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Changes in the Organization of Business Activity and Implications for Tax Reform

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  • George A. Plesko
  • Eric J. Toder

Abstract

We review the changing economic significance of various business entity types since the Tax Reform Act of 1986 (TRA86) and the implications of these changes for the design of tax policy. In particular, we focus on the increased role of pass-through entities and the declining significance of the taxable corporate form. Our analysis suggests that significant reductions in the corporate tax rate, absent changes in the personal tax rate, will likely reverse the organizational form incentives that have existed since TRA86. Further, if the loss in revenue from a rate reduction is offset by a broadening of the tax base, most business entities, comprising most business income, are likely to face an overall increase in their tax burden.

Suggested Citation

  • George A. Plesko & Eric J. Toder, 2013. "Changes in the Organization of Business Activity and Implications for Tax Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(4), pages 855-870, December.
    • Handle: RePEc:ntj:journl:v:66:y:2013:i:4:p:855-870
    DOI: 10.17310/ntj.2013.4.04
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    References listed on IDEAS

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    1. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
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    Cited by:

    1. Neba Bhalla & Rakesh Kumar Sharma & Inderjit Kaur, 2023. "Effect of Goods and Service Tax System on Business Performance of Micro, Small and Medium Enterprises," SAGE Open, , vol. 13(2), pages 21582440231, June.

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