Tax Break

Study: Companies of Republican CEOs pay more tax than Democrats’

July 9, 2012

Boeing CEO James McNerney (L) introduces U.S. Republican Presidential candidate Mitt Romney to speak to company leaders at a gathering sponsored by the Business Roundtable. Washington, June 13, 2012. REUTERS/Jason Reed

Despite Democratic attempts to paint the Republicans as the party of the tax dodger, companies run by CEOs with Republican political leanings typically pay more in taxes than those run by Democrats, according to a new study.

Republican-led firms paid 2 percent more than their more liberal counterparts, the study’s authors will report to the annual meeting of the American Accounting Association next month.

Other studies have found that people who are politically conservative also are less daring in other aspects of their lives, fearing losses, valuing financial security, and running their businesses with more conservative financing and investing policies.

The authors of the analysis, a trio of academics from the University of Arizona and a fourth from the University of Georgia, posit that conservatism may be influencing corporate tax practices:

“If they set a tone of being conservative, due to their risk-averse nature and desire to avoid uncertainty, that can potentially translate into encouraging the firm’s inside and outside tax advisers to be more conservative in their tax strategies. For example, this can lead the firm to pass on using strategies that either may not be upheld by the IRS or that could expose the firm to significant non-tax costs if detected (i.e., fines and penalties, negative publicity, stock price declines, etc.)”

Top executives lean to the Republican party by a ratio of about two to one, according to the study, and were the majority in all 48 industries surveyed, except for one: entertainment.

The Democrats in the study were more likely to work for growth-oriented companies which spent more on research and development and enjoy a higher tax benefit from stock-option exercises than the Republican-led firms, the authors found.

To figure out what party a CEO favors, they mined Federal Election Commission data on¬†executives’ personal contributions to presidential, Senate and House of Representatives candidates as well as party committees, creating a pool of 70,000 separate contributions made between 1992 and 2008, by 10,000 top executives of large companies.

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