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 corporations 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.

Share this article

About the Authors

Andrew Lundeen

Director of Federal Projects
Kyle Pomerleau Tax Foundation

Kyle Pomerleau

Resident Fellow, American Enterprise Institute

Kyle Pomerleau is a resident fellow at the American Enterprise Institute (AEI), where he studies federal tax policy. Before joining AEI, Mr. Pomerleau was chief economist and vice president of economic analysis at the Tax Foundation, where he led the macroeconomic and tax modeling team and wrote on various tax policy topics, including corporate taxation, international tax policy, carbon taxation, and tax reform.