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While there is a strong theoretical foundation for the relationship between business sectors' political spending and the policy benefits that they receive, the empirical support for it is mixed. We use the logic of this exchange to examine a policy area that directly and significantly affects all businesses, and is thus a most likely case, taxation. Using principally firm-level tax rates of a large random sample of U.S. corporations for the 1998-2005 time period, we determine whether lobbying has measurable effects on firm-level tax rates. Contrary perhaps to popular belief, or at least anecdotal illustration, we find after controlling for firm size and industry-level tax rates, among other controls, that there is no discernible effect of political spending on firm-level taxation: firms that spend more in an effort to affect policy generally or tax policy specifically are no more likely to benefit from lower tax rates. We also examine the possibility that firms in the same industry coordinate efforts to affect tax rates. While we find limited evidence that firms occasionally coordinate within industries - or at least lobby simultaneously - to affect tax rates, perhaps more importantly, we determine that free-riding by smaller firms at the expense of the largest firms is rampant. [ABSTRACT FROM AUTHOR]

In the study of corporate political activity in the United States, scholars have consistently relied on samples comprised entirely or principally of large firms. While scholars have raised the issue of bias in these samples, there have been no systematic examinations of the consequences for causal inference. We address this issue directly by comparing the results of comprehensive models that examine corporate lobbying using both large-firm and randomly-generated samples. We find that while there are some notable differences, they are certainly not so large as to lead us to question fundamentally the results of decades of scholarship. In short, the results generated using a random sample lead to causal inferences largely consistent with those in the theoretical and empirical literature. In particular, firms' resources and interactions with government condition both their decisions to lobby and the level of their activity. [ABSTRACT FROM AUTHOR]