Companies across all industries and sectors would pay an averageeffective tax rate of 9 percent next year under the Republicantax-overhaul bill, a Penn Wharton Budget Model study said onTuesday.

By 2027, that average effective rate would double to 18percent—because of some corporate tax breaks that would move offthe books, according to researchers for the economic policy centerat the University of Pennsylvania's Wharton School of Business.

The bill would cut the corporate tax rate to 21 percent—downfrom 35 percent currently—but the study examined how its variouschanges would affect the actual taxes companies pay on their pretaxincome. Because of differing deductions and tax strategies, acompany's effective tax rate can vary greatly from the “statutory”rate. Currently, U.S. companies pay an average effective rate of 21percent, according to the Penn Wharton report.

Utilities, real estate, transportation, agriculture, and healthservices companies would see the biggest effective rate drops inthe initial years after the bill becomes law, due to a provisionthat would allow companies to fully and immediately deduct the costof certain equipment purchases until Jan. 1, 2023. Under currentlaw, businesses must spread out those costs over several years.

The amount that could be deducted would phase down beginning in2023, giving capital-intensive industries average effective ratesabove 21 percent by 2027, according to the study. Utilities, forexample, would pay an effective rate of 15.62 percent in 2018, downfrom their current 28.83 percent. But that would rise to 23.43percent in 2023 and to 24.64 percent in 2027, the study says.

Average effective rates for finance and insurance companieswould fall to 14.3 percent next year, from a current 26.08 percent.Then in 2023 and 2027, they'd rise to just under 21 percent.

That's because of a provision that limits the deductionscompanies can take on their net interest expenses. The deductionwould be limited to 30 percent of a business's “adjusted taxableincome,” though amounts over could be carried forward.

In 2018 through 2021, the income measure would be EBITDA, orearnings before interest, taxes, depreciation, and amortization.But in subsequent years, it would be earnings only before interestand taxes—a less generous measure, according to tax experts.

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