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

50 Pages Posted: 23 Feb 2007 Last revised: 20 Jun 2007

See all articles by James M. Poterba

James M. Poterba

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

Nirupama Rao

University of Michigan, Stephen M. Ross School of Business

Jeri K. Seidman

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 2 versions of this paper

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)

National Bureau of Economic Research (NBER) ( email )

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

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617-253-6673 (Phone)
617-253-1330 (Fax)

Nirupama Rao

University of Michigan, Stephen M. Ross School of Business ( email )

Ann Arbor, MI
United States

Jeri K. Seidman

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

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