SMBs Pay More Than Their Fair Share in Taxes

By Small Business FOXBusiness

As the tax reform debate continues, a new study finds most small businesses are paying a higher effective tax rate than corporations.

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According to the study, S corporations and partnerships – two types of pass-through entities favored by small businesses – are paying significantly greater tax rates than corporations. The research was conducted by Quantria for the National Federation of Independent Business and the S Corporation Association.

“This study confirms what many Americans already know:  Our broken tax code is too complex and imposes an unfair burden on small businesses – the lifeblood of local economies,” says Rep. Tim Griffin (R-AR).

According to the report, S corporations are paying the highest average effective tax rate at 31.6%, while partnerships are at 29.4%. In comparison, corporations are paying an effective tax rate of 17.8%. This is lower than the rate paid even by the smallest S corporations, which are paying 19%.

Additionally, changes earlier this year raised the top marginal tax rates for individuals and pass-through entities above the top rate for corporations (44.7% vs. 35%).

Lawmakers say the study confirms the need for tax reform for small businesses.

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“We know Main Street businesses employ most of the workers, and this study shows they pay lots of taxes too,” said Rep. Dave Reichert (R-WA). “Tax reform needs to be comprehensive, and it needs to level out the tax burden paid by businesses of all types.”

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