A Half Century of Small Business Federal Income Tax Rates and Collections
Special Report No. 61
Executive Summary Since 1950, small businesses have, on an average annual basis, paid about nine percent of the income taxes imposed by the federal government. On average over the past 45 years, “small” C corporations have paid 2.34 percent of all federal corporate income taxes; small businesses not structured as c corporations have paid 11.52 percent of all federal individual income taxes.
Small businesses are defined here to include sole proprietorships, farms, partnerships, S corporations, and corporations having assets of approximately $1 million or less in constant 1994 dollars. Over the course of forty-five tax years from 1950 to 1994 there has been a large amount of fluctuation in the average income tax paid by such businesses. These fluctuations have had three fundamental causes: changes in tax rates, changes in the definition of taxable income, and trend changes in the overall economy.