TY  - JOUR
AU  - Carroll,Robert
AU  - Holtz-Eakin,Douglas
AU  - Rider,Mark
AU  - Rosen,Harvey S.
TI  - Entrepreneurs, Income Taxes, and Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6374
PY  - 1998
Y2  - January 1998
UR  - http://www.nber.org/papers/w6374
L1  - http://www.nber.org/papers/w6374.pdf
N1  - Author contact info:
Robert Carroll
Ernst & Young LLP
1101 New York Avenue, NW
Washington, DC  20005
Tel: 202-327-6032
Fax: 866-724-2443
E-Mail: carroll@american.edu

Douglas Holtz-Eakin
American Action Forum
1401 New York Ave, NW
Suite 1200
Washington, DC 20005
E-Mail: dholtzeakin@americanactionforum.org

Harvey S. Rosen
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4022
Fax: 609/258-6419
E-Mail: HSR@princeton.edu
AB  - This paper investigates the effect of entrepreneurs' personal income tax situations on their capital investment decisions.  We examine the income tax returns of a sample of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates for the relatively affluent associated with that law affected their decisions to invest in physical capital.  We find that individual income taxes exert a statistically and quantitatively significant influence on investment decisions.  In our sample increase in marginal tax rates would reduce the proportion of entrepreneurs who make new capital investments by 10.4 percent, and decrease mean investment expenditures by 9.9 percent.
ER  -