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Changes in marginal tax rates over the past three decades in the United States

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  • Xikai Chen
  • Meiting Lu
  • Yaowen Shan

Abstract

This paper investigates changes in corporate marginal tax rates (MTRs) in the United States over the past three decades. Similar to effective tax rate, MTR exhibits a significant but much more modest decline over time, even after accounting for tax‐related firm characteristics and industry variations. In contrast to Dyreng et al., we find that MTR declines more rapidly for purely domestic firms than for multinationals. Our findings highlight the puzzling evidence in Dyreng et al. and call for future research to study possible drivers that explain the sustained and differential decline in corporate tax rate over time between domestic and multinational firms.

Suggested Citation

  • Xikai Chen & Meiting Lu & Yaowen Shan, 2021. "Changes in marginal tax rates over the past three decades in the United States," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2601-2624, April.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:s1:p:2601-2624
    DOI: 10.1111/acfi.12636
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    References listed on IDEAS

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    1. Graham, John R. & Mills, Lillian F., 2008. "Using tax return data to simulate corporate marginal tax rates," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 366-388, December.
    2. Plesko, George A., 2003. "An evaluation of alternative measures of corporate tax rates," Journal of Accounting and Economics, Elsevier, vol. 35(2), pages 201-226, June.
    3. Edgerton, Jesse, 2010. "Investment incentives and corporate tax asymmetries," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 936-952, December.
    4. Francis A. Longstaff, 2011. "Municipal Debt and Marginal Tax Rates: Is There a Tax Premium in Asset Prices?," Journal of Finance, American Finance Association, vol. 66(3), pages 721-751, June.
    5. Dyreng, Scott D. & Hanlon, Michelle & Maydew, Edward L. & Thornock, Jacob R., 2017. "Changes in corporate effective tax rates over the past 25 years," Journal of Financial Economics, Elsevier, vol. 124(3), pages 441-463.
    6. Blouin, Jennifer & Core, John E. & Guay, Wayne, 2010. "Have the tax benefits of debt been overestimated?," Journal of Financial Economics, Elsevier, vol. 98(2), pages 195-213, November.
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