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.
