IDEAS home Printed from https://ideas.repec.org/a/ntj/journl/v62y2009i3p413-27.html

The Effects of the Length of the Tax-Loss Carryback Period on Tax Receipts and Corporate Marginal Tax Rates

Author

Listed:
  • Graham, John R.
  • Kim, Hyunseob

Abstract

We investigate how the length of the net operating loss carryback period affects corporate liquidity and marginal tax rates. We estimate that extending the carryback period from two to five years, as recently proposed in President Obama’s budget blueprint, would provide $19 ($34) billion of additional liquidity to the corporate sector for 2008 (2009). Our calculations imply that the benefits of the extended carryback period would be concentrated in the homebuilding, automobile, and financial industries. Extending the carryback period would increase the marginal tax rate of loss firms by more than 200 basis points on average, which all else equal would lead corporations to use an additional $8 ($10) billion of debt and reduce tax payments by another $1.2 ($1.5) billion in 2008 (2009). Overall, the tax break proposed by the Obama administration would have a significant liquidity effect on corporations suffering large losses in recent years. If the tax proposal were extended to include TARP firms, the liquidity effect would triple in size.

Suggested Citation

  • Graham, John R. & Kim, Hyunseob, 2009. "The Effects of the Length of the Tax-Loss Carryback Period on Tax Receipts and Corporate Marginal Tax Rates," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(3), pages 413-427, September.
    • Handle: RePEc:ntj:journl:v:62:y:2009:i:3:p:413-27
    DOI: 10.17310/ntj.2009.3.04
    as

    Download full text from publisher

    File URL: https://doi.org/10.17310/ntj.2009.3.04
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://doi.org/10.17310/ntj.2009.3.04
    Download Restriction: Access is restricted to subscribers and members of the National Tax Association.
    File URL: https://libkey.io/10.17310/ntj.2009.3.04?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giacomo Brusco & Benjamin Glass, 2023. "Risky business: policy uncertainty and investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1331-1345, October.
    2. Christine L. Dobridge, 2016. "Fiscal Stimulus and Firms: A Tale of Two Recessions," Finance and Economics Discussion Series 2016-13, Board of Governors of the Federal Reserve System (U.S.).
    3. Kruschwitz, Lutz & Löffler, Andreas, 2015. "Marginal tax rates under asymmetric taxation," arqus Discussion Papers in Quantitative Tax Research 191, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2013. "Capital structure choice and company taxation: A meta-study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2850-2866.
    5. Eric Zwick, 2018. "The Costs of Corporate Tax Complexity," NBER Working Papers 24382, National Bureau of Economic Research, Inc.
    6. Lutz Kruschwitz & Andreas Löffler, 2018. "Valuing the Tax Shield under Asymmetric Taxation," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 70(1), pages 3-17, February.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ntj:journl:v:62:y:2009:i:3:p:413-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: The University of Chicago Press (email available below). General contact details of provider: https://www.ntanet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.