Do Low Taxes Lead to Entrepreneurial Growth?

Notes of Sources

1. Small Business Survival Index 2001: http://www.sbsc.org  -- 17 factors are used to develop the overall rankings: personal income taxes, capital gains taxes, corporate income taxes, property taxes, sales taxes, estate taxes, unemployment taxes, health insurance taxes, electricity costs, workers' compensation costs, crime rates, right-to-work status, number of government employees, tax limitation status, Internet taxes, gas taxes, and state minimum wages.

Columns 2-6 are from the Development Report Card for the States: 2000 The descriptions and sources listed below are taken directly from the web version of the report. The "we" reference is to the Corporation for Enterprise Development.

2. New Companies 
New company formation is one of the principle ways we measure entrepreneurial energy. New firms are defined as those that seek new account numbers from state employment services. Measure: Number of companies applying for new employment service account numbers, 1998, per 1,000 1998 workers. Source: U.S. Small Business Administration, Office of Advocacy, from the Council of Economic Advisers, Economic Indicators, March 1998 and March 1999 and the Bureau of Labor Statistics. 

3. Change in New Companies 
This measure examines the trend in new company formations on a year-to-year basis. 
Measure: Percentage of change in companies applying for new employment service account numbers, from 1997 to 1998. Source: U.S. Small Business Administration, Office of Advocacy, from the Council of Economic Advisers, Economic Indicators, March 1998 and March 1999 and the Bureau of Labor Statistics. 

4. New Business Job Growth 
A good indicator of the impact of entrepreneurship in a state is the job growth associated with relatively young businesses. This measure gives a picture of the influence of local entrepreneurs on a state economy through the creation of new jobs. Measure: Percent growth in employment at firms less than five years old, 1993-1998. Source: David Burch, Jan Gundersen, Anne Haggerty, and William Parsons. Who's Creating Jobs? Cognetics, Inc. Cambridge, MA: 1999. 

5. Technology Companies 
The size of this sector creates more opportunities for clustering, agglomeration economies, and dynamic interactions that increase the chances of producing commercially successful companies. Measure: Percentage of business establishments that are technology companies, 1997. Source: U.S. Department of Commerce, Bureau of the Census. County Business Patterns, 1997. Washington D.C.: 2000. 

6. Initial Public Offerings 
The number and/or value of initial public offerings is an excellent indicator of the growth potential of these small companies. The rate and value of IPOs reflects the competitiveness of the state's small business sector. While many innovative and successful companies choose to remain under private ownership, companies that tap into the vast capital resources of the financial markets generate the largest absolute gains in employment and revenue. Measure: Proceeds of initial public offering, per business establishment, in dollars.
1999. Source: 1999 IPO Activity by State. Thomson Financial Securities Data. Accessed
July 2000.

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