Since 2011, dozens of business trade groups representing millions of Main Street Employers have written to Congress communicating their support for three critical tax reform principles. These principles are designed ensure the competitiveness of the entire business community – from the smallest private business to the largest public corporation – while making the United States the best place for all businesses to form, invest, and create new jobs.
This year, under the Parity for Main Street Employers banner, more than 100 business groups have called on Congress to ensure that any effort to reform the tax code must:
- Be comprehensive, addressing all forms of businesses
- Restore rate parity between corporations and pass-through businesses
- Eliminate the double tax on corporate income
You can read the full letter here.
Comprehensive: Businesses organized as S corporations, partnerships, and sole proprietorships employ the majority of private sector workers and contribute a majority of business income to the national economy. Tax reform should begin with this critical portion of the business community and not treat them as an afterthought.
Parity: Tax rates on pass-through businesses went up sharply in 2013 as a result of the fiscal cliff and the implementation of the new Affordable Care Act investment tax. As a result, top tax rates on pass-through businesses are nearly 45 percent today, or almost 10 percentage points higher than the top tax rate imposed on C corporations. Tax reform proposals that reduce tax rates for C corporations only would make this disparity worse. Tax reform needs to reduce tax rates and restore rate parity for all employers, regardless of how they are organized.
End the Double Tax: The correct way to tax business income is to tax it once, tax it when it is earned, and tax it at reasonable rates. Today, however, pass-through businesses pay tax rates up to 45 percent while C corporation income is subject to two layers of tax – a corporate tax and a shareholder tax. This double tax changes how C corporations behave, resulting in less business investment, fewer jobs and lower wages. Tax reform should restore reasonable tax rates for all businesses while eliminating the double tax on corporations.