Does the Federal Income Tax Law Favor Entrepreneurs?

2020 ◽  
Vol 73 (4) ◽  
pp. 1219-1232
Author(s):  
Eric Toder

This paper estimates the effective tax rate on entrepreneurial income, defined as the return to an individual who starts a successful new business and then sells their interest once it becomes an established enterprise. The rate depends on both the tax imposed on the appreciation of the firm’s value during its growth phase and on the effects of the tax system on the value of equity in ongoing business enterprises. Under reasonable assumptions, this rate is lower than the rate the entrepreneur would pay on ordinary income. Preferential taxation of entrepreneurial income has consequences for both economic growth and income distribution.

1927 ◽  
Vol 26 (2) ◽  
pp. 230
Author(s):  
George M. Morris ◽  
Roland R. Foulke

Entropy ◽  
2021 ◽  
Vol 23 (11) ◽  
pp. 1492
Author(s):  
Donald J. Jacobs

How can an income tax system be designed to exploit human nature and a free market to create a poverty free society, while balancing budgets without disproportional tax burdens? Such a tax system, with universal character, is deduced from the following guiding principles: (1) a single tax rate applies to all income types and levels; (2) the tax rate adjusts to satisfy budget projections; (3) government transfer only supplements the income of households with self-generated income below the poverty line; (4) deductions for basic living expenses, itemized investments and capital losses are allowed; (5) deductions cannot be applied to government transfer. A general framework emerges with three parameters that determine a minimum allowed tax deduction, a maximum allowed itemized deduction, and a maximum deduction defined by income percentage. An income distribution that mimics the United States, and a series of log-normal distributions are considered to quantitatively compare detailed characteristics of this tax system to progressive and flat tax systems. To minimize government dependency while maximizing after-tax income, the effective tax rate (ETR) as a function of income percentile takes the shape of the letter, V, inspiring the name victory tax, where the middle class has the lowest ETR.


1988 ◽  
Vol 81 (3) ◽  
pp. 176-181
Author(s):  
Yves Nievergelt

The new federal income tax, signed into law on 22 October 1986, spurred extensive analysis in the daily newspapers, an analysis similar to the study of a function in a beginning mathematics course. This similarity with the familiar income tax may help students understand three aspects of the abstract concept of “function”: formulas, graphs, and ordered pairs. Defined by several formulas—not just one—the tax function also prepares beginners for such functions as the a bsolute value, which also involves both a lgebraic formulas and logical tests, a combination that poses difficulties to many students (see Johnson [1986]).


1913 ◽  
Vol 23 (1) ◽  
pp. 105
Author(s):  
Henry Crofut White

1913 ◽  
Vol 19 (8) ◽  
pp. 570
Author(s):  
W. H. Osborn ◽  
W. G. McAdoo

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