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Tax Cuts by Occupation: Entrepreneurs vs. Workers

Author

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  • Myeongju Kim

    (Yonsei University)

  • Eunseong Ma

    (Yonsei University)

Abstract

This paper studies how the macroeconomic effects of tax cuts depend on occupational targeting-toward entrepreneurs versus wageworkers. Using a new state-level panel of occupation specific federal tax shocks for the United States from 1981 to 2017, we find that entrepreneur targeted tax cuts generate substantially larger increases in output, consumption, and employment than revenue-equivalent worker-targeted cuts. These effects coincide with increases in both entrepreneurship and wage employment, pointing to business formation and firm expansion as key transmission channels. An incomplete-markets model with occupational choice attributes these findings to earnings-based borrowing constraints and demand-driven amplification that jointly produce large entrepreneur multipliers.

Suggested Citation

  • Myeongju Kim & Eunseong Ma, 2026. "Tax Cuts by Occupation: Entrepreneurs vs. Workers," Working papers 2026rwp-291, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2026rwp-291
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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