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Deferred Tax Positions and Incentives for Corporate Behavior Around Corporate Tax Changes

50 Pages Posted: 23 Feb 2007  

James M. Poterba

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Nirupama Rao

New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

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Date Written: February 2007

Abstract

A firm's deferred tax position can influence how it is affected by a transition from one tax regime to another. We compile disaggregated deferred tax position data for a sample of large U.S. firms between 1993 and 2004 to explore how these positions might affect firm behavior before and after a pre-announced change in the statutory corporate tax rate. Our results suggest that the heterogeneous deferred tax positions of large U.S. corporations create substantial variation in the short-run effect of tax rate changes on reported earnings. Recognizing these divergent incentives is important for understanding the political economy of corporate tax reform.

Suggested Citation

Poterba, James M. and Rao, Nirupama and Seidman, Jeri K., Deferred Tax Positions and Incentives for Corporate Behavior Around Corporate Tax Changes (February 2007). NBER Working Paper No. w12923. Available at SSRN: https://ssrn.com/abstract=964886

James M. Poterba (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Nirupama Rao

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

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Jeri K. Seidman

University of Virginia - McIntire School of Commerce ( email )

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Charlottesville, VA 22904-4173
United States

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