The Effect of U.S. Tax Reform on the Tax Burdens of U.S. Domestic and Multinational Corporations

37 Pages Posted: 30 Jun 2020

See all articles by Scott Dyreng

Scott Dyreng

Duke University - Accounting

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Mary Vernon

University of Wisconsin - Madison

Date Written: June 5, 2020

Abstract

We quantify the net effect of recent U.S. tax reform on the tax rates of public U.S. corporations and find they decreased by 7.5 to 11.4 percentage points on average following tax reform. Further, we separately examine the effect of tax reform on purely domestic firms and multinational firms because some key provisions only affect multinational firms. We find both sets of firms benefited from tax reform, although domestics benefited the most. We also find the entirety of multinational tax savings stemmed from tax savings on their domestic operations, not as a result of more favorable taxation of international income. We also find no changes in the federal tax burden on foreign income for firms most likely to be subject to the new anti-abuse provisions. Overall, our findings suggest that despite the recent overhaul in international taxation, the federal tax burden on the foreign earnings of U.S. corporations appears to have been largely unaffected.

Keywords: corporate taxation, tax reform, Tax Cuts and Jobs Act

JEL Classification: H25, K34

Suggested Citation

Dyreng, Scott and Gaertner, Fabio B. and Hoopes, Jeffrey L. and Vernon, Mary, The Effect of U.S. Tax Reform on the Tax Burdens of U.S. Domestic and Multinational Corporations (June 5, 2020). Available at SSRN: https://ssrn.com/abstract=3620102 or http://dx.doi.org/10.2139/ssrn.3620102

Scott Dyreng (Contact Author)

Duke University - Accounting ( email )

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

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Mary Vernon

University of Wisconsin - Madison ( email )

Madison, WI
United States

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