
|
|
11
|
PROCTOR & GAMBLE
|
7,200
|
13%
|
14%
|
|
12
|
INTEL
|
6,200
|
13%
|
18%
|
|
13
|
COCA-COLA
|
6,100
|
19%
|
28%
|
|
14
|
ALTRIA GROUP
|
6,000
|
6%
|
9%
|
|
15
|
MOTOROLA
|
4,600
|
15%
|
15%
|
|
16
|
DELL
|
4,100
|
18%
|
8%
|
|
17
|
MORGAN STANLEY
|
4,000
|
1%
|
10%
|
|
18
|
CITIGROUP
|
3,200
|
0%
|
3%
|
|
19
|
ORACLE
|
3,100
|
15%
|
26%
|
|
19
|
WYETH
|
3,100
|
9%
|
18%
|
Data Driven Viewpoints 
Watched movies while bed-ridden during a recent health set-back – Margin Call and Casino Jack –
Margin Call was a dramatization of the the 2008 mortgage crash and Casino Jack was about….wait for it….
The Super Lobbyist – – –
🙂
Harikumar,Capitalists don’t technology dicretly. But their actions cause same effect. For a capitalist, primary objective is profit maximization (or optimization). A listed company focusses on quarterly results, and every one in capitialistic society strives for survival (short-term).Do you agree with this?If yes, any technology is exploited for short term profit maximation only. Capitalists neglect long term science/technology needs.Take Nuclear power plants for example. Let us say it takes about 5 years of further research by a large team of scientists to achieve a radiation free, radio-active-waste free process. Also assume that this will cost $500 billion.When a capitalist gets hold of this technology, generating a lot of power, but also radio-active waste, he wants to run with it. Pollution, safety etc, will be managed with politicians and officials (paying bribes worth $1 billion, say). He will not invest for the technology to be developed further.You can apply this to any technology/invention. So far, new inventions/discoveries almost always happen in government funded labs, universities or in garages where a lonely inventor works.
My name isn’t Hrikumar, but since you replied to my comment, I will reply – Bottom Line, until the basic Federal Laws regarding the confines within which a corporation must function, change, then yes, I agree that corporations will always put quarterly profits over any other consideration (product quality, customers, employees, environmental concerns) because they are, by law, required to do so currently – this is a foundational weakness of our current laws regarding corporations – -and can be changed through the legislative process – –
There are businesses who choose to follow the letter of the law AND address other concerns so important to us all – but if the legislation re: corporations and their ‘legal priorities’ changes, then, we are talking about a whole different ball game –
Presently, a corporation’s first obligation is, by law, to it’s investors – until that changes, decisions made for short term profits with long term negative effects will continue to be made…
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