Skip to content

95 Percent of Businesses Pay Taxes at Individual Tax Rates

1 min readBy: Andrew Lundeen, Kyle Pomerleau

In number of firms, pass-throughs are the dominant business type, with over 30 million taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. returns in 2011. Pass-throughs are unique in that all pass-through business income is taxed at individual tax rates.

Over the last 30 years, the number of pass-throughs has increased substantially. Much of this growth comes from the doubling in number of sole proprietorships since the 1980s.

The number of S corporations—a type of pass-through—has also increased, particularly since the Tax Reform Act of 1986 lowered individual tax rates. Since then, the number of S corporationAn S corporation is a business entity which elects to pass business income and losses through to its shareholders. The shareholders are then responsible for paying individual income taxes on this income. Unlike subchapter C corporations, an S corporation (S corp) is not subject to the corporate income tax (CIT). s has grown from 800,000 to over 4 million returns.

C corporations are now outnumbered by all three types of pass-throughs.

For more charts like this, please see our new chart book, Business in America: Illustrated.