The Macroeconomic Information Content of Corporate Estimated Tax Payments

• In Event: Corporate Potpourri: Compliance, Incentives, and Insights

Abstract

We investigate whether corporate quarterly estimated tax payments possess information content for future gross domestic product (GDP) growth and whether professional forecasters efficiently incorporate it into GDP growth expectations. Although not disclosed on financial reports, corporate quarterly estimated tax payments are reported in aggregate on the Monthly Treasury Statements (MTS) issued by the U.S. Department of the Treasury. We find growth in aggregate corporate estimated tax payments is positively associated with both GDP growth and professional GDP forecast errors. These associations are incremental to aggregate accounting earnings growth and other macroeconomic indicators and vary predictably by quarter based on institutional details underlying corporate estimated tax payments. We also find that corporate estimated payments predict GDP revisions that align with the timing of MTS release and the provision of corporate tax data to BEA. Aggregate estimated corporate tax payments, therefore, represent a low-cost and timely source of macroeconomic information.

Authors

• Erin Henry, University of Arkansas

• George Plesko, gplesko@uconn.edu

• Dillon Walker, University of Arkansas