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Home > UA Law > Akron Law Journals > AKRONTAXJOURNAL > Vol. 24 (2009)

 

Authors

Rafael Efrat

Abstract

Tax burden on small business owners in the United States is significant and regressive in nature. Some studies have linked the tax burden on small business owners to lower profitability, lower rate of entrepreneurial growth, and business closures. The tax burden also appears to cause some small business owners to resort to bankruptcy protection. The objective of this study is to investigate the burden tax obligations impose on small business owners at the time of their bankruptcy filing. Specifically, using a national sample, this study ascertains the pervasiveness of tax debts among small business owner bankruptcy petitioners.

The findings from this study suggest that the tax burden is pervasive to a much greater extent among small business owners in bankruptcy as compared to consumer petitioners. This study also suggests that individual small business owners, who are encumbered with high tax debts, are significantly worse off financially as compared to the small business owners who have low tax debts or no tax debts. This study indicates that the tax burden is also significant in total amount outstanding. Not only did a sizeable number of small business owners in bankruptcy sample report significant tax debts as part of their bankruptcy schedules, tax debts appear to impair the ability of some small business owners from obtaining a financial fresh start.

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