STATE TAX POLICY AND ENTREPRENEURSHIP

We expand the literature on state taxes and entrepreneurship in several ways. First, we estimate dynamic panel regressions rather than fixed effects models in order to account for the inertia in taxes and small business outcomes. Second, while prior research has focused on extensive-margin indicators of small business activity such as self-employment rates, we consider more policy-relevant intensive-margin measures drawn from nonfarm proprietors' income and employment data. Third, we examine a longer panel (1978-2009) of state data. We conclude that major state tax policies do not have statistically significant impacts on entrepreneurial performance.