Working Paper: NBER ID: w13709
Authors: John R. Graham; Lillian F. Mills
Abstract: We document that simulated corporate marginal tax rates based on financial statement data (Shevlin 1990 and Graham 1996a) are highly correlated with simulated rates based on corporate tax return data. We provide algorithms that can be used to estimate the book or tax simulated rates when they are not available. We find that the simulated book marginal tax rate does a better job of explaining financial statement debt ratios than does the analogous tax return variable and discuss how the book simulated rate is likely to be an appropriate measure in settings with global, long-term considerations.
Keywords: corporate marginal tax rates; financial statements; tax return data
JEL Codes: G32; H25; M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| simulated book marginal tax rate (H29) | corporate financial decisions (G39) |
| simulated book marginal tax rate (H29) | financial statement debt ratios (G32) |
| simulated corporate marginal tax rates based on financial statement data (H32) | simulated corporate marginal tax rates based on tax return data (H32) |
| simulated book marginal tax rate (H29) | corporate debt structuring (G32) |
| simulated book marginal tax rate (H29) | tax planning (H26) |
| higher simulated MTRs (E17) | increased corporate debt usage (G32) |