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S Corp Taxation: Level the Playing Field

8 Pages Posted: 11 Dec 2013  

Cherie J. Hennig

University of North Carolina (UNC) at Wilmington - Department of Accountancy and Business Law

Blaise M. Sonnier

University of Colorado, Colorado Springs - College of Business

William A. Raabe

University of Wisconsin - Whitewater - College of Business and Economics

John O. Everett

Virginia Commonwealth University (VCU) - Department of Accounting

Date Written: April 22, 2013

Abstract

A MAXTax would equalize the tax treatment of business income from passthrough entities with that of corporations. The tax revenue loss from a MAXTax would be partially offset by closing the S corporation SE tax loophole. In the absence of a MAXTax, individuals may choose to incorporate their businesses to take advantage of the lower corporate tax rate. If the S corporation payroll tax loophole is not closed, more individuals will use S corporations to minimize their Medicare and net investment income tax liabilities, significantly reducing projected tax revenues from those taxes.

Keywords: S corporation, self employment tax, medicare tax, net investment income tax, choice of entity, small business

JEL Classification: E62, H25, K34

Suggested Citation

Hennig, Cherie J. and Sonnier, Blaise M. and Raabe, William A. and Everett, John O., S Corp Taxation: Level the Playing Field (April 22, 2013). Tax Notes, April 22, 2013. Available at SSRN: https://ssrn.com/abstract=2365490

Cherie J. Hennig

University of North Carolina (UNC) at Wilmington - Department of Accountancy and Business Law ( email )

601 S. College Road
Wilmington, NC 28403
United States

Blaise M. Sonnier

University of Colorado, Colorado Springs - College of Business ( email )

1420 Austin Bluffs Parkway
Colorado Springs, CO 80933-7150
United States

William A. Raabe (Contact Author)

University of Wisconsin - Whitewater - College of Business and Economics ( email )

Whitewater, WI 53190
United States

HOME PAGE: http://billraabetax.com

John O. Everett

Virginia Commonwealth University (VCU) - Department of Accounting ( email )

Richmond, VA 23284
United States

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