A Tax-Cut Tonic

A new study of an old tax cut demonstrates how rate reductions boost small-business growth

President Bush's plan to cut the top marginal income tax rate from 39.6% to 33% would aid small-business growth, implies a National Bureau of Economic Research study. In the study, researchers Robert Carroll, Douglas Holtz-Eakin, Mark Rider, and Harvey S. Rosen analyzed tax-return data to learn how the drop in income-tax rates in the Tax Reform Act of 1986 affected the revenues of sole proprietorships -- unincorporated businesses owned by single individuals.

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