Taxes and Entrepreneurial Endurance: Evidence from the Self-Employed
Do 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.
Volume (Year): 55 (2002)
Issue (Month): N. 1 (March)
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NBER Working Papers
4494, National Bureau of Economic Research, Inc.
- Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 53-75, February.
- Douglas Holtz-Eakin & David Joulfaian & Harvey Rosen, 1993. "Sticking It Out: Entrepreneurial Survival and Liquidity Constraints," Working Papers 698, Princeton University, Department of Economics, Industrial Relations Section..
- 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.
- 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.
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