There have been a few congressional hearings, a comment by President Obama in his state-of-the-union address and a few other activities focused on prospects of lowering the corporate tax rate. The discussions have also raised questions about why so few businesses operate as C corporations. In fact, questioning at one hearing led to some statements that perhaps more entities should be taxed as C corporations. I think the intent was more looking at small versus large and the fact that not businesses operating outside of the C corp form are small. That led to Senator Snowe introducing S. Res. 88 saying that businesses should be free to choice their form. Interesting. I attempted to summarize the themes of the activities so far this year in discussions about lowering the corporate tax rate in an article in the AICPA Corporate Taxation Insider - The Journey to a Lower Corporate Tax Rate (3/24/11). In that article, I also have some links to some charts I prepared using IRS data on the mix of business entities in 1980, 1990, 2000 and 2007, as well as the receipts generated. I encourage you to take a look at the article. I also have some additional data here. So, key issues:
- How to pay for a lower corporate tax rate? The Administration wants a revenue neutral approach.
- Should the tax rules vary based on small versus large businesses or by type of legal entity?
- What problems arise if the corporate rate drops while the individual rate likely goes up to 39.6% in 2013 (even higher with the new Medicare taxes)?
What do you think?
