Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access

No 901, Working Papers from University of Miami, Department of Economics

Abstract: This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.

Keywords: Lobbying; campaign ï¬ nance reform; political access; bid caps; verfiable information; evidence disclosure (search for similar items in EconPapers)
JEL-codes: D44 D72 D78 D82 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-12
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Forthcoming: Under Review

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https://www.herbert.miami.edu/_assets/files/repec/wp2009-01-taxorcap.pdf First Version, 2008 (application/pdf)

Related works:
Journal Article: Should we tax or cap political contributions? A lobbying model with policy favors and access (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:0901

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