- December 22, 2021
- Posted by: Stratford Team
- Category: Business
A major finding of our forthcoming work is that more than half of the income generated by closely held businesses (that is, businesses other than corporations) is untaxed. This discrepancy between earned and taxed income is due to some combination of tax rules, taxpayer avoidance strategies, and outright evasion of liabilities. A pure income tax would subject all forms of income to taxation. That conceptual ideal, of course, does not apply to the United States revenue system. Nonetheless, it would be useful to understand better why so much business income is untaxed and what the revenue and distributional effects of taxing that income would be.
We show that Survey of Consumer Finances (SCF) business owners report incomes that are substantially higher than the totals reported to the IRS and nearly the same as income from businesses as estimated in the National Income and Product Accounts (NIPA), which is more than double the published IRS figures….
