The Revolving Door and Regulatory Enforcement: Firm-level Evidence on Tax Rates and Tax Audits

Benjamin Egerod*

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstract

Can firms extract policy concessions by hiring former Members of Congress (MCs)? I argue that firms use personnel with a background in politics to keep regulators away.With an empirical focus on tax enforcement, I present comprehensive evidence that firms can use MCs to avoid regulatory enforcement. Hiring MCs decreases firm-level tax rates—highly connected MCs who served on committees responsible for tax policy produce the largest decrease. Leveraging a novel hand-coded dataset of tax audits, Is how that hiring an MC is associated with a lower probability of being audited. The change in enforcement has important consequences: Hiring an MC is associated with smaller fines and with uncertain tax positions being automatically accepted due to lapses in the statute of limitations. This indicates that rules are enforced differently against politically connected firms, shedding new light on the role of connections in the American political economy.
OriginalsprogEngelsk
TidsskriftThe Journal of Politics
Antal sider80
ISSN0022-3816
DOI
StatusUdgivet - 19 jul. 2023

Bibliografisk note

Epub ahead of print. Published online: 19 July 2023.

Emneord

  • Political connections
  • The revolving door
  • Regulatory enforcement
  • Lobbying the bureaucracy
  • Corporations in politics

Citationsformater