|Much of the tax reform debate in the U.S. centers on the federal corporate income tax. However, the vast majority of businesses in the U.S. are not even subject to it.
Over 90% of U.S. businesses are “pass-through” businesses, whose income is reported on the business owners’ tax returns and is taxed under the individual income tax.
These businesses earn over half of all business income in the U.S., and employ the majority of the private-sector workforce.
Although they are not subject to the corporate income tax, pass-through businesses are subject to both the federal individual income tax, with a top rate of 43.4%, and state and local income taxes, with rates ranging up to 13.3%.
As the tax reform debate moves forward in 2017, it will be important to consider the effects of reform on these businesses.
Click the link below to see what has been proposed so far and what we think is the smartest policy for taxing pass-throughs: