TY  - JOUR
AU  - Carroll,Robert
AU  - Holtz-Eakin,Douglas
AU  - Rider,Mark
AU  - Rosen,Harvey S.
TI  - Personal Income Taxes and the Growth of Small Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7980
PY  - 2000
Y2  - October 2000
UR  - http://www.nber.org/papers/w7980
L1  - http://www.nber.org/papers/w7980.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
M1  - published as Robert Carroll, Douglas Holtz-Eakin, Mark Rider, Harvey S. Rosen. "Personal Income Taxes and the Growth of Small Firms," in James M. Poterba, editor, "Tax Policy and the Economy, Volume 15" MIT Press (2001)

M2  - featured in NBER digest on 2001-04-01
AB  - This paper investigates the effect of entrepreneurs' personal income tax situations on the growth rates of their enterprises. We analyze the personal income tax returns of a large number of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates associated with that law affected the growth of their firms as measured by gross receipts.  We find that individual income taxes exert a statistically and quantitatively significant influence on firm growth rates.  Raising the sole proprietor's tax price (one minus the marginal tax rate) by 10 percent increases receipts by about 8.4 percent.  This finding is consistent with the view that raising income tax rates discourages the growth of small businesses.
ER  -