Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Creating Effective Tax Reform Will Be Difficult

Author: Scarinci Hollenbeck, LLC

Date: May 13, 2015

Key Contacts

Back

Creating effective tax reform in Washington will likely be difficult, as both the tax code – and the tax base – are complex.

While many advocate creating effective tax reform, a wide range of businesses have sharply reduced their tax liabilities either by not repatriating their active income earned overseas or by harnessing tax breaks, The Fiscal Times reported.

In addition, many companies have changed their corporate structure to become pass through entities – including partnerships, sole proprietorships and S-corporations – in order to lower their tax rates, according to the news source. After making such a shift, organizations must pay individual income tax rates on their earnings, which are lower than those that corporations pay on their profits.

Tax base shifts

As a rising number of organizations have taken advantage of this opportunity, the tax base has shifted. A Joint Committee on Taxation review produced earlier this year detailed these changes, stating that in fiscal year 2014, corporate income tax receipts were 1.9 percent of gross domestic product. While this figure was slightly higher than the last two years, it fell short of the average fraction since 1950, which is 2.6 percent, according to Reuters.

The JCT report also revealed that businesses filed 1.64 U.S. corporate tax returns in 2012, compared to 2.18 million in 2000, the media outlet reported.

Individual returns rise

While the number of corporate tax returns has declined over roughly the last 15 years, the IRS has been receiving more returns from sole proprietorships, and these organizations filed 23.5 million such returns in 2012, compared to 17.9 million in 2000, according to the news source. In addition, the returns filed by S-corporations and partnerships increased.

The change in tax revenue provided by these organizations has also been significant, The Fiscal Times reported. Pass through entities generated $1.4 trillion in revenue by 2010, a sharp increase from the figure of $100 billion a year in the 1980s. Urban Institute economist Joe Rosenberg analyzed IRS data, and discovered that business income provided $850 billion worth of adjusted gross income on individual returns.

“It’s really kind of changed the landscape, and it’s made the whole issue of what is the composition of individual taxes very different,” Howard Gleckman, who works for the Urban Institute as a Resident Fellow and is an expert on tax policy, told the news source.

During a recent interview, he emphasized that it is often challenging to differentiate business taxation from the individual tax code, the media outlet reported. Gleckman – and other experts – have stated that because so many businesses have changed their structures, any attempt in creating effective tax reform proposals must account for the shifting landscape.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Why Secured Transactions Are Important post image

Why Secured Transactions Are Important

Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]

Author: Dan Brecher

Link to post with title - "Why Secured Transactions Are Important"
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications post image

Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications

Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]

Author: Dan Brecher

Link to post with title - "Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications"
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors post image

Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors

The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]

Author: Dan Brecher

Link to post with title - "Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors"
Corporate Consolidation and Antitrust Issues in Mergers post image

Corporate Consolidation and Antitrust Issues in Mergers

Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]

Author: Dan Brecher

Link to post with title - "Corporate Consolidation and Antitrust Issues in Mergers"
What is Business Law and Why Is it Important? post image

What is Business Law and Why Is it Important?

Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]

Author: Dan Brecher

Link to post with title - "What is Business Law and Why Is it Important?"
Corporate Transactions: Best Practices for Successful Deals post image

Corporate Transactions: Best Practices for Successful Deals

Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]

Author: Dan Brecher

Link to post with title - "Corporate Transactions: Best Practices for Successful Deals"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!