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| EST. READ TIME 2 MIN.Lowering capital gains tax rate best way to encourage financing for entrepreneurs
Financial Markets, Laws, and Entrepreneurship
Financial Markets, Laws, and Entrepreneurship, a chapter in the recently released book Demographics and Entrepreneurship: Mitigating the Effects of an Aging Population, finds that the preferential tax rate for small businesses does not encourage entrepreneurship, and actually acts as a barrier for small businesses to grow into medium and large businesses, because doing so triggers a substantial tax increase.
Likewise, Labour Sponsored Venture Capital Corporations (LSVCC) have widely been seen as failures because LSVCCs are used largely for their generous tax credits, and often fail to deliver financing to entrepreneurs.
A second related chapter in the book—Spurring Entrepreneurship through Capital Gains Tax Reform—looks specifically at the economics of capital gains and Canada’s current competitiveness.
Among other insights from the chapter, it notes how several developed countries, including New Zealand, Switzerland and Belgium don’t have capital gains taxes. Others including Australia, Britain, Germany and Japan have lower rates than Canada, which in 2015/16, had a top personal marginal capital gains tax rate of 26.5 per cent—higher than the OECD average (25.5 per cent).
Not only do lower capital gains tax rates incentive greater entrepreneurial activity by increasing the potential reward for starting a business, a lower rate also frees up capital and encourages investment in business startups by similarly increasing the potential reward for investors if a new company is a success.
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Daniel J. Mitchell
Daniel J. Mitchell is a co-founder and president of the Center for Freedom and Prosperity and the Center for Freedomand Prosperity Foundation. Dr. Mitchell holds a Ph.D. in Economics from George Mason University and master’s and bachelor’s degrees in economics from the University of Georgia. Dr. Mitchell was a senior fellow with the Cato Institute and The Heritage Foundation, and an economist for Senator Bob Packwood and the Senate Finance Committee. He also served on the 1988 Bush/ Quayle transition team and was Director of Tax and Budget Policy for Citizens for a Sound Economy.… Read more -
Brian Garst
Vice President, Center for Freedom and ProsperityBrian Garst is Vice President of the Center for Freedom and Prosperity in Virginia. He has a bachelor’s degree inComputer Science from the Florida Institute of Technology, and a master’s degree in Political Science from the University of West Florida. He is frequently published in U.S. and international outlets on the topics of tax competition, taxpayer privacy, and free market economics.… Read more -
Charles Lammam
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Taylor Jackson
Independent Researcher
Taylor Jackson is an Independent Researcher and a former Senior Policy Analyst with the Fraser Institute. He holds a B.A. andM.A. in Political Science from Simon Fraser University. Mr. Jackson is the coauthor of a number of Fraser Institute studies, including Safety in the Transportation of Oil and Gas: Pipelines or Rail?, and the Fraser Institute's annual Global Petroleum Survey, and Survey of Mining Companies. He is also the coauthor of a book chapter on the past, present, and future of Canadian-American relations with Professor Alexander Moens. Mr Jackson's work has been covered in the media all around the world and his commentaries have appeared in the National Post, Financial Post, and Washington Times, as well as other newspapers across Canada.… Read more -
Douglas Cumming
Distinguished Professor of Finance and Entrepreneurship, Florida Atlantic University -
Sofia Johan
Associate Professor of Finance, Florida Atlantic UniversitySofia Johan is Associate Professor of Finance at Florida Atlantic University, USA, and Visiting Professor at InnoLab, University of Vaasa,Finland. She is co-editor of Venture Capital: An International Journal of Entrepreneurial Finance and associate editor of the British Journal of Management, the International Journal of Finance and Economics, and the British Accounting Review. She is on the editorial boards of Entrepreneurship Theory and Practice, Small Business Economics: An Entrepreneurship Journal, Emerging Markets Review, and Finance Research Letters, among others. Her research focuses on corporate finance, corporate governance, alternative investments (hedge funds, venture capital, private equity, real estate investment trusts, and IPOs) and alternative finance (crowdfunding, peer-to-peer lending, and cryptocurrencies).… Read more