According to The Atlantic, entrepreneurs are more likely than other Americans to receive public benefits, after accounting for income. The argument in this article is that expanding these benefit programs helps increase new business creation.
In 2014, Harvard Business School’s Gareth Olds studied the link between entrepreneurship and food stamps. He found that the expansion of the program in some states in the early 2000s increased the chance that newly eligible households would own a startup business by 16 percent. The Atlantic explains that expanding this program provided a threshold for entrepreneurs, by reassuring them that if their venture failed, they could fall back on food stamps.
In another study, Olds looked at the creation of the Children’s Health Insurance Program, which provides publicly funded health insurance for children whose families do not qualify for Medicaid. In order to estimate the program’s impact on new business creation, Olds compared the rate of entrepreneurship of those who barely qualified for CHIP to those whose incomes barely made the cutoff. He found that the rate of startup ownership for the eligible households just below the cutoff was 31 percent higher than for families that barely made the cutoff. Similarly, CHIP eligibility increased immigrant household’s chances of owning an incorporated business (startup) by 28 percent.
The article explains that taxes are also often a threat to entrepreneurship. A lower capital gains tax rate is associated with a greater supply of entrepreneurship, however the article explains that this system can often be inefficient. A better change would be to implement an entrepreneur-friendly tax reform, by shifting the tax code away from its current bias for debt over equity, while also preserving or expanding key tax credits such as the exemption for long-term investment in small businesses.
Do you all agree with the argument that when the government provides citizens with economic security, they use it to take business risks?