Most family businesses file through the individual income tax code – in 2009 33.6 million businesses filed taxes on personal income tax returns. These pass through entities pay approximately 44 percent of all business income taxes, while only accounting for 35 percent of business receipts.
Lowering the marginal tax rates for individuals and businesses will lead to an increase in employment. A recent study by Ernst & Young found that an entrepreneur’s increase in after tax funds of 10 percent would increase the likelihood of hiring by 12 percent and increase the average wage by 3.7 percent. Additionally, business receipts from an increase in after tax funds would increase business receipts by 8.4 percent, further helping to increase consumption. An increase in wages and workers will better stimulate the economy than any increase in government spending.
The Family Business Coalition is working to help shape future tax policy to help family business owners to create a fairer tax system that helps the American economy grow instead of hindering it.
The Family Business Coalition is in favor of full tax reform and has been following tax reform closely. Making the tax code simpler and fairer will help all Americans.