Document Type

Working Paper

Date

7-1998

Language

English

Series

Metropolitan Studies Program Series

Acknowledgements

We thank Esther Gray, Ann Wicks, and Jodi Woodson for their aid in preparing the manuscript. We are grateful to Lowell Dworin, Bo Honoré, Joel Slemrod, and attendees at both the April 1997 pre-conference and October 1997 conference for useful suggestions.

Disciplines

Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy

Description/Abstract

This paper investigates the effect of entrepreneurs’ personal income tax situations on their capital investment decisions. We examine the income tax returns of a sample of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates for the relatively affluent associated with that law affected their decisions to invest in physical capital. We find that individual income taxes exert a statistically and quantitatively significant influence on investment decisions. In our sample, a 5 percentage point increase in marginal tax rates would reduce the proportion of entrepreneurs who make new capital investments by 10.4 percent, and decrease mean investment expenditures by 9.9 percent.

ISSN

0732 507X

Additional Information

Metropolitan studies program series occasional paper no.192

Source

Local Input

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.