We study the causal effect of upside progressivity in the personal income tax schedule, known as success taxes, on entrepreneurship in the UK by exploiting sharp discontinuities in the convexity of taxation that arise at government-specified thresholds in the income distribution. Using a regression discontinuity design we find no evidence that assignment to greater upside convexity around the top tax bracket affects transitions into self-employment. This result is robust to examining the question over longer time horizons, using other threshold points, and cannot be explained by offsetting jumps in other covariates or strategic behaviour.
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Richard Kneller and Danny McGowan
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Sir Clive Granger BuildingUniversity of NottinghamUniversity Park Nottingham, NG7 2RD
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