8 Pages Posted: 11 Dec 2013
Date Written: April 22, 2013
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: 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