Description/Abstract
This paper investigates the effect of entrepreneurs’ personal income tax situations on the growth rates 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 finding is consistent with the view that raising income tax rates discourages the growth of small businesses.
Document Type
Working Paper
Date
10-2000
Keywords
Policy, Income Taxes
Series
Working Papers Series
Disciplines
Business | Entrepreneurial and Small Business Operations
Recommended Citation
Carroll, Robert; Holtz-Eakin, Douglas; Rider, Mark; and Rosen, Harvey S., "Personal Income Taxes and the Growth of Small Firms" (2000). Center for Policy Research. 170.
https://surface.syr.edu/cpr/170
Source
local input
Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.
Additional Information
Working paper no. 29