Effective corporate tax rates the effect of size, capital intensity, leverage, and other factors

Abstract

The extent of neutrality of the corporate income tax system is examined empirically in this study by determining whether differences in effective corporate tax rates between major U.S. firms can be systematically related to the size of the firm, degree of capital intensity, extent of foreign operations, involvement in natural resources, and degree of leverage. Multivariate statistical tools are used to assess the combined effects of these possible explanatory variables. The empirical results show that firms with the lowest effective tax rates tend to be highly leveraged, heavily capital intensive, and involved in natural resource industries. Foreign involvement and size do not appear to play dominating roles in explaining differences in effective tax rates.