Do state tax changes affect corporate tax aggressiveness? US evidence
ISSN: 0114-0582
Article publication date: 30 September 2022
Issue publication date: 9 January 2023
Abstract
Purpose
The purpose of this paper is to empirically explore whether and to what extent the changes in state corporate income tax rates affect corporate tax aggressiveness.
Design/methodology/approach
Using a differences-in-differences approach with dynamic treatment, the authors investigate the effect of staggered changes in state corporate income tax rates in the USA on corporate tax aggressiveness.
Findings
Firms become more aggressive in avoiding taxes following state tax increases but are insensitive to tax cuts. The effect of state tax increases on tax aggressiveness is weaker for firms with greater debt tax shields and marginal tax rates. Firms are more likely to shift their operations and relocate their headquarters out of states experiencing tax increases.
Originality/value
To the best of the authors' knowledge, this paper is the first to study the relation between state tax policy changes and corporate tax aggressiveness. This paper finds an asymmetrical pattern of corporate tax aggressiveness in response to state tax changes.
Keywords
Citation
Jin, D., Shen, H., Wang, H. and Yin, D. (2023), "Do state tax changes affect corporate tax aggressiveness? US evidence", Pacific Accounting Review, Vol. 35 No. 1, pp. 161-179. https://doi.org/10.1108/PAR-09-2021-0156
Publisher
:Emerald Publishing Limited
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