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.