Entrepreneurs, income taxes and investment
By: Robert Carroll ... [et al.].
Contributors: Carroll, Robert J.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 6374; Working paper series (National Bureau of Economic Research) -- working paper no. 6374.
Publisher: National Bureau of Economic Research
Published: 1998
Place of publication: Cambridge, MA
Language: eng
Number of pages: 27
Subjects: Businesspeople -- Taxation -- Economic aspects -- United States.; Capital investments -- Economic aspects -- United States.; Income tax -- Economic aspects -- United States.; Sole proprietorship -- Economic aspects -- United States.
Description: This paper investigates the effect of entrepreneurs' personal income tax situations on their capital investment decisions. We examine the income tax returns of a sample of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates for the relatively affluent associated with that law affected their decisions to invest in physical capital. We find that individual income taxes exert a statistically and quantitatively significant influence on investment decisions. In our sample increase in marginal tax rates would reduce the proportion of entrepreneurs who make new capital investments by 10.4 percent, and decrease mean investment expenditures by 9.9 percent.
Notes: "January 1998."

JEL no. H25, H32.

Includes bibliographical references (p. 23-27).

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