Income taxation, entrepreneurship, and incorporation status of self-employment
Ege Can ()
Additional contact information
Ege Can: University of Nevada-Reno
International Tax and Public Finance, 2022, vol. 29, issue 5, No 7, 1260-1293
Abstract This paper splits self-employment, which has mostly been used as a proxy for entrepreneurship, into two different entrepreneur types with incorporated and unincorporated businesses. I examine how these two types differ in sensitivity to individual-specific marginal and average personal income tax rates in the USA. I analyze the probability of becoming an incorporated or unincorporated self-employed worker by utilizing IV models. I use the Annual Social and Economic rotating panel data of the Current Population Survey from 2005 to 2019 to track a paid employee's decision to become self-employed. My empirical findings show that reducing personal income tax rates increases overall self-employment activity. Higher personal income tax rates encourage incorporated entrepreneurship but discourage unincorporated entrepreneurship. These results imply that future research and tax policy should take into account that different types of entrepreneurs respond differently to tax incentives.
Keywords: Income Taxes; Entrepreneurship; Self-employment; Incorporated; Unincorporated (search for similar items in EconPapers)
JEL-codes: H24 H25 L26 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10797-021-09702-0 Abstract (text/html)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:29:y:2022:i:5:d:10.1007_s10797-021-09702-0
Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2
Access Statistics for this article
International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf
More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().