Business Income to Shoulder Over a Third of Tax Increase on Top Earners

Advocates of allowing the top two federal income tax rates to expire claim that only 2 or 3 percent of businesses would be affected, but a new Tax Foundation report shows that more than one-third of the revenue from an increase in the top two rates would come from business income.

About 39 percent of the $630 billion tax increase on high-income taxpayers (defined by President Obama as individuals earning more than $200,000 and married couples earning more than $250,000) in 2011 would come from business income. This amounts to an extra $246 billion in taxes on business income over 10 years.

For more information, see Tax Foundation Special Report, No. 185, “Over One-Third of New Tax Increases to Come from Business Income” or visit the Tax Foundation’s FAQ on the Bush-Era Tax Cuts.

To see how the fate of the Bush-era tax cuts would impact your 2011 federal income tax liability, visit the Tax Foundation’s interactive calculator at www.mytaxburden.org.