Business in the United States: Who Owns it and How Much Tax Do They Pay?

Publication Year
2016

Type

Book Chapter
Abstract

"Pass-through” businesses like partnerships and S-corporations now generate over half of U.S. business income and account for much of the post-1980 rise in the top- 1% income share. We use administrative tax data from 2011 to identify pass-through business owners and estimate how much tax they pay. We present three findings. (1) Relative to traditional business income, pass-through business income is substantially more concentrated among high-earners. (2) Partnership ownership is opaque: 20% of the income goes to unclassifiable partners, and 15% of the income is earned in circularly owned partnerships. (3) The average federal income tax rate on U.S. pass- through business income is 19%|much lower than the average rate on traditional corporations. If pass-through activity had remained at 1980's low level, strong but straightforward assumptions imply that the 2011 average U.S. tax rate on total U.S. business income would have been 28% rather than 24%, and tax revenue would have been approximately $100 billion higher.

Links: Video of Presentation. Discussion with Jim Poterba. NBER Interview on Tax Policy and the Economy.
Coverage: NBER Digest Summary,WSJ,WSJ,Washington Post, PBS, Fiscal Times, WSJ,Politico, Politico, Bloomberg, New York Times, Los Angeles Times, Capital Ideas, New York Times, New York Times.

Book Title
Tax Policy and the Economy
Volume
30
Pages
90-128
Publisher
MIT Press
City
Cambridge