TY  - JOUR
AU  - Petroni,Kathy R.
AU  - Shackelford,Douglas A.
TI  - Managing Annual Accounting Reports to Avoid State Taxes: An Analysis of Property-Casualty Insurers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6590
PY  - 1998
Y2  - June 1998
UR  - http://www.nber.org/papers/w6590
L1  - http://www.nber.org/papers/w6590.pdf
N1  - Author contact info:
Douglas Shackelford
University of North Carolina at Chapel Hill
Kenan-Flagler Business School
Campus Box 3490, McColl Building
Chapel Hill, NC  27599-3490
Tel: 919/962-3197
Fax: 919/962-4727
E-Mail: doug_shack@unc.edu
AB  - We hypothesize that, in their annual accounting reports, insurers allocate premiums and losses from multistate policies to reduce total state taxes.  To test this prediction, we examine firm-level data, collected from the publicly-available statutory reports used to compute tax bases and filed with each state government.  If insurers manage allocations to avoid taxes, we anticipate an inverse relation between the tax rate and the premium-to-loss ratio, which is the industry's standard measure of the price of a unit of coverage.  Firm-specific prices are computed using premium and loss information from the annual regulatory reports filed with each state in which an insurer underwrites.  Primary analysis is conducted on 12,573 insurer-state observations from 1993.  We find the premium-to-loss ratio is decreasing in state tax rates, consistent with multistate insurers managing their annual accounting reports to shift premiums (losses) to more (less) favorably taxed states.
ER  -