Entrepreneurship, Inequality, and Taxation
- Topics:
- Taxes
- Tags:
- Entrepreneur,
- Payroll Solutions,
- Operational Accounting,
- Management,
- Income Tax,
- Income,
- Financial Planning,
- Finance,
- Entrepreneurship,
- Entrepreneurial,
- ...
- Source:
- Bank of Canada
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Overview: This paper confirms the conjecture that the evaluation of tax policy leads to very different conclusions once the role of entrepreneurs is considered. Contrary to previous literature, the author finds that switching from a progressive to a proportional income tax system has a negligible effect on wealth inequality in the United States. This surprising result arises because entrepreneurial activities moderate the effects of the policy change on the wealth distribution. The author shows that proportional income tax reform increases entrepreneurial investment and savings by reducing the marginal income tax rates paid by entrepreneurs. The model is also able to account for the substantial share of income and wealth held by entrepreneurs, the high savings rate of entrepreneurs relative to workers, and the high concentration of wealth observed in the data.
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Format: PDF | Size: 296KB | Date: May 2002 | Pages: 156
