September 13, 2010 Over One-Third of New Tax Revenue Would Come from Business Income If High-Income Personal Tax Cuts Expire Print this page Subscribe Support our work Download Special Report No. 185 Special Report No. 185 Key Findings • The frequently cited statistic that only 2 or 3 percent of tax returns with business income pay tax in the top two brackets and would face higher tax rates in 2011 is factually accurate but misleading. Those 2 or 3 percent represent the fortunes of larger, growing, profitable businesses whose continued prosperity is important to economic recovery. • Assuming that business income is the last dollar of income a taxpayer earns, Tax Foundation economists estimate that 39 percent of the $629 billion tax increase on high-income taxpayers proposed in the Obama 2011 budget would be extracted from business income. Over ten years then, an extra $246 billion would be taken out of business income. • In 2007, the federal government taxed more business income under the individual income tax code than under the traditional corporate tax code. • More than 74 percent of tax filers in the highest tax bracket report business income, compared to 20 percent of those at the lowest bracket. • Of the roughly $864 billion in taxable business income reported on individual tax returns in 2008, nearly 68 percent was claimed by taxpayers earning over $200,000 and 35 percent was claimed by taxpayers earning over $1 million. Topics Center for Federal Tax Policy Business Taxes Corporate Income Taxes Individual and Consumption Taxes Individual Income and Payroll Taxes Research Tags Bush Tax Cuts Millionaires and High Income Earners Tax Brackets