America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation.
The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation.
“There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets.
It said that corporate closings have recently picked up steam and now 60,000 a year are shut down.
A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years.
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The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates.
“More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation.
“Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement.
“Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector," he added.
Paul Bedard, the Washington Examiner's "Washington Secrets" columnist, can be contacted at firstname.lastname@example.org.