Journal Description Editorial Committee How to Subscribe Forthcoming Articles Staff Papers Archive Copyright Information Use the free Adobe Acrobat Reader to view pdf files Free Email Notification Receive emails when we post new
items of interest to you. |
|
|
|
Can High Personal Tax Rates Encourage Entrepreneurial Activity? By Roger Gordon Full Text of This Article (PDF 2,168 K)
Abstract: When the top personal tax rates are above the corporate rate, high income individuals have an
incentive to reclassify their earnings as corporate rather than personal income for tax
purposes. At least U.S. tax law imposes strict limits on the extent to which employees in publicly traded
corporations can engage in such income shifting. However, entrepreneurs setting up new firms
can easily reclassify their income for tax purposes. This tax incentive therefore favors
entrepreneurial activity. In the United States, these tax incentives were huge during the 1950s
and 1960s, though they have been much smaller since then. [JEL H25,O31,L11] © 1998 International Monetary Fund |
