Does Government Partisanship Influence Multinational Corporations’ Tax Payments in the United States?

Abstract

ObjectiveScholars have made conflicting predictions as to whether partisan politics influences taxes paid by multinational corporations (MNCs). The current study tests this question by examining the relationship between the partisan composition of government and tax rates that MNCs paid to their home country, the United States, using firm‐level data on financial information from the U.S. Fortune 1000 for the period 1986–2010.MethodsI employ a multilevel regression model allowing for varying intercepts across firms and years as a way to model unobserved heterogeneity.ResultsI find no relationship between the partisan orientation of governing parties and the level of corporate taxes MNCs pay. Internationally mobile firms have lower effective tax rates than domestically operating firms.ConclusionThis study suggests that the effect of partisan politics on corporate tax policy does not extend to the taxation of MNCs in the United States.