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| Research on Tax Rates & Entrepreneurship Unveiled
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March 3, 2005
Washington, D.C. - The Small Business & Entrepreneurship Council (SBE Council) co-hosted a media briefing on March 2 at the National Press Club on tax relief and its impact on entrepreneurship.
The event featured the release of a new study by University of Tennessee economist Donald Bruce, Ph.D., and Tami Gurley titled "Taxes and Entrepreneurial Activity." The study was commissioned by the SBA Office of Advocacy, and is available for downloading at www.sba.gov/advo/research/rs252tot.pdf.
The authors noted: "We find convincing evidence that tax rates have important effects on entrepreneurial entry and survival." They concluded, "our empirical results suggest that policies aimed at reducing the relative tax rates on entrepreneurs might lead to increases in entrepreneurial activity and better chances of survival. Additionally, our results indicate that equal-rate cuts in tax rates on both wage and entrepreneurship incomes could yield similar results. Conversely, equal-rate increases in tax rates on both sources of incomes would most likely result in reduced rates of entrepreneurship entry and increased rates of entrepreneurial exit."
SBE Council chief economist Raymond J. Keating added that these findings jibe with what we've experienced in the economy when income tax rates have been reduced. Keating observed: "Over the past 85 years, the U.S. has experienced four periods of substantive reductions in income tax rates - in the 1920s, 1960s, 1980s and now since 2003 - and each time, the U.S. economy has experienced robust economic growth. The same goes for the five significant cuts in the capital gains tax implemented over this same period."
SBE Council President & CEO Karen Kerrigan added: "This report from the SBA Office of Advocacy makes an important contribution to the current debate regarding the impact of tax policy. That's critical for efforts to make the 2001 and 2003 tax cuts permanent, as well as reforming the tax code."
Also commenting at the National Press Club event were Thomas Sullivan, Chief Counsel for Advocacy at the SBA Office of Advocacy, John Berthoud, President of the National Taxpayers Union, and Dan Clifton, Executive Director of the American Shareholders Association.
For more information please visit the SBE Council's website at http://www.sbecouncil.org/. For over ten years the SBE Council, a nonpartisan, nonprofit small business advocacy group headquartered in Washington, D.C., has been working to protect small business and promote entrepreneurship.
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