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Working Paper
Entrepreneurship and State Taxation
Decker, Ryan A.; Curtis, E. Mark (2018-01-11)
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 ...
Finance and Economics Discussion Series , Paper 2018-003

Working Paper
What Do Survey Data Tell Us about US Businesses?
Birinci, Serdar; See, Kurt; McGrattan, Ellen R.; Bhandari, Anmol (2020-01)
This paper examines the reliability of survey data on business incomes, valuations, and rates of return, which are key inputs for studies of wealth inequality and entrepreneurial choice. We compare survey responses of business owners with available data from administrative tax records, brokered private business sales, and publicly traded company filings and document problems due to nonrepresentative samples and measurement errors across several surveys, subsamples, and years. We find that the discrepancies are economically relevant for the statistics of interest. We investigate reasons for ...
Working Papers , Paper 2019-021

Discussion Paper
Assisting Firms during a Crisis: Benefits and Costs
Wall, Larry D. (2020-08-10)
Public and private efforts to reduce COVID-19 infection levels have led to a sharp drop in economic activity around the world. In an attempt to mitigate the damage to businesses, governments around the world have implemented a variety of financial programs to help firms. These programs have been criticized as interfering with markets, providing bailouts, and creating adverse incentives. In this article, I review both the rationale for government-provided assistance and the costs of providing that assistance from the perspective of how that aid effects the likely level and volatility of ...
Policy Hub , Paper 2020-10

Report
Sweat Equity in U.S. Private Business
Bhandari, Anmol; McGrattan, Ellen R. (2017-11-20)
This paper uses theory disciplined by U.S. national accounts and business census data to measure private business sweat equity, which is the value of time to build customer bases, client lists, and other intangible assets. We estimate an aggregate sweat equity value of 0.65 times GDP, with little cross-sectional dispersion in valuations when compared to business net incomes and large cross-sectional dispersion in rates of return. Our estimate of sweat equity is close to the estimate of marketable fixed assets used in production by private businesses, implying a high ratio of intangible to ...
Staff Report , Paper 560

Working Paper
What determines the level of local business property taxes?
Merriman, David (2016-01-01)
Conventional economic theory intuitively holds that local business property taxes, which account for over one-third of the state and local taxes that firms pay, should be efficiently structured in order to recover the exact cost of providing public services to these firms. However, this conceptual thinking does not accord with observed geographic and over-time variation in business taxation. To better explain these discrepancies, the author develops an alternative theoretical model with heterogeneous firms, some of which are more profitable than others in certain locations. This model more ...
Working Papers , Paper 16-2

Working Paper
Tax Heterogeneity and Misallocation
Kaymak, Barış; Schott, Immo (2023-12-19)
Companies face different effective marginal tax rates on their income. This can be detrimental to allocative efficiency unless taxes offset other distortions in the economy. This paper estimates the effect of tax rate heterogeneity on aggregate productivity in distorted economies with multiple frictions. Using firm-level balance-sheet data and estimates of marginal tax rates, we find that tax heterogeneity reduces total factor productivity by about 3 percent. Our findings highlight the positive correlation between marginal tax rates and other distortions to capital and especially labor. This ...
Working Papers , Paper 23-33

Discussion Paper
How Will the New Tax Law Affectt Homeowners in High Tax States? It Depends
Peach, Richard; Koşar, Gizem; Gorton, Nicole (2018-04-11)
The Tax Cuts and Jobs Act of 2017 (TCJA) introduces significant changes to the federal income tax code for individuals and businesses. Several provisions of the new tax law are particularly significant for the owner?occupied housing market. In this blog post, we compare the federal tax liability and the marginal after-tax cost of mortgage interest and property taxes under the old and new tax codes for a wide range of hypothetical recent home buyers in a high tax state. We find that impacts vary substantially along the income/home price distribution.
Liberty Street Economics , Paper 20180411

Working Paper
To Cut or Not to Cut? On the Impact of Corporate Taxes on Employment and Income
Smolyansky, Michael; Ljungqvist, Alexander (2016-02-05)
Do corporate tax increases destroy jobs? And do corporate tax cuts boost employment? Answering these questions has proved empirically challenging. We propose an identification strategy that exploits variation in corporate income tax rates across U.S. states. Comparing contiguous counties straddling state borders over the period 1970 to 2010, we find that increases in corporate tax rates lead to significant reductions in employment and income. We find little evidence that corporate tax cuts boost economic activity, unless implemented during recessions when they lead to significant increases in ...
Finance and Economics Discussion Series , Paper 2016-6

Working Paper
Capital Gains Taxation and Investment Dynamics
Hong, Sungki; Moon, Terry S. (2018-10-31)
This paper quanti?es the long-run effects of reducing capital gains taxes on aggregate investment. We develop a dynamic general equilibrium model with heterogeneous ?rms, which face discrete capital gains tax rates based on their ?rm size. We calibrate our model by targeting relevant micro moments as well as the difference-in-differences estimate of the capital elasticity based on the institutional setting and a policy reform in Korea. We ?nd that the ?rm-size reform that reduced the capital gains tax rates from 24 percent to 10 percent for the affected ?rms increased aggregate investment by ...
Working Papers , Paper 2018-31

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