Document Type

Working Paper

Date

2000

Embargo Period

6-28-2012

Keywords

Business economics, models with panel data, startup businesses, new firms, economic development, entrepreneurship, Tax Reform Act of 1986

Language

English

Disciplines

Entrepreneurial and Small Business Operations

Description/Abstract

This paper investigates the effect of entrepreneurs' personal income tax situations on the growth rate of their enterprises. We analyze the personal income tax returns of a large number of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates associated with that law affected the growth of their firms as measured by gross receipts. We find that individual income taxes exert a statistically and quantitatively significant influence on firm growth rates. Raising the sole proprietor's tax price (one minus the marginal tax rate) by 10 percent increases receipts by about 8.4 percent. This findings is consistent with the view that raising income tax rates discourages the growth of small businesses.

Additional Information

Harvest from RePEc at http://repec.org

Source

Metadata from RePEc

Creative Commons License

Creative Commons Attribution 3.0 License
This work is licensed under a Creative Commons Attribution 3.0 License.

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