Using Tax Return Data to Simulate Corporate Marginal Tax Rates

48 Pages Posted: 21 Feb 2007

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Lillian F. Mills

University of Texas at Austin - McCombs School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 21, 2007

Abstract

We document that simulated corporate marginal tax rates based on financial statement data (Shevlin 1990 and Graham 1996a) are highly correlated with simulated rates based on corporate tax return data. We provide algorithms that can be used to estimate the book or tax simulated rates when they are not available. We find that the simulated book marginal tax rate does a better job of explaining financial statement debt ratios than does the analogous tax return variable and discuss how the book simulated rate is likely to be an appropriate measure in settings with global, long-term considerations.

Keywords: marginal tax rate, simulated tax rates, tax return data, financial statements, book tax difference, capital structure

JEL Classification: H25, M41, G32

Suggested Citation

Graham, John Robert and Mills, Lillian F., Using Tax Return Data to Simulate Corporate Marginal Tax Rates (September 21, 2007). Available at SSRN: https://ssrn.com/abstract=959245 or http://dx.doi.org/10.2139/ssrn.959245

John Robert Graham (Contact Author)

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lillian F. Mills

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

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