Taxes and Entrepreneurial Endurance: Evidence from the Self-Employed
AbstractDo taxes drive entrepreneurs out of business? This paper uses panel data on self-employed workers to examine whether differential income and payroll taxes affect their decisions to continue operating or to close their doors and take wage-and-salary jobs. I exploit statutory variations in the tax treatment of wage and self-employment income using data from the Panel Study of Income Dynamics. Taking into account the endogeneity of individual-level tax rates, I find that higher relative marginal tax rates on self-employment income do not necessarily increase the probability of exit.
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 55 (2002)
Issue (Month): N. 1 (March)
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- Robert Carroll & Douglas Holtz-Eakin & Mark Rider & Harvey S. Rosen, 2001.
"Personal Income Taxes and the Growth of Small Firms,"
in: Tax Policy and the Economy, Volume 15, pages 121-148
National Bureau of Economic Research, Inc.
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- Marsha Blumenthal & Charles Christian & Joel Slemrod, 1998. "The Determinants of Income Tax Compliance: Evidence from a Controlled Experiment in Minnesota," NBER Working Papers 6575, National Bureau of Economic Research, Inc.
- Donald Bruce & Douglas Holtz-Eakin & Joseph F. Quinn, 2000. "Self-Employment and Labor Market Transitions at Older Ages," Boston College Working Papers in Economics 490, Boston College Department of Economics.
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