TY - JOUR
T1 - Taxes and entrepreneurship
T2 - A literature review and research agenda
AU - Bruce, Donald
AU - Gurley-Calvez, Tami J.
AU - Norwood, Alex
N1 - Publisher Copyright:
© 2020 BMJ Publishing Group. All rights reserved.
PY - 2020/6/8
Y1 - 2020/6/8
N2 - The potential impacts of tax policies on entrepreneurial activity have attracted the attention of researchers and policy makers for several decades. Entrepreneurship and innovation are critical elements of the macroeconomy and small businesses contribute significantly to employment and economic growth. Recognizing this, policy makers have a long history of attempting to encourage small business activity through a variety of attractive tax policies. The effectiveness of these policies hinges critically on the extent to which entrepreneurs actually respond to taxes. The theoretical literature has recognized that taxing the returns to risky activity can actually increase risk-taking, especially in the presence of progressive marginal tax rates and loss offset provisions (Domar and Musgrave, 1944). The empirical literature has been inconclusive, with some studies finding a positive relationship between tax rates and small business activity, others finding a negative relationship, and still others finding no significant relationship at all. In this monograph, we review the existing empirical literature in this area and lay out an agenda for future research. We discuss the many ways in which researchers have measured entrepreneurship and small business activity, as well as the variety of tax rates and other policies that have been explored in prior studies.
AB - The potential impacts of tax policies on entrepreneurial activity have attracted the attention of researchers and policy makers for several decades. Entrepreneurship and innovation are critical elements of the macroeconomy and small businesses contribute significantly to employment and economic growth. Recognizing this, policy makers have a long history of attempting to encourage small business activity through a variety of attractive tax policies. The effectiveness of these policies hinges critically on the extent to which entrepreneurs actually respond to taxes. The theoretical literature has recognized that taxing the returns to risky activity can actually increase risk-taking, especially in the presence of progressive marginal tax rates and loss offset provisions (Domar and Musgrave, 1944). The empirical literature has been inconclusive, with some studies finding a positive relationship between tax rates and small business activity, others finding a negative relationship, and still others finding no significant relationship at all. In this monograph, we review the existing empirical literature in this area and lay out an agenda for future research. We discuss the many ways in which researchers have measured entrepreneurship and small business activity, as well as the variety of tax rates and other policies that have been explored in prior studies.
UR - http://www.scopus.com/inward/record.url?scp=85086675049&partnerID=8YFLogxK
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U2 - 10.1561/0300000079
DO - 10.1561/0300000079
M3 - Review article
AN - SCOPUS:85086675049
SN - 1551-3114
VL - 16
SP - 393
EP - 443
JO - Foundations and Trends in Entrepreneurship
JF - Foundations and Trends in Entrepreneurship
IS - 5
ER -