DECEMBER 17, 2015 - KENT, OHIO
Curtis Lockwood Reynolds, Ph.D., and Shawn Rohlin, Ph.D., Economics faculty at Kent State University’s College of Business Administration, have been awarded a $76, 574 grant by the Ewing Marion Kauffmann Foundation for their research on identifying the effects of local property taxes on entrepreneurial startups.
“This is a highly competitive award from the country’s leading foundation for the study of entrepreneurship,”
said Donald Williams, professor and Chairperson in the Department of Economics at Kent State. “This grant is another example of the high quality of research conducted by professors Reynolds and Rohlin, reflecting the innovative methodology and use of data. It also reflects the potential impact their research has on public policy in the United States.”
Reynolds’ and Rohlin’s research will examine how local taxation affects entrepreneurship by using school property tax votes and property tax rate changes. Their research efforts will be to better understand how local taxation affects entrepreneurship both in size and type. They believe their research will prove that high local taxes, particularly on property, have the potential to restrict entrepreneurial activity due to rising operating costs causing fewer businesses to form, thus decreasing the likelihood that new establishments will be successful or to simply encourage entrepreneurs and established businesses to relocate to lower-tax areas.
“We are very grateful to the Ewing Marion Kauffman Foundation for their generous support of our research,” said Reynolds. “The research we plan to conduct will result in being useful to both entrepreneurial businesses and policy-makers.”
Traditionally, estimating the magnitude of such effects has been difficult due to limited data that confound estimates. However, Reynolds and Rohlin proposed a study on the impact of local property taxes on entrepreneurs with two interrelated but separate research papers.
The first paper will directly study how changes in local property taxes affect entrepreneurs utilizing a “regression discontinuity approach” by comparing what happens to entrepreneurial activity in school districts that barely pass their property tax levies to entrepreneurial activity in school districts that barely fail to pass their property tax levies. This will provide an unbiased estimate of the effect of local taxation on entrepreneurs.
The second paper will investigate how local taxation and entrepreneurship affected entrepreneurial activity in Ohio by the exemption of business inventories, which previously had been taxed at the same rate as real property, in the mid-2000s. These state-level tax changes shift the local tax burden away from entrepreneurs who have high business inventories (capital intensive), such as retail, construction and manufacturing businesses and toward entrepreneurs with more labor-intensive services for startups and experienced entrepreneurs.
“Understanding how local property taxes affect entrepreneurship is an important issue,” said Rohlin. “We are honored and excited to have the Ewing Marion Kauffman Foundation fund our research.”
The Ewing Marion Kauffman Foundation focuses on supporting entrepreneurship and education and is one of the largest private foundations in the United States.