Uncertainty, taxation and entrepreneurial entry
Part of : Αρχείον οικονομικής ιστορίας ; Vol.XV, No.2, 2003, pages 17-30
Issue:
Pages:
17-30
Author:
Abstract:
In what way do higher taxes and uncertainty influence the decision to become an entrepreneur? In other words, “What tax system suits entrepreneurial entry in the market process best?” The paper answers the question from the Austrian perspective. The perspective is to be contrasted with the mainstream neoclassical perspective. If the market -as the Austrians do say- is a process of discovery, the first effect of a tax system is not its effect on the relative preferability for the decision-maker of already-perceived alternative courses of action. The effect we have to take into account is, first and foremost, the possibility that the tax may have significant impact upon the very perception by the prospective taxpayer of what array of opportunities are available for his choice. This view goes against the mainstream view that higher taxes could serve as an insurance against the greater risk in self-employment as compared to that in wage employment. In terms of policy implications, tax relief efforts aimed at small businesses for sure do foster entrepreunerial entry. Raising taxes, however, even with full loss recovery, might be a risky “strategy” to increase entrepreneurial entry.
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Subject (LC):
Keywords:
entrepreneurship, uncertainty, taxation
Notes:
JEL classification: B53, H21, M13
