Tax Competition and Employment

May 26, 2023
Working Paper

We examine how exposure to international tax competition affects domestic firms’ employment. Consistent with prior work, we find evidence that reductions in foreign tax rates affect the domestic competitive environment via increases in import competition and investment in foreign-owned subsidiaries. More

Tax-Induced Organizational Complexity and Executive Performance Measurement

April 03, 2023
Working Paper

We examine how tax-induced organizational complexity (“TIOC”), which we define as the organizational complexity that would not exist in a zero-tax world, is associated with executive performance measurement. More

Tax-Loss Harvesting with Cryptocurrencies

April 01, 2023
Working Paper

We describe the taxation landscape in the cryptocurrency markets, especially concerning U.S. taxpayers, and examine how recent increases in tax scrutiny have led to changes in crypto investors’ trading behavior. More

Does the Tax System Favor Superstar Firms?

January 26, 2023
Working Paper

Influential recent research finds that economic activity is increasingly concentrated in large, highly profitable "superstar firms." The causes and consequences of the rise of superstar firms are the subjects of intense debate among academics, policymakers, and others. Acting on concerns that superstar firms have tax advantages relative to other firms, policymakers are increasingly designing and enacting additional taxes that target superstar firms. We examine the validity of the underlying assumption that the tax system favors superstar firms, using both forward-looking and backward-looking measures of firms’ tax burdens. Across multiple specifications, we find little empirical support for the idea that superstar firms are tax advantaged. Overall, the evidence suggests that tax advantages generally are not an important factor in explaining which firms rise to superstar status, nor do they appear to be an important factor in sustaining their dominance. More

Federal Corporate Tax Enforcement and Local Business Activity

January 11, 2023
Working Paper

We examine the consequences of federal corporate tax enforcement for local business activity, and in particular whether (i) these consequences vary across regions and firms and (ii) tax enforcement has spillover effects. Exploiting geographic variation in exposure to firms of different sizes and variation in tax return audit rates across firm size groups, we first document that corporate tax enforcement is negatively associated with regional business activity. More interestingly, we document substantial heterogeneity in this association. We find that tax enforcement has spillover effects, as indicated by a stronger negative effect in urban areas and in regions with more vertically-related business activity. The negative association is also greater in regions in which firms likely face higher compliance costs and have less access to external capital. Our findings collectively suggest that the effects of tax enforcement on business activity are highly heterogeneous, which should be of interest to academics and policymakers. More

Investor Perceptions of the Book Minimum Tax

September 28, 2022
Working Paper

The Inflation Reduction Act establishes a new 15 percent corporate minimum tax on large U.S. corporations’ adjusted financial accounting income. While the minimum tax is estimated to raise $222 billion over 10 years, critics fear firms will manipulate their accounting earnings to reduce their tax liabilities, resulting in less revenue raised. Further, given the current political environment future legislatures could gut the tax, further eroding estimated tax revenues. Using an event study, we examine the extent to which investors believe this tax will reduce firm value. We examine stock market reactions around key legislative developments leading to the enactment of the book minimum tax. Our findings show targeted firms experience significantly lower stock returns than non-targeted firms during the enactment process (about 1.4 to 1.8 percent). In aggregate, our findings are consistent with the Joint Committee on Taxation’s revenue estimates. In cross-sectional tests, we do not observe that the firms most likely to avoid the tax via earnings management experience more positive returns, suggesting the market does not anticipate firms avoiding the tax via earnings management. Overall, our results suggest investors do not expect firms to largely avoid this tax. Instead, they expect a significant portion of the corporate minimum tax will be remitted by firms and borne by shareholders.   More

Proximity and the Management of Innovation

March 22, 2022
White Paper

UNC Tax Center Research Scholars Stephen Glaeser and Eva Labro in addition to Chloe Glaeser, UNC Assistant Professor of Operations, will have their research published in Management Science. Their research examines the tax incentives that encourage firms to locate R&D facilities away from corporate headquarters and the consequences this has on productivity. More

Tax Planning Knowledge Diffusion via the Labor Market

May 12, 2021
Working Paper

This paper examines the extent to which the labor market facilitates the diffusion of tax planning knowledge across firms. Using a novel dataset of tax department employee movements between S&P 1500 firms, the researchers find that firms experience an increase in their tax planning after hiring a tax employee from a tax aggressive firm. This finding is robust to various research designs and specifications. More

Tax Reform Made Me Do It!

November 29, 2018
Working Paper

This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes — bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. More

Strategic Subsidiary Disclosure

March 10, 2018
Working Paper

We use data multinational firms provide to the Internal Revenue Service regarding their foreign subsidiary locations to explore whether some firms fail to publicly disclose subsidiaries in some countries, even when the subsidiaries are significant and should be disclosed per Security and Exchange Commission rules. More