How does the tax treatment of entrepreneurial activity affect the decision to start a business? We study this question in the context of a major tax reform in Poland that introduced a flat tax for business owners, leaving the taxation of employees unchanged. Using a difference-in-differences framework and data on the universe of Polish taxpayers, we find that a 1 percentage point increase in the tax differential at the top of the income distribution leads to a 1.4% increase in the share of self-employed five years after the reform. The increase is primarily driven by transitions from employment to self-employment, in particular solo self-employment (self-employment without dependent workers). Moreover, the transitions occur in industries with a high human-capital component. Altogether, we find that high-income taxpayers respond strongly to the increased attractiveness of self-employment by starting a business, that such behavior shows considerable persistence, that it accumulates over time, and much of it is likely to reflect income reclassification rather than genuine entrepreneurial activity.