Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S

The working paper by the National Bureau of Economic Research concludes that lowering personal tax rates in most cases appears to discourage entrepreneurial activity. The study finds that a reduction of 5 percent in the corporate tax rate correlates with a doubling of entrepreneurial activity. On the other hand, if personal income tax rates were reduced across the board by 5 percent, a 30 percent decrease in entrepreneurial activity follows.