Taxes and Lobbying

It seems the 1% spend an enormous amount of money on lobbying and campaigning to keep their taxes low or non-existent. Is this cost effective? Do they actually save more in taxes than they spend for the effort to keep taxes from affecting them?

You are going to have a very, very hard time figuring out what lobbying expenditures are for keeping taxes low, as opposed to lobbying expenditures are for every other issue there is under the sun. However, one high-profile and mostly single-issue advocacy organization, Americans for Tax Reform (known for Grover Norquist’s pledge signed by most elected Republicans to oppose any tax increases), gets contributions in the neighborhood of high-single digit millions.

It is probably fair to say that Americans for Tax Reform has an influence far greater than its operating budget, so in that sense, donors to that cause are certainly getting their money’s worth.

I’m not sure the question can be factually answered as it was asked. Not only is it hard to separate tax lobbying from all political contributions, but political spending doesn’t have any guaranteed result. Even well-funded candidates can lose and even a winning candidate may fail to fulfill campaign promises.

However, let me contribute a data point that may be of interest: when Romney’s return was released, I did a quick analysis to see what he’d pay if the Bush tax cuts expired. The difference was something like $2 million in tax for that single year, IIRC. The difference compared to rates from the 1970’s is more like $4 million in savings per year.

Romney has a large difference because of the amount of his income from investments. Not every 1%-er would have the same result, but there’s clearly room for these folks to “profit” on their political contributions through tax savings.

I’ve seen estimates of the reduction in revenues from continuing the Bush tax cuts as $60-100 billion per year. If groups are spending $6-10 million per year to achieve that they’re getting back 1,000,000% return on their investment. Not too shabby.

That number certainly overstates the exact return, but it’s in the ballpark for most lobbying efforts to get large contracts. Congress is very cheap to buy. That’s not a pejorative but a straightforward acknowledgment that since they (mostly) don’t take direct bribes and deal with sums 1000-1000000 times their salaries on a regular basis, a mere nudge toward any positive that will get them re-elected is sufficient.

Here’s one case where it paid off magnificently:

I rather imagine that penultimate word is redundant.