Journal of Financial Economics Vol. 108 No. 3 2013
Exploring the role Delaware plays as a domestic tax haven
Abstract
We examine whether Delaware is a domestic tax haven. We find that taxes play an economically important role in determining whether U.S. firms locate subsidiaries in Delaware and that a Delaware-based state tax avoidance strategy lowers state effective tax rates by between 0.7 and 1.1 percentage points, on average. The tax savings represent a 15–24% decrease in the state income tax burden and translate to an increase in net income of 1.04–1.47%. However, we find that the tax benefits of Delaware tax strategies are diminishing over time in response to initiatives by state governments to limit multistate tax avoidance.
- DOI
- 10.1016/j.jfineco.2013.01.004
- Volume
- 108
- Issue
- 3
- Pages
- 751-772
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib