We investigate the motivation for and outcome of corporate participation in shaping tax policy via lobbying. We posit that generally tax-sophisticated firms lobby on tax issues and that their motives for doing so are either to obtain a tax benefit or to avoid losing one. We label these motives as strategic and defensive tax lobbying, respectively, and we empirically investigate whether strategic lobbying yields a measurable reduction in future tax rates. Using a proxy measure of strategic tax lobbying, we find a significant and negative relation between our measure and future cash ETRs. Alternative specifications of our primary model produce similar results.

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