Firm responses to book income alternative minimum taxes

Jordan Richmond

Journal of Public Economics, 2024, vol. 236, issue C

Abstract: This paper studies how firms respond to book income alternative minimum taxes (AMTs) by examining the AMT book income adjustment in 1987. Using Compustat data and an event study approach, I find no evidence that firms avoid the tax, and no evidence of significant real production or investment responses. Firm tax base responses imply an elasticity of book income of −0.03 [−0.63,0.56], smaller than previous estimates because I correct for mean reversion. The null results indicate that firms face strong, non-tax incentives to report high book incomes.

Keywords: Book income; Taxes; Firm responses (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:236:y:2024:i:c:s004727272400094x

DOI: 10.1016/j.jpubeco.2024.105158

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