Abstract State taxes as a proportion of total corporate taxes have been rising over the past decade. As a result, state tax planning is becoming increasingly Important. Prior tax research has examined the effect of federal taxes on management financing and accounting decisions. This study expands upon this research by examining the effects of differing state tax regimes on management decisions. California's Income tax, Michigan's value-added tax and Texas' net-worth tax are examined, and hypotheses are developed about how accounting and financing decisions are affected by these very different types of taxes. Test variables include the level of debt and accounting accrual choices. Results suggest that firms' levels of discretionary accruals are differentially affected by different state tax regimes.
Susan L. Porter (Wed,) studied this question.