Assistant professor, Duke Ferguson's paper, "Raising the Stakes: How Progressive Tax Rates Affect Risk-Taking by Pass-Through Businesses" was presented at the 2023 Contemporary Accounting Research Conference in Vancouver, Canada. 

Abstract: We examine how the progressive structure of individual tax rates affects risk-taking by pass-through businesses (PTBs). PTBs generate over 60 percent of U.S. business income and make up roughly 95 percent of business tax returns, yet there is limited empirical research on how progressive tax rates affect project selection. We study PTBs using the unique setting of thoroughbred racing and examine how progressive tax rates affect the decision to enter a risky stakes race or a less risky allowance race. The setting is advantageous as it provides a rare opportunity to empirically observe the choice by PTBs between two mutually exclusive projects that differ only in terms of payoffs and risk. Using a difference-in-differences design surrounding the reduction in progressivity under the Tax Cuts and Jobs Act, we find that investment in stakes races increases in the U.S. relative to Canada. We find further evidence of a negative relation between progressive tax rates and risk-taking in additional analyses that exploit variation in the progressivity of state tax rates. Overall, our findings provide evidence that the progressivity of individual tax rates creates significant payoff asymmetry that has negative effects on risk-taking.

Victor ‘Duke’ Ferguson obtained a PhD in management with a concentration in accounting from Purdue in 2020 and is currently an Assistant Professor at the University of Kentucky. His primary research interest is taxation, specifically the communication between taxpayers, tax authority and third parties. Some of his research uses the unique setting of the thoroughbred racing industry to examine income underreporting and the relationship between tax rates and risk-taking.
Before pursuing a PhD, Duke spent two years working in the Lexington office of Blue & Company, a regional public accounting firm. He worked primarily in tax and gained experience working with individuals, nonprofits, and business entities. Duke has an undergraduate accounting degree from Transylvania University and is a licensed CPA in Kentucky.