NCPA - National Center for Policy Analysis

What Many Do Not Realize about Businesses and Taxes

November 13, 2014

The Tax Foundation has a new report showing just how businesses are doing in today's economy. While political commentators often talk about businesses as if they are their own entities, the report begins by noting that laws that impact businesses ultimately impact people: "[T]he reality is that businesses are simply groups of people; they are workers, consumers, and shareholders." As such, a tax on business is not a tax on some faceless corporate entity, but ultimately a tax on individual citizens, whether it results in lower wages for workers or higher prices for consumers.

The report offers a number of statistics and figures that many people may not realize about businesses and corporations, including:

  • Many people believe that corporations receive excessive amounts of tax breaks; in reality, it is individuals -- not corporations -- that receive the vast majority of tax breaks. In 2014, just 13 percent of all tax expenditures will go to corporations, according to the Office of Management and Budget, while the remaining 87 percent will go to individuals.
  • High individual income tax rates on high income earners actually tax many businesses, because many businesses are "pass-through" entities, meaning that business profits are taxed when the individual owner pays his own income taxes. Seventy-four percent of income from pass-through businesses is earned by individuals with incomes of more than $100,000.
  • Less than 1 percent of businesses employ half (50.6 percent) of the private sector workforce.
  • Corporate tax rates around the world have fallen over the past 10 years, leaving the United States behind. The United States has a corporate tax rate of 39.1 percent, higher than the world average. There are only two countries with corporate income tax rates higher than the United States: Chad and the United Arab Emirates.

The report notes that economic growth in the United States has been low since 2000, encouraging policymakers to reform U.S. economic and tax policy to boost growth.                                  

Source: "Business in America: Illustrated," Tax Foundation, November 2014.

 

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