WASHINGTON — Big companies that spent hundreds of millions lobbying successfully for a tax break enacted in 2004 got a 22,000-percent return on that investment — proof that for those who can afford it, hiring a lobbyist can pay handsome dividends.
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The figures, compiled by professors at the University of Kansas for a study to be released Thursday, offer a rarely seen glimpse of how the lobbying business works, and why — even as President Barack Obama vows to curb lobbyists' influence — the industry is booming as never before.
The report details efforts by hundreds of companies in 2003 and 2004 to push through a one-time tax "holiday" that lowered for a year the tax rate they paid on profits earned abroad. All told, U.S. companies saved about $100 billion in taxes, with pharmaceutical behemoths Pfizer and Merck & Co., technology giants IBM and Hewlett Packard, and health products maker Johnson & Johnson among the top beneficiaries.
93 firms, $282.7 million
The study zeros in on 93 firms that spent as much as $282.7 million lobbying on the issue during that period, and ultimately saved a total of $62.5 billion through the tax change. Researchers used publicly available lobbying disclosures filed with Congress and financial statements submitted to the Securities and Exchange Commission to compare the amount each company saved with its lobbying expenditures.
"It calls into question what Congress did in 2004," said Stephen Mazza, who conducted the study with Raquel Alexander and Susan Scholz. "It clearly is a very lucrative field for lobbyists. Congress wanted to create jobs, and what they probably did was create jobs for the lobbyists."
The results reflect one reason that lobbying — always a major industry in Washington — has experienced explosive growth in recent years. Companies and interest groups spent $3.42 billion lobbying Congress and the federal government in 2008, the last year for which such figures are available, according to the Center for Responsive Politics. That's a 14 percent jump from the previous year.
And there's growing evidence that companies get what they pay for — maybe a lot more — when they hire seasoned Washington hands to help them navigate major legislative fights. A separate group of business professors reported last year that companies that lobbied had better market valuations and investment returns than those that did not, and that those that did so most intensively had portfolios that consistently outperformed the market.
Hui Chen of the University of Colorado, David C. Parsley of Vanderbilt University and Ya-Wen Yang of the University of Miami found that, on average, a company's income rose by more than a half-percent for every 10 percent more it spent on lobbying. That translates into many millions of dollars for a large firm.
Lobbyists say they're not surprised by the findings, which prove what they tell their clients all the time: You can't afford not to have a seasoned Washington player on your team.
"There's literally no way that you can take an action in Washington by simply coming to town and sitting around on street corners waiting for it to happen — you really do have to have professional help," said Robert S. Walker, a former Republican congressman whose firm Wexler & Walker Public Policy Associates lobbies heavily on transportation, health care, energy and trade matters. "It would be like going to court without a lawyer."
Some lobbyists calculate the returns they bring clients and use the information to woo new business. The Carmen Group, a midsize lobbying firm that has lobbied for private companies like HealthSouth as well as local governments, hospitals and universities, among others, markets itself as an outfit that brings clients an "extraordinary" return of investment of 100 to 1 or better, according to its Web site.
"We play a decisive role in realizing projects that deliver value ranging from hundreds of thousands all the way through billions of dollars," the site says. The firm declined to comment for this story.
But the data alarm some watchdog groups that worry ordinary Americans who can't afford representation by a well-paid lobbyist will lose out in debates with companies and interest groups who can.
Companies are "spending big money, but ... it pales in comparison to the potential profit they can reap if they're successful," said Sheila Krumholz of the Center for Responsive Politics, which tracks money in politics.
Rates of return
The nonpartisan group recently released a study comparing the amount spent by bailed-out banks on political contributions and lobbying with the amount of money they got from the Wall Street rescue fund, known as the Troubled Asset Relief Program. The results produced eye-popping rates of return, an overall 258,449 percent for the $114 million they spent on campaign donations and lobbying.
"The issue for us is not so much how much they're spending, but is policy being decided on the merits or is it being unduly influenced by the money spent, and then do the non-moneyed interests, the ones that don't have even that much to spend on lobbying, lose a valuable seat at the table?" Krumholz said.
While companies and coalitions may get their money's worth from lobbying, there's at least some evidence that the result isn't always in the public interest. The Kansas paper notes that the tax holiday didn't accomplish its stated objective of encouraging multinational companies to invest in jobs and equipment in the United States.
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