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Do Tax Cuts Promote Entrepreneurial Longevity?

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  • Gurley–Calvez, Tami
  • Bruce, Donald

Abstract

We use a 12–year panel of tax return data to assess whether or not taxes affect the duration of entrepreneurial activities. Our study is the first to examine the effects of tax rates on exit decisions using duration–analysis techniques. We find convincing evidence that cutting marginal tax rates faced by wage–and–salary workers can reduce the duration of entrepreneurial activities, while cutting marginal tax rates faced by entrepreneurs can lengthen entrepreneurial spells. The relative magnitudes of these effects suggest that an across–the–board tax cut would increase entrepreneurial longevity.

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  • Gurley–Calvez, Tami & Bruce, Donald, 2008. "Do Tax Cuts Promote Entrepreneurial Longevity?," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 225-250, June.
    • Handle: RePEc:ntj:journl:v:61:y:2008:i:2:p:225-50
    DOI: 10.17310/ntj.2008.2.04
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    Cited by:

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    3. José María Millán & Emilio Congregado & Concepción Román, 2010. "Determinants of Self-Employment Dynamics and their Implications on Entrepreneurial Policy Effectiveness," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 72, pages 45-76.
    4. Beem, Richard & Bruce, Donald, 2021. "Failure to launch: Measuring the impact of sales tax nexus standards on business activity," Journal of Public Economics, Elsevier, vol. 201(C).
    5. Jeffrey S. Smith & James E. West, 2012. "Retirement Pay and Officer Retention," NBER Working Papers 18502, National Bureau of Economic Research, Inc.
    6. Richard Kneller & Danny McGowan, 2011. "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 11/08, University of Nottingham, School of Economics.
    7. Catherine Fazio & Jorge Guzman & Scott Stern, 2020. "The Impact of State-Level Research and Development Tax Credits on the Quantity and Quality of Entrepreneurship," Economic Development Quarterly, , vol. 34(2), pages 188-208, May.
    8. Nicola Matteucci & Raffaella Santolini & Silvio Di Fabio, 2023. "ICT diffusion in public administrations and business dynamics: Evidence from Italian municipalities," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1233-1271, December.
    9. Tami Gurley-Calvez & Thomas J. Gilbert & Katherine Harper & Donald J. Marples & Kevin Daly, 2009. "Do Tax Incentives Affect Investment?," Public Finance Review, , vol. 37(4), pages 371-398, July.
    10. Tami Gurley-Calvez & Brian Hill, 2011. "Time to Retire? The Effect of State Fiscal Policies on Retirement Decisions," American Economic Review, American Economic Association, vol. 101(3), pages 35-39, May.
    11. Jack Mintz & Patrick Smith & V. Balaji Venkatachalam, 2021. "A New Approach to Improving Small-Business Tax Competitiveness," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 14(24), October.
    12. Gordon, Roger & Sarada,, 2018. "How should taxes be designed to encourage entrepreneurship?," Journal of Public Economics, Elsevier, vol. 166(C), pages 1-11.
    13. Staniewski, Marcin W., 2016. "The contribution of business experience and knowledge to successful entrepreneurship," Journal of Business Research, Elsevier, vol. 69(11), pages 5147-5152.
    14. John Nkwoma Inekwe, 2021. "Global financial networks and entrepreneurship," The World Economy, Wiley Blackwell, vol. 44(5), pages 1261-1280, May.
    15. Can, Ege & Fossen, Frank M., 2023. "Income Taxation and Hours Worked in Different Types of Entrepreneurship," IZA Discussion Papers 16683, Institute of Labor Economics (IZA).
    16. Veroniek Collewaert, 2012. "Angel Investors’ and Entrepreneurs’ Intentions to Exit Their Ventures: A Conflict Perspective," Entrepreneurship Theory and Practice, , vol. 36(4), pages 753-779, July.
    17. José Millán & Emilio Congregado & Concepción Román, 2012. "Determinants of self-employment survival in Europe," Small Business Economics, Springer, vol. 38(2), pages 231-258, February.
    18. Gordon, Roger H & Sarada,, 2017. "How Should Taxes Be Designed to Encourage Entrepreneurship?," University of California at San Diego, Economics Working Paper Series qt86z3h4n4, Department of Economics, UC San Diego.
    19. Amelia Biehl & Tami Gurley-Calvez & Brian Hill, 2014. "Self-employment of older Americans: do recessions matter?," Small Business Economics, Springer, vol. 42(2), pages 297-309, February.
    20. Comlanvi Martin Konou, 2023. "Entrepreneurial Risk and Digital Financial Inclusion: A Cross‐Country Analysis," Economic Papers, The Economic Society of Australia, vol. 42(3), pages 267-281, September.
    21. Ege Can, 2022. "Income taxation, entrepreneurship, and incorporation status of self-employment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1260-1293, October.
    22. Douglas R. Ayres & John L. Campbell & James A. Chyz & Jonathan E. Shipman, 2019. "Do financial analysts compel firms to make accounting decisions? Evidence from goodwill impairments," Review of Accounting Studies, Springer, vol. 24(4), pages 1214-1251, December.
    23. Lucio Fuentelsaz & Consuelo Gonz�lez-Gil & Juan P. Maicas, 2015. "What determines entepreneurial failure: taking advantage of the institutional context," Documentos de Trabajo dt2015-05, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.

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