Does the Tax System Favor Superstar Firms?

79 Pages Posted: 26 Jan 2023 Last revised: 7 Feb 2024

See all articles by John Gallemore

John Gallemore

University of North Carolina Kenan-Flagler Business School

Edward L. Maydew

University of North Carolina at Chapel Hill

William Yoder

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: April 1, 2023

Abstract

Influential research finds that economic activity is increasingly concentrated in large, highly profitable "superstar firms," potentially leading to adverse outcomes such as decreased competition and entrenchment. Acting on concerns that the tax system favors superstar firms, policymakers are increasingly targeting superstar firms with tax increases. We test the validity of the underlying assumption that superstar firms are tax advantaged, using both forward-looking and backward-looking tax burden measures. Overall, we find little evidence that superstar firms systematically pay lower taxes than their non-superstar competitors or smaller profitable firms, casting doubt on the idea that the tax system favors superstar firms.

Keywords: superstar firms, corporate taxes

JEL Classification: H25, H26, M21, L22, L41

Suggested Citation

Gallemore, John and Maydew, Edward L. and Yoder, William, Does the Tax System Favor Superstar Firms? (April 1, 2023). Kenan Institute of Private Enterprise Research Paper No. 4337736, Available at SSRN: https://ssrn.com/abstract=4337736 or http://dx.doi.org/10.2139/ssrn.4337736

John Gallemore (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://www.johngallemore.com

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

William Yoder

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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