effective tax rates across firms. Figure 3.1 provides a
distributionofeffectivetaxratesforfirmsintheUnitedStates
in January2005.Note thatthemedianeffectivetaxrate is
about 32 percentandthatafewfirmsreportedeffectivetax
rates in excess of 100 percent. Some firms even reported
negative effective tax rates.
12
FIGURE3.1EffectiveTaxRates:U.S.CompaniesinJanuary
2005
Source:Value Line.
ReasonsforDifferencesbetweenMarginalandEffectiveTax
Rates
Given that most of the taxable income of publicly traded
firms is atthehighest marginaltaxbracket, why woulda