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The Declining Cash Effective Tax Rates of US Domestic Firms

Kimberly S. Krieg ^a

John Li ^b

^{^a}University of San Diego, USA

^{^b}Toronto Metropolitan University, Canada

Advances in Taxation

ISBN: 978-1-83549-585-8

Publication date: 20 June 2024

Abstract

We examine why Cash ETRs of US domestic firms have decreased over time. Using samples from two periods – an early period (1994–1998) and a late period (2011–2015) – we regress Cash ETRs in each period on a set of explanatory variables, and allow coefficients to differ across time periods. We find that, when coefficients are allowed to differ, there is no longer a decline in the unexplained portion of Cash ETR across the two periods, and that the previously observed decline is associated with a change in the relation between firm size and Cash ETR between the two periods. Further analysis suggests that the coefficient on firm size has been declining over the past 20 years, and that controlling for this time trend alone is sufficient to explain the declining trend in Cash ETRs for domestic firms.

Keywords

Acknowledgements

Acknowledgments

We thank our adviser Dave Guenther, Terry Shevlin (discussant), Aruhn Venkat (co-discussant), and workshop participants at the 2018 AAA Western Regional Meeting Doctoral Student Faculty Interchange and the University of Oregon for helpful comments.

Citation

Krieg, K.S. and Li, J. (2024), "The Declining Cash Effective Tax Rates of US Domestic Firms", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 31), Emerald Publishing Limited, Leeds, pp. 1-43. https://doi.org/10.1108/S1058-749720240000031001

Publisher

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Emerald Publishing Limited