State Corporate Taxation and Business Power: A Pooled Analysis

This article investigates whether businesses in concentrated or regulated industries are more likely to exert influence in the area of tax policy. Simultaneous equation models are developed that describe the behavior of firms in their effort to achieve policy outcomes beneficial to their common interests. These models are estimated using pooled time series cross-sectional data. The results show that firms in concentrated industries are likely to seek political influence if they are affected by direct or exclusive government regulation. The study also reveals that industrial concentration leads to greater corporate income. Examination of the political partisanship thesis provides support for the view that firms' tax rates vary depending upon the partisan coloration of state government.