Interesting hypothesis. It would be easy enough to test--if a local governement or Chamber of Commerce wanted to encourage small business development, they could offer a "Tax Refund Stimulus" whereby the local government refunds all the other taxes (Federal, etc) paid by the small business. While this isn't the same as not paying the taxes in the first place (specifically it is MORE paperwork to fill out), it is more likely to encourage the small businessperson than not getting such a refund.
So here we are--we have a testable hypothesis. Now all we need is the cash.