![]() Pass-through business income faces lower tax rates than traditional corporate income. In addition, some partnerships are circular, in the sense that they are owned by other partnerships, which could in turn be owned by yet other partnerships. A fifth of partnership income was earned by partners that the study's authors were not able to classify into one of several categories, such as a domestic individual or a foreign corporation. While taxpayers in the top 1 percent are eight times as likely to receive dividends as taxpayers in the bottom 50 percent, the ratio for partnerships is more than 50 to 1. The concentration of partnership and S corporation income is much greater than the concentration of dividend income (45 percent to the top 1 percent) which proxies for income from C corporations (traditional corporations). By linking 2011 partnership and S corporation tax returns with federal individual income tax returns, in particular Form 1065 and Form 1120S K-1 returns, the researchers find that over 66 percent of pass-through business income received by individuals goes to the top 1 percent. Previous research has shown that the two phenomena are linked: The growth of income from pass-through entities accounted for 41 percent of the rise in the income of the top 1 percent. Over roughly the same period, the income share of the top 1 percent of income earners doubled. business income by 2011, they represented 54.2 percent. In 1980, pass-through entities accounted for 20.7 percent of U.S. In contrast, the income of traditional corporations, more specifically subchapter C corporations, is subject to corporate income taxes, and after-tax income distributed from the corporation to its owners is also taxable. Their income passes directly to their owners and is taxed under whatever tax rules those owners face. Pass-through entities - partnerships, tax code subchapter S corporations, and sole proprietorships - are not subject to corporate income tax. "This problem is especially severe for partnerships, which constitute the largest, most opaque, and fastest growing type of pass-through." business activity, we lack clean, clear facts about the consequences of this change for the distribution and taxation of business income," write Michael Cooper, John McClelland, James Pearce, Richard Prisinzano, Joseph Sullivan, Danny Yagan, Owen Zidar, and Eric Zwick. "Despite this profound change in the organization of U.S. ![]() Over the same period, the amount of pass-through business income flowing to the top 1 percent of income earners has increased sharply, according to Business in the United States: Who Owns It and How Much Tax Do They Pay? (NBER Working Paper 21651). ![]() The importance of pass-through business entities has soared in the past three decades. ![]() In 1980, pass-through entities accounted for 20.7 percent of US business income by 2011, they represented 54.2 percent. Transportation Economics in the 21st Century.Training Program in Aging and Health Economics.The Roybal Center for Behavior Change in Health. ![]() Retirement and Disability Research Center.Measuring the Clinical and Economic Outcomes Associated with Delivery Systems.Improving Health Outcomes for an Aging Population.Early Indicators of Later Work Levels, Disease and Death.Conference on Research in Income and Wealth.Boosting Grant Applications from Faculty at MSIs.Productivity, Innovation, and Entrepreneurship.International Finance and Macroeconomics. ![]()
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