Tax-Minded Executives and Corporate Tax Strategies: Evidence from the 2013 Tax Hikes

45 Pages Posted: 24 Nov 2014 Last revised: 31 Jan 2017

Gerardo Perez Cavazos

Harvard Business School

Andreya Marie Silva

Independent

Date Written: January 1, 2017

Abstract

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

Suggested Citation

Perez Cavazos, Gerardo and Silva, Andreya Marie, Tax-Minded Executives and Corporate Tax Strategies: Evidence from the 2013 Tax Hikes (January 1, 2017). Available at SSRN: https://ssrn.com/abstract=2529509 or http://dx.doi.org/10.2139/ssrn.2529509

Gerardo Perez Cavazos (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Andreya Marie Silva

Independent ( email )

No Address Available

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