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

Abstract

The view that “lobbying is essentially an informational activity” has persistently served the suggestion that lobbying provides a public good by educating legislators about policy and the consequences of legislation.

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 contraints identified in the literature. We argue that corporate lobbying should be encouraged – by allowing business to deduct lobbying expenses – but only to the extent that the information subsidy that corporate lobbying supplies in fact educates lawmakers on complex policy issues. In other words, to the extent that lobbying supplies an informational public good, such information should actually be made generally available through full and timely publication, rather than 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.