Working Paper: NBER ID: w12923
Authors: James Poterba; Nirupama Rao; Jeri Seidman
Abstract: A firm's deferred tax position can influence how it is affected by a transition from one tax regime to another. We compile disaggregated deferred tax position data for a sample of large U.S. firms between 1993 and 2004 to explore how these positions might affect firm behavior before and after a pre-announced change in the statutory corporate tax rate. Our results suggest that the heterogeneous deferred tax positions of large U.S. corporations create substantial variation in the short-run effect of tax rate changes on reported earnings. Recognizing these divergent incentives is important for understanding the political economy of corporate tax reform.
Keywords: deferred tax positions; corporate tax behavior; tax reform
JEL Codes: H25; M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deferred tax assets (H25) | Accelerate income recognition (G19) |
| Deferred tax liabilities (G32) | Defer income recognition (H26) |
| Tax rate reduction (H29) | Increase in taxable income (for firms with deferred tax assets) (H32) |
| Tax rate reduction (H29) | Decrease in tax liabilities (for firms with deferred tax liabilities) (H32) |
| Deferred tax positions (H26) | Influence lobbying behavior regarding tax reform (H32) |