Many people are beginning to wrap their minds around the House Republicans’ proposed destination-based cash-flow tax and what it means for tax reform. Most people are still looking into the tax’s impacts on trade and how...
- The Tax Policy Blog
- Reform the Individual Tax Code for Small Business Success
Reform the Individual Tax Code for Small Business Success
This week our economist Kyle Pomerleau has a new study on how individual tax rates have a big impact on U.S. businesses and economic growth. As Kyle points out, the number of small firms that are not subject to the corporate income tax has been growing significantly in the last 30 years, so much so that the majority of business income in the U.S. is now taken in by these so-called "pass-through" business entities.
The income from these firms is passed through to their individual owners, where it is then subject to the individual income tax, which currently has a top rate of 39.6%. Most pass-through income is taken in by individuals who are subject to this top rate, thus giving smaller businesses an even higher tax rate than U.S. corporations - which already are taxed at the highest rate in the developed world.
Kyle appeared on Fox Business last night to explain this effect.
Get Email Updates from the Tax Foundation
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.