Proxies for the corporate marginal tax rate

Journal Article (Journal Article)

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.

Full Text

Duke Authors

Cited Authors

  • Graham, JR

Published Date

  • January 1, 1996

Published In

Volume / Issue

  • 42 / 2

Start / End Page

  • 187 - 221

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/0304-405X(96)00879-3

Citation Source

  • Scopus