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1 Kyle Pomerleau, Potential Economic Impact of Revenue Neutral Corporate Tax Reform on Pass-through Businesses 1 (2015)

handle is hein.taxfoundation/peinctxre0001 and id is 1 raw text is: TA XSiiiiim 0 FOUNDATION FISCAL FACT June 2015 No. 469 The Tax Foundation is a 501(c)(3) non-partisan, non-profit research institution founded in 1937 to educate the public on tax policy. Based in Washington, D.C., our economic and policy analysis is guided by the principles of sound tax policy: simplicity, neutrality, transparency, and stability. @2015 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Melodie Bowler Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Potential Economic Impact of Revenue Neutral Corporate Tax Reform on Pass-Through Businesses By Kyle Pomerleau Economist Key Findings * Policymakers are currently focused on revenue neutral corporate tax reform to bring down the high U.S. statutory corporate tax rate. * Corporate-only tax reform leaves out nearly 95 percent of all businesses from tax reform. * Revenue neutral corporate tax reform that eliminates business tax expenditures in exchange for a 25 percent corporate tax rate could increase taxes on pass-through businesses. * Using the Tax Foundation's Taxes and Growth economic model, we estimate that revenue neutral corporate tax reform that increases taxes on pass-through businesses would reduce the size of the economy by 0.2 percent or $36 billion in the long run due to the increased cost of capital in the pass-through sector. * In isolation, the impact of the elimination of business tax expenditures for pass-through businesses has a significant negative impact on the economy, reducing GDP by 0.5 percent or $84 billion in the long run.