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Study: Entrepreneurship Unaffected by State Taxes

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Nov. 21, 2006 -- State tax policies have only a modest impact on entrepreneurship, according to a study by the Small Business Administration's Office of Advocacy.

The study, which examined both the rates and composition of state taxes, found that higher top income tax rates, sales tax, and state-level inheritance taxes tend to slightly reduce the amount of entrepreneurial activity. At the same time, top marginal tax rates on individual and corporate income, as well as the types of state taxes levied, "do not have statistically significant effects on state entrepreneurship rates," the study reported.

The level of entrepreneurship in each state was gauged by the number of Schedule C filers on federal income tax returns, along with the amount of non-farm sole proprietors, researchers said.

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