According to the report, firms that reduce their capital spending could see increased tax payments.

Mulford says the situation is part of the consequences of deferred tax liabilities. The risks occur when capital expenditures are reduced, resulting in reductions in deferred tax liabilities. Income taxes, which were deferred in previous periods, come due, resulting in higher tax payments.

Such increased tax payments may occur during difficult economic times as companies respond to slack demand by reducing capital spending.