Saturday, October 17, 2015

NYU-UCLA Tax Policy Symposium on Entrepeneurship

The conference was yesterday, and I'm now at LAX awaiting the boarding call for my return flight.

Hopefully this will go more smoothly than my delayed flight out to Los Angeles on Thursday night. But AM travel tends to go more smoothly than late travel. I had needed to pick a late departure time due to a late afternoon class. Missed the Mets' thrilling Game 5 victory, then couldn't sleep until I had thoroughly absorbed the highlights. (Pessimism and fear had lessened the suspense of waiting for wheels-down so I could check the score.)

I would say the conference largely confirmed my prior that designing tax policy to encourage "entrepreneurship" is mainly a blind alley, cant and Ayn Randian rhetoric aside.

The first paper, by Eric Allen and Susan Morse, uses a model in which entrepreneurs have a very small probability of very big success, and have limited time and money that will run out if they don't hit it big enough first to attract the next round of VC financing. Backloaded tax benefits that will help if they succeed (but not otherwise) and that are costly to set up prove in this model to have very little value, and to potentially lower the chance of ultimate success (if accessing them uses scarce resources) even if they modestly raise one's after-tax expected return.

The second paper, by Donald Bruce, shows that it's difficult to link changes to any of the macroeconomic aggregates that we might think encouraging entrepreneurship has in mind, to policies ostensibly encouraging entrepreneurship, using any available measures of who these people are.

The third panel, for which I was the moderator, had a paper by Bill Gentry finding that people whom we might conceivably think of as including entrepreneurs have a lot of unrealized gain.  Vic Fleischer had a paper discussing the point that lots of capital gains these days are actually labor income. The papers had opposing policy suggestions, and I had some things to say at the session, but as both paper drafts are preliminary, perhaps best to leave it for now. (The video may be available on line).

On the fourth and last panel, Steve Shay had a paper, also in preliminary form, suggesting that, even taking as given the case for  providing subsidies or support of some kind for intellectual property creation (not necessarily limited to that which is patentable or copyrightable), it is not clear that we can do a good job either of identifying the things we might want to encourage, or of deciding how best (and how much) to encourage them.

I'm back in NYC as I finish this post, and glad that I will not be back on the road (or at least, going further to a conference than Brooklyn) for the next couple of weeks.

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