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The effects of income taxation on entrepreneurial investment: A puzzle?
Ist Teil von
International tax and public finance, 2020-12, Vol.27 (6), p.1321-1363
Ort / Verlag
New York: Springer US
Erscheinungsjahr
2020
Link zum Volltext
Quelle
Alma/SFX Local Collection
Beschreibungen/Notizen
We investigate how personal income taxes affect the portfolio share of personal wealth that entrepreneurs invest in their own business. In a portfolio choice model that allows for tax sheltering, we show that lower tax rates may increase investment in entrepreneurial equity at the intensive margin, but decrease it at the extensive margin. Using German panel data, we identify tax effects on the portfolio shares of six asset classes by exploiting tax and entry regulation reforms. Our results indicate that lower taxes drive out businesses that are viable only due to tax sheltering, but increase investment in productive entrepreneurial businesses.