Small business property tax reductions and job growth

Matthew Gobey, Karolis Matikonis

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

The incomplete devolution of taxation powers to English Local Government has been constrained by central government’s doubling of reductions in property taxes for small firms. The aim is to stimulate local growth, but we question the economic logic. We analyse reductions in place since 2005, with a newly linked dataset for all firms that incorporate administrative data down to local units. We find the reductions do not overcome supposed market failures, do not stimulate job growth and once we control for firm age, that the targeted small firms do not produce extra employment. Young firms and larger firms have better growth rates, but there is no systematic size effect. We conclude that the tax reductions fail because they do not account for tax capitalisation (i.e. incidence shifts from firms to property owners), the basic characteristics of the average small firm or develop a clear mechanism for change among heterogeneous economic actors.
Original languageEnglish
Pages (from-to)277-292
Number of pages16
JournalSmall Business Economics
Volume56
DOIs
Publication statusPublished - 30 Jul 2021

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