When Marginal Tax Rates Are Lowered, Business Owners Work Harder And Increase Firm Revenues

From NBER Working Paper Series, "The Impact Of Tax Incentives On The Economic Activity Of Entrepreneurs" by Jarkko Harju and Tuomas Kosonen, Working Paper 18442:

We ... study empirically to what extent the income tax burden on entrepreneurs affects the output of their firms.***The results indicate that decreasing the marginal tax rate of an entrepreneur increases the turnover [revenues] of her firm. Our main specification that compares partnerships with corporations indicates that a 10 percent reduction in the marginal tax rate leads to a 1.7 percent increase in turnover [revenues].***there is no indication that more people are being employed. Thus it seems that the reforms did not increase labor demand. Moreover we do not find any statistically significant increase in investments. Therefore the increase in turnover is due to increase in effort that the entrepreneurs exert.