Taxing the Untaxed Business Sector

摘要

In the United States, most goods and services are produced by private firms and paid for through private transactions, and most of the income from those transactions is subject to federal corporate or individual income taxes. Some institutions, however, are like private businesses in that they sell goods or services to generate revenue for their operations, but their income is not taxed by the federal government at either the corporate or the individual level. Those institutions include many nonprofit organizations (such as hospitals and universities), various types of cooperatives (including credit unions), and business enterprises owned by state or local governments (such as utilities). The tax treatment of that untaxed business sector has been a topic of considerable debate. Subjecting the entities in that sector to corporate income taxes would be unlikely to raise as much revenue as the size of the sector suggests, mainly because those entities' organizational structure would allow them to avoid taxation in ways that for-profit companies find infeasible. Those tax-avoidance actions would reduce national income. They would also lower the entities' accumulation of internal capital, making them more dependent on external capital for growth.