TY  - JOUR
AU  - Gordon,Roger H.
AU  - Lee,Young
TI  - Do Taxes Affect Corporate Debt Policy? Evidence from US Corporate Tax Return Data
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7433
PY  - 1999
Y2  - December 1999
UR  - http://www.nber.org/papers/w7433
L1  - http://www.nber.org/papers/w7433.pdf
N1  - Author contact info:
Roger H. Gordon
Department of Economics 0508
University of California, San Diego
9500 Gilman Drive, Dept. 0508
La Jolla, CA 92093
Tel: 858/534-4828
Fax: 858/534-7040
E-Mail: rogordon@ucsd.edu

Young Lee
AB  - Past attempts to measure the impact of taxes on corporate debt policy have focused on larger firms.  Given that the top statutory corporate tax rate has varied little in recent years, tax incentives vary among these firms, almost entirely due to current or prospective tax losses.  Results are inevitably mixed, given that firms with losses or nondebt tax shields may have different propensities to borrow even ignoring taxes. This paper uses US Statistics of Income balance sheet data on all corporations, to compare the debt policies of firms of different sizes.  Given the progressivity in the corporate tax schedule, small firms face very different tax rates than larger firms.  Relative tax rates have also changed frequently over time. Our results suggest that taxes have had a strong and statistically significant effect on debt levels.  In particular, the difference in corporate tax rates currently faced by the largest vs. the smallest firms (35% vs. 15%) is forecast to induce larger firms to finance an additional 8% of their assets with debt, compared with smaller firms.
ER  -