Taxing Businesses Through the Individual Income Tax.

摘要

Since the individual income tax was instituted in 1913, the profits of most businesses have been allocated, or passed through, to their owners and subjected to that taxrather than to the corporate income tax. However, most business activity has occurred at firms subject to the corporate income tax (C corporations) because those firms tend to be larger than pass-through entities. Over the past few decades, the proportion of firms organized as pass-through entities and their share of the revenues that businesses receive from sales of goods and servicesthat is, business receiptshave increased substantially: In 1980, 83 percent of firms were organized as pass-through entities, and they accounted for 14 percent of business receipts; by 2007, those shares had increased to 94 percent and 38 percent, respectively. This report examines those shifts in organizational structure, the effect they have had on federal revenues, and the potential effects on revenues and investment of various alternative approaches to taxing businesses profits.