Tax-Minded Executives and Corporate Tax Strategies: Evidence from the 2013 Tax Hikes
45 Pages Posted: 24 Nov 2014 Last revised: 31 Jan 2017
Date Written: January 1, 2017
Exploiting the increase in personal tax rates due to the American Taxpayer Relief Act and Healthcare Act, we identify tax-minded executives who exhibit a preference for personal tax savings. We find that 2,281 top executives strategically realized their built-in capital gains prior to the tax hikes to save nearly $741 million in personal taxes in 2012. These executives also save their shareholders taxes and save their firms cash taxes. Specifically, their firms distributed $8 billion in special and accelerated dividends in 2012, which saved shareholders nearly $700 million in taxes. Further, each tax-minded executive reduces a firm’s long-run cash effective tax rate by 0.43%.
Keywords: Executives, capital gains, dividends, effective tax rates, tax avoidance
JEL Classification: H25, K34, M41
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