Proxies for the Corporate Marginal Tax Rate

Posted: 19 Jun 1998

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Date Written: April 1996

Abstract

This paper focuses on how best to measure the corporate marginal tax rate, which is an important input into financial analysis of the cost of capital, financing policy, corporate hedging, and corporate reorganizations. The results indicate that the simulated tax rate used by Shevlin (1990) and Graham (1996), although difficult to calculate, is the best available proxy for the "true" marginal tax rate. If the simulated rate is unavailable, an easy-to-calculate trichotomous variable or the statutory marginal tax rate (which captures the progressivity in the tax rate schedule) are reasonable alternatives, better than most commonly used tax variables. The difficult task of forecasting taxable income is also discussed.

JEL Classification: G32

Suggested Citation

Graham, John Robert, Proxies for the Corporate Marginal Tax Rate (April 1996). Available at SSRN: https://ssrn.com/abstract=7412

John Robert Graham (Contact Author)

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
3,278
PlumX Metrics