This study examines the influence of tax policy on entrepreneurship and small business growth, assessing whether lower tax rates stimulate startup formation and enhance business sustainability. Using a mixed-methods approach, we analyzed quantitative data from national business registration databases and taxation records from 2020 to 2024, applying regression models and correlation analyses. The findings reveal a strong negative correlation (-0.98) between tax rates and entrepreneurial activity, confirming that a 1% tax reduction leads to a 0.45% increase in startup formation and a 0.38% rise in small business revenue growth (p < 0.001). Chi-square tests further demonstrate that tax policy changes significantly influence business location decisions (χ² = 25.0, p = 0.00005). These results suggest that while lower tax burdens enhance financial liquidity and encourage risk-taking, their effectiveness depends on complementary policies such as simplified tax compliance and access to business credit. Policymakers should integrate tax incentives with broader economic strategies to maximize their impact on entrepreneurship and sustainable business growth.