Business Lobbying as an Informational Public Good: Can Tax Deductions for Lobbying Expenses Promote Transparency?

Abstract

In this article, we link a proposed tax reform with a substantive disclosure requirement to promote the kind of “information subsidy” that serves the public interest, while mitigating—at least to some extent—the distortion that may result from the imbalance of financial resources on the business side and other institutional constraints identified in the literature. We argue that businesses that lobby should be encouraged to disclose the information that serves as a basis for their positions by allowing business taxpayers to deduct lobbying expenses, but only to the extent that the information subsidy that a taxpayer's lobbying supplies in fact educates lawmakers on policy issues. In other words, business lobbying can be considered to supply an informational public good only where such information is made available to all participants in the legislative process through full and timely publication. It cannot be said to supply an informational public good where it is inserted strategically into the legislative process at a time, and in such manner, that excludes others from using the information to assess the merits of proposed legislation or promote contrary interests.