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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Entrepreneurship and State Taxation
E. Mark Curtis
Ryan Decker
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.


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E. Mark Curtis & Ryan Decker, Entrepreneurship and State Taxation, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2018-003, 11 Jan 2018.
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Keywords: Labor supply and demand ; Entrepreneurship ; Firm dynamics ; Taxation
DOI: 10.17016/FEDS.2018.003
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