TAX REFORM AND PASSTHROUGH BUSINESSES
PASSTHROUGH BUSINESSES DOMINATE U.S. ECONOMY ANDT AX REFORM MUST INCLUDE THEM, TAX GROUP SAYS “Much time is devoted to improving the corporate side of the tax code, but corporate-only business tax reform misses a significant portion of business activity.” This is the assessment offered by the Tax Foundation (www.taxfoundation.org), a Washington D.C.-based tax research group that is urging Congress and the President not to leave Mom and Pops, partnerships, and S Corporations behind.
In a new study, the Tax Foundation found that sole proprietorships, S corporations, and partnerships make up the vast majority of businesses. Together, they earn more than 60 percent of net business income in America and account for more than half of the private sector workforce and 37 percent of total private sector payroll. The report observes that pass-through businesses are represented in all industries in the United States.
The study explains that majority of pass-through business income is taxed at top individual tax rates. Thus, any tax reform undertaken by the President and Congress needs to address the individual income tax code, not just the corporate provisions, because of the economic importance of pass-through businesses.
The full report is available here: SPECIAL REPORT No. 227: An Overview of Pass-through Businesses in the United States (PDF)