"If the ability to take accelerated depreciation were to be withdrawn, simple mathematics would suggest cash taxes higher than GAAP taxes, all else being equal; depreciation benefits for cash tax purposes would be far lower than for GAAP taxes, since prior year benefits have already been exhausted," writes Moffett.
The analyst doesn't expect 'anything draconian,' were the windfall to reverse because AT&T and Verizon are smart in their management of tax liabilities and may use larger contributions to company pension plans to reduce cash liabilities in coming years. Moffett projects AT&T's cash tax rate will be just 12% in 2013 and will rise to 29% by 2016, while Verizon's rate will be 25% in 2013 and 27% by 2016.
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-- Written by Antoine Gara in New York