Changes in Corporate Effective Tax Rates Over the Past Twenty-Five Years

61 Pages Posted: 11 Nov 2014 Last revised: 26 Aug 2016

Scott Dyreng

Duke University

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Edward L. Maydew

University of North Carolina at Chapel Hill

Jacob R. Thornock

Brigham Young University

Date Written: August 25, 2016

Abstract

We investigate systematic changes in corporate effective tax rates over the past 25 years and find that effective tax rates have decreased significantly. Contrary to conventional wisdom, we find that the decline in effective tax rates is not concentrated in multinational firms; effective tax rates have declined at approximately the same rate for both multinational and domestic firms. Moreover, we find that within multinational firms, both foreign and domestic effective rates have decreased. Finally, we find that changes in firm characteristics and declining foreign statutory tax rates explain little of the overall decrease in effective rates. The findings have broad implications for research, as well as for current policy debates about reforming the corporate income tax.

Keywords: Corporate tax rates, tax avoidance, trend

Suggested Citation

Dyreng, Scott and Hanlon, Michelle and Maydew, Edward L. and Thornock, Jacob R., Changes in Corporate Effective Tax Rates Over the Past Twenty-Five Years (August 25, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2521497 or http://dx.doi.org/10.2139/ssrn.2521497

Scott Dyreng

Duke University ( email )

Box 90120, Fuqua School of Business
Durham, NC 27708-0120
United States

Michelle Hanlon (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

Edward L. Maydew

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Jacob Thornock

Brigham Young University ( email )

Provo, UT 84602
United States
8014220828 (Phone)

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