TY - JOUR AU - Cooper, Michael AU - McClelland, John AU - Pearce, James AU - Prisinzano, Richard AU - Sullivan, Joseph AU - Yagan, Danny AU - Zidar, Owen AU - Zwick, Eric TI - Business in the United States: Who Owns it and How Much Tax Do They Pay? JF - National Bureau of Economic Research Working Paper Series VL - No. 21651 PY - 2015 Y2 - October 2015 DO - 10.3386/w21651 UR - http://www.nber.org/papers/w21651 L1 - http://www.nber.org/papers/w21651.pdf N1 - Author contact info: Michael Cooper US Department of Treasury Office of Tax Analysis Washington DC 20020 E-Mail: michael.cooper@treasury.gov John McClelland Congressional Budget Office Ford House Office Building Washington, DC 20515 E-Mail: john.mcclelland@cbo.gov James Pearce Department of the Treasury Fax: Financial Economist E-Mail: James.Pearce@cbo.gov Richard P. Prisinzano 3440 Market Street Suite 300 Philadelphia, pa 19104 Tel: 2158982277 E-Mail: rpprisin@wharton.upenn.edu Joseph Sullivan Department of the Treasury E-Mail: jsullivan@jd18.law.harvard.edu Danny Yagan Department of Economics University of California, Berkeley 530 Evans Hall, #3880 Berkeley, CA 94720 E-Mail: yagan@berkeley.edu Owen M. Zidar Department of Economics & School of International and Public Affairs Princeton University 237 Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: ozidar@princeton.edu Eric Zwick Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 239/822-8942 E-Mail: ezwick@chicagobooth.edu M1 - published as Michael Cooper, John McClelland, James Pearce, Richard Prisinzano, Joseph Sullivan, Danny Yagan, Owen Zidar, Eric Zwick. "Business in the United States: Who Owns It, and How Much Tax Do They Pay?," in Jeffrey R. Brown, editor, "Tax Policy and the Economy, Volume 30" University of Chicago Press (2016) M2 - featured in NBER digest on 2015-12-30 M3 - presented at "Tax Policy and the Economy", September 24, 2015 AB - “Pass-through” businesses like partnerships and S-corporations now generate over half of U.S. business income and account for much of the post-1980 rise in the top- 1% income share. We use administrative tax data from 2011 to identify pass-through business owners and estimate how much tax they pay. We present three findings. (1) Relative to traditional business income, pass-through business income is substantially more concentrated among high-earners. (2) Partnership ownership is opaque: 20% of the income goes to unclassifiable partners, and 15% of the income is earned in circularly owned partnerships. (3) The average federal income tax rate on U.S. pass- through business income is 19%|much lower than the average rate on traditional corporations. If pass-through activity had remained at 1980's low level, strong but straightforward assumptions imply that the 2011 average U.S. tax rate on total U.S. business income would have been 28% rather than 24%, and tax revenue would have been approximately $100 billion higher. ER -