Taxes and Entrepreneurial Endurance: Evidence From the Self-Employed

Donald Bruce

National Tax Journal, 2002, vol. 55, issue 1, 5-24

Abstract: 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.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:55:y:2002:i:1:p:5-24

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