Taxes create a wedge between what a new venture earns and what investors receive, boosting the hurdle rate that must be met in order to attract funding.
In a recent study, we examined how big this effect is, how it varies across industries, and how it differs between startups and established businesses. To do so, we combined all of the features of the federal tax code—rates, deductions, credits, special provisions, etc.—into a single measure known as a marginal effective tax rate (METR).
