Using Tax Return Data to Simulate Corporate Marginal Tax Rates
John R. Graham
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
Lillian F. Mills
University of Texas at Austin - McCombs School of Business
September 21, 2007
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.
Number of Pages in PDF File: 48
Keywords: marginal tax rate, simulated tax rates, tax return data, financial statements, book tax difference, capital structure
JEL Classification: H25, M41, G32working papers series
Date posted: February 21, 2007
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