$283M Lobbying Cost; $62B Benefit; ROI = 22,000%

From the paper "Measuring Rates of Return for Lobbying Expenditures: An Empirical Analysis Under the American Jobs Creation Act":

The tax law is, perhaps, the only legislation that can be used to quantify lobbying returns; a comparison of taxpayers’ tax liabilities prior to and after a tax law change demonstrates additional tax savings or tax expenditures. However, researchers outside the Internal Revenue Service cannot access this tax liability data because tax returns are confidential and, to date, no corporation publicly discloses tax return information. The dividend repatriation provision of the American Jobs Creation Act of 2004 (AJCA) provides a unique opportunity to quantify the returns to lobbying as the tax benefits were limited to a single taxable year and the benefits accruing to each company were publicly disclosed in financial statements.

The AJCA allowed U.S. multinationals a one-time opportunity to bring home foreign earnings and pay taxes on only 15% of this repatriated income. Because the amounts repatriated typically had a material effect on companies’ taxes, information about the repatriation is usually disclosed in the financial statements of publicly traded companies. Further, public accounting firms audit financial statements disclosures and attest to their accuracy. Thus, 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.

Another difficulty researchers encounter when calculating rates of return to lobbying is measuring lobbying expenditures. In this study we overcome this limitation by hand collecting lobbying data from the Senate database on lobbying expenditures, the Federal Election Commission, and from annual reports of all publicly traded firms. Our study identifies 496 firms reporting repatriating under the auspices of the ACJA. Of these, 476 provide information about the amount repatriated, the amount of tax paid because of the repatriation, or the taxes saved by repatriating. Based on these 476 firms’ information, we analyze $298 billion of repatriations under the AJCA.

We identify 93 firms engaged in lobbying for the rate reduction. Combined, they repatriated $208 billion (or 70% of the total). We estimate that the lobbying group spent $282.7 million on lobbying expenditures and received $62.5 billion in tax savings, or a 220:1 return on investment (22,000%). Using a statistical regression, we estimate that lobbying activity is highly associated with amount repatriated even after controlling for firm industry, size, profitability, liquidity and growth prospects. Surprisingly, this tax provision was so lucrative that several firms borrowed funds to repatriate the cash as earnings.

HT: Economix