How Individual Income Tax Policy Affects Entrepreneurship

By David Clingingsmith & Scott Shane
April 30, 2016


This Article reviews the empirical literature on the effects of individual income tax policy on entrepreneurship.  We find no evidence of consensus, even on relatively narrow questions such as whether individual income tax rates deter or encourage entrepreneurial entry.  We believe the absence of consensus reflects both the complexity of mechanisms connecting tax policy to entrepreneurial decision making and the infeasibility of employing the most reliable empirical methods, such as experiments, in this domain.