Tag Archives: politicians


Will campaign contributions lower your tax rates?

Many politicians will tell you that donating to their campaigns does not affect the way they vote or design laws. However, a new study from the W. P. Carey School of Business at Arizona State University suggests regular ongoing contributions do help provide access to influential lawmakers and that companies making campaign contributions specifically to tax-writing members of Congress wind up paying lower tax rates over time.

“We found that firms investing in relationships with tax policymakers through campaign contributions do gain greater future tax benefits,” says Assistant Professor Jennifer Brown of the W. P. Carey School of Business, one of the study authors. “We specifically looked at members of the Senate Finance Committee and the House Ways and Means Committee in the research. Overall, we saw that donating companies experienced lower and more consistent effective tax rates in the long run.”

The new research was recently published online by the Journal of the American Taxation Association. The authors are Brown and two recent Ph.D. graduates from the W. P. Carey School at Arizona State University: Assistant Professor Laura Wellman, now of the University of Illinois at Chicago, and Assistant Professor Katharine Drake, now of the University of Arizona. In the study, they remark that political action committee (PAC) contributions to members of Congress, in general, rose 60 percent from the years 2000 to 2008, but PAC contributions specifically to tax-writing members of Congress went up even more — 80 percent.

“Proactive firms build relationships with policymakers through continued campaign support, with the expectation of gaining some economic benefit,” says Wellman. “There is an advantage to getting in the game early and maintaining your seat at the table. Our research provides evidence that increasing the number of political ties to tax policymakers produces a stronger effect on future tax rates.”

The paper points out that one member of the Senate Finance Committee raised more than $11 million in his 2008 campaign, even though he was running essentially unopposed. The research isn’t aimed at showing that anything inappropriate is happening, but rather, that contributions to tax policymakers may help supply more access, such as a receptive ear.

The study utilizes PAC data from the Federal Election Commission and lobbying data from the Center for Responsive Politics. The researchers found that when a firm moved from the 25th percentile to the 75th percentile of “relational” activity – equal to supporting at least five more candidates — then that firm experienced a lower future cash effective tax rate, which added up to an average of about $33 million in annual savings. The frequency of the donations and the power level of the candidates also play a role in the equation.

The article adds that lobbying and contributions work together in achieving firms’ tax-policy outcomes. The full study is available at http://aaajournals.org/doi/pdf/10.2308/atax-50908.


Coalition Formed to Combat Proposed EPA Regulations

A group of Arizona business leaders and politicians announced that they have created a coalition to address proposed regulations on the Navajo Generating Station.

The Arizona Coalition for Water, Energy and Jobs said in a press conference on Tuesday that regulations proposed by the U.S. Environmental Protection Agency, if implemented, will have an adverse effect on the Arizona economy by “significantly increasing water prices.”

The proposed regulations, which are a part of the EPA’s “regional haze program,” would require the generating station to install pollution control technology, intended to reduce haze and increase visibility over the Grand Canyon.

“This (the regulations) will not improve enjoyment of the Grand Canyon, but will increase the cost of business,” Sid Wilson, chairman of the coalition said.

Wilson, who came out of a four-year retirement from the Central Arizona Water Conservation District to chair the coalition, said during the conference that implementing the necessary emissions control technology, which are proposed to be complied with by Aug. 6, “could cost up to $1 billion.”

“At risk are 3,400 jobs each year,” said Karrin Taylor, board chair of Valley Partnership.

“If these jobs disappear, they would be very difficult to replace,” said Kelly Norton, president of the Arizona Mining Association, noting that an increase in water prices would have a “cascading effect on the economy.”

Taylor also said that the regulations would stagnate business development in Arizona.

“One of the most important considerations for developing businesses is power and water rates,” she said.  “If we double or triple the cost of water, we immediately remove an important attribute of business development.”

She said that Arizona has “always had a competitive advantage” due to its ability to offer low rates on water and power, and noted “the Navajo Generating Station is at the heart of that system.”

“We can’t put at risk such an important economic tool for a rule that will deliver no benefit,” she said.

House Speaker Andy Tobin said during the conference that the coalition is rallying both locally and in Washington for support on the issue.

“I am asking the President of the United States to protect Arizona from these regulations,” he said.

David Martin, president of the Arizona Chapter of the Associated General Contractors, said during the conference that the proposed regulations would produce results “similar to what happened at the Mohave Power Station,” which was forced to be shut down in 2005 after facing similar government intervention.

“We are not going to let special interests force us into the same corner,” he said.

Coalition members also said that the benefits of the regulations, which they cite as being based on “flawed technical analysis,” do not exceed the costs.

“The EPA has yet to thoughtfully approach the cost/benefit analysis required under law,” Martin said.  “If the costs of this rule exceed the benefits, and they clearly do, there would be no required retrofit.”

Political junkets

Politicians Need To Travel, But They Also Have To Be Aware Of The Pitfalls

In light of the Fiesta Bowl scandal, we can expect a higher level of scrutiny when it comes to our elected officials and their travel. People will be very fixated on our politicians’ trips abroad and the reasons for them. This isn’t a new issue, but it is an issue that sometimes goes unnoticed and then other times receives a lot of attention (especially after controversy).

I had a friend ask me why it seems so hard for elected officials to just say no to travel, especially when it may be so obviously a junket. Having been in elected office, I can only tell you that this issue isn’t always so black and white. I traveled a few times in the four years I served and never felt like I took a single junket, but others might disagree.

When staff or some other outside interest first approached me about traveling, there were often selling points introduced up front. It starts with why the trip needed to be taken. Next was the explanation of who would be paying for the trip (taxpayers, a nonprofit, business, etc.). Occasionally, and this could be the biggest indicator of whether it would be a junket or not, they might give you validation statements: “This won’t even be noticed.”  “Everybody does it.”  “Nobody will care.” Sadly, sometimes those points are accurate. Now I am not excusing what happened with the Fiesta Bowl “junketeers” as they are being called, but this temptation can cloud your perspective.

The saddest part about blatant abuses is that it taints everybody. There are trips that we should have our elected officials take. Without a doubt the public receives benefit from some of these trips. The most obvious example I have is of Sen. Lamar Alexander when he was governor of Tennessee. The state’s economy was in bad shape, so he spent time traveling in the Far East, where he was able to convince a Japanese car company to build a plant in Tennessee. Without a doubt this benefited his state and probably could not have been done without direct “on-the-ground” contact.

With economic development you also run into the issue that you can’t expect an obvious result attached to each trip. Sometimes you need to cultivate relationships. A trip may not bring an exact result, but eventually it might pay off with a win such as Tennessee received.

Then you run into the question of how important is diplomacy? Does the public receive a benefit from elected officials having meetings with other elected officials from both the U.S. and abroad? The city of Phoenix has benefited greatly by elected officials traveling to Washington, D.C. to pursue grant dollars and other assistance.

Sometimes the public has the view that any travel is a “perk” and unjustified. When I was on council, I was involved in a program called River Rampage. This program took inner-city kids and youth with physical disabilities on a river trip. Each kid had to perform 40 hours of community service. In order to accomplish this, they used volunteers who had to go through an orientation, help three or four kids get their service in (which meant serving with them), and then make sure they had the appropriate gear for the trip. After months of working with these kids, it ended with a one-week trip on the river. I volunteered with River Rampage. My office staff worried that this trip would be viewed as a “free” river trip junket as opposed to me volunteering in a youth program. Fortunately, that accusation was never made, but it was a concern.

Without a doubt there are abuses that occur in elected officials’ travel. These abuses are harmful to the public because they create a sense that elected officials are in it for their own pleasure. But beyond that, these abuses also create fear within the elected ranks that might prevent officials from taking trips that are important and would serve the public.