Fundamental Tax Reform / Startup Jobs Collapse

I am participating in a “fundamental tax reform” panel hosted by the Mercatus Center on Friday. The goal is to get beyond the tired old debates about extending or not extending taxes on this class or that class of Americans and start with first principles.  I will be talking about entrepreneurs, and will probably mention my latest study showing that the startup job creation rate has collapsed during the last three years and actually fallen lower in 2011 than ever before. I’ll ask: Why did the IRS start cracking down on companies that hire American contractors in 2009? I might even mention that after 50 years of an LBJ-inspired War on Poverty, poverty is winning. Maybe the United States should design a tax code that doesn’t treat low-income Americans as dependent victims (and thus trapping them in poverty with effective tax rates above 100%), no?

Details of the Mercatus event:
Sept. 21, 2012 — 12:00-1:30 PM
Senate Dirksen, Room 562

And here’s the chart from my report:

5 responses to “Fundamental Tax Reform / Startup Jobs Collapse

  1. Somewhat related, this paper by Bhagat and Obreja;

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1923829

    ‘We find that our measures of cash flow uncertainty have a significantly negative impact on corporate employment and corporate investment in both tangible and intangible assets. Economically, if cash flow uncertainty were to revert to levels observed back in 2005, corporate employment would increase by more than 1.89 million jobs, investment in tangible assets would increase by more than 10%, and investment in intangible assets would increase by more than 19%. Furthermore, we document that our risk measures have had a more negative impact on corporate employment and corporate investment in tangible and intangible assets during economic recessions than during economic expansions. These findings have significant policy implications. To wit, if policy makers would like corporations to increase their employment and investment, they should focus on policies that decrease corporate cash flow uncertainty.’

  2. I’ll look forward to following the debate on Friday. Thanks for the great blog, I’ll certainly look into getting your book when it comes out.

  3. Gee – your startup jobs series seems to have a definite business cycle component to it. Which is not surprising at all. One should also admit that recessions tend to increase poverty rates while booms tend to decrease them. So this could all be attributed to aggregate demand factors as opposed to alleged changes in tax policy.

    • If Obama gains re-election, he will have a full 8 years to compare his record against that of Clinton and Bush 43. Of course there are many more variables that don’t appear to be accounted for.

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