Recent revelations that companies such as Microsoft, Google, and Apple keep income overseas to avoid paying U.S. taxes have led to calls to reform the tax code so firms have more incentive to return those earnings to the U.S.

A study co-authored by a University of Iowa researcher finds that such proposals likely would lead to increased income shifting by U.S. firms. However, the overall increase in shifting is likely to be modest, and changes in tax revenue would have little effect on a federal budget in the trillions of dollars.

Kevin Markle, assistant professor of accounting in the Tippie College of Business, notes that more than $2 trillion in foreign profits are held abroad by U.S.-based multinationals, in part because U.S. law requires those companies to pay tax on whatever money they earn overseas when it’s brought back home. One of the most frequently proposed reforms is the adoption of a so-called territorial system, common in the rest of the world, that taxes only income earned at home.

One concern is that a territorial system would cost the U.S. Treasury as much as $500 billion over 10 years as companies shift income to lower-tax countries to avoid U.S. taxes.

But Markle’s study shows the amount likely will be far less because the firms most likely to begin shifting income don’t have a lot of income to shift.

Markle and his co-author, Scott Dyreng of Duke University, analyzed the effects of income shifting by 2,058 U.S.-based multinationals between 1998 and 2011. They estimate that had a territorial system been in effect over that time, about $80 billion more would have been shifted to other countries, costing the Treasury about $28 billion.

But Markle says the companies that would begin shifting income overseas mostly are companies that have not been able to do so because they are financially constrained. That is, they don’t have enough cash on hand to pay all of their domestic expenses, and so are unable to defer the U.S. tax on their foreign earnings by leaving the earnings abroad. Larger companies with more cash are able to send money outside the U.S. because they don’t need it to pay ongoing domestic expenses.

A territorial system would allow more financially constrained firms to move money overseas because they no longer would have to pay federal tax to bring it back to the U.S. should it be needed.

In the study, Markle compares how changing to a territorial system would impact income -shifting by larger, more prosperous companies and by smaller, financially constrained firms. The study suggests that few large firms would shift more income because doing so would provide little benefit that they don’t already enjoy. The firms that would start shifting income are the constrained firms unable to do so now. As a result, he estimates a territorial tax system would increase income shifting by U.S. firms by only about 8 percent.

Markle’s study, “The Effect of Financial Constraints on Income-Shifting by U.S. Multinationals,” is published in the current issue of The Accounting Review.