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Brief

Options to Reduce the Taxation of Pass­‐through Income

Jeffrey Rohaly, Joseph Rosenberg, Eric Toder
May 16, 2017
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Abstract

The Trump administration and House Republicans are developing proposals that would reduce the individual income tax rate on income earned through pass-through entities such as sole proprietorships, partnerships, and S-corporations.

To analyze the impact of reducing the individual income tax rate on pass-through income, we use TPC’s microsimulation model of the federal tax system to estimate the revenue and distributional effects of several illustrative options relative to a baseline that repeals the individual alternative minimum tax (AMT) and implements ordinary income tax rates of 12, 25, and 33 percent. We provide estimates for two different definitions of qualifying pass-through income—a broad base and a narrow base—and for two different top pass-through tax rates, 15 and 25 percent.

Research Area

Business Taxes Pass-through entities
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Meet the Experts

  • Jeffrey Rohaly
    Principal Research Associate
  • Joseph Rosenberg
    Senior Research Associate
  • Eric Toder
    Institute Fellow and Codirector, Tax Policy Center
Research report

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March 30, 2022
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