Historical cost, inflation, and the U.S. corporate tax burden

Dan S. Dhaliwal, Fabio B. Gaertner, Hye Seung Grace Lee, Robert Trezevant

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


We study whether the interaction between U.S. tax rules and inflation increases the real U.S. corporate tax burden because tax deductions based on historical cost are not inflation-indexed. We extend prior literature by using new models to examine this prediction. We find a significantly positive association between tax burden and inflation for capital- and inventory-intensive firms, even after they utilize inflation-mitigating tax law provisions. We also find that the LIFO inventory method mitigates inflation-induced tax distortions. These results provide evidence that capital- and inventory-intensive firms face a higher real tax burden in the presence of inflation.

Original languageEnglish (US)
Pages (from-to)467-489
Number of pages23
JournalJournal of Accounting and Public Policy
Issue number5
StatePublished - Sep 2015
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Sociology and Political Science


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