Entrepreneurship and State Taxation

59 Pages Posted: 16 Jan 2018 Last revised: 29 Apr 2020

See all articles by E. Mark Curtis

E. Mark Curtis

Wake Forest University - Department of Economics

Ryan Decker

Board of Governors of the Federal Reserve System

Date Written: January, 2018

Abstract

Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively?and disproportionately?affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in the tax base and other state-level policies.

JEL Classification: L26, D22, H71, H25, J23

Suggested Citation

Curtis, E. Mark and Decker, Ryan, Entrepreneurship and State Taxation (January, 2018). FEDS Working Paper No. 2018-3, Available at SSRN: https://ssrn.com/abstract=3101649 or http://dx.doi.org/10.17016/FEDS.2018.003

E. Mark Curtis (Contact Author)

Wake Forest University - Department of Economics ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States

Ryan Decker

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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