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Lawmakers Need to Get Serious About Business Tax Reform
['Kyle Pomerleau', 'Stan Veuger', 'Andrew G. Biggs', 'Alex Brill']
American Enterprise Institute – AEI
The current 20 percent deduction reduces the top marginal tax rate on pass-through business income to 29.6 percent.
Although C corporations face a 21 percent corporate tax rate, their profits are also subject to the individual income tax when distributed to shareholders.
After considering various tax provisions that reduce the tax burden on C corporation shareholders, the Congressional Budget Office (CBO) finds that pass-through business investment faces a lower tax burden than C corporate investment.
After the passage of the OBBBA, lawmakers now have time to plan the next business tax reform.
Such a reform should tax business income neutrally and eliminate this deduction.