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The New Tax Shelter for Wealthy Americans

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The New Tax Shelter for Wealthy Americans

C-Corporations

Brookings Institution,

5 min read
5 take-aways
Audio & text

What's inside?

US tax reform offers businesses and the wealthy opportunities to shield income from the government.

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Editorial Rating

8

Qualities

  • Analytical
  • Eye Opening
  • Overview

Recommendation

With the US Congress enacting sweeping tax legislation in late 2017, tax strategies will change dramatically, particularly for those businesses that currently pay taxes at pass-through individual tax rates. Researcher Adam Looney, in an article written just before the final landmark legislation passed, explains how the reduction in the corporate tax rate might propel businesses to reorganize to avoid higher individual rates. getAbstract recommends this thought-provoking and expert report to executives and business owners looking to better understand the ramifications of tax reform.

Summary

A 2017 revamping of the US tax code provides significant relief for businesses. Under the legislation, the top corporate tax rate falls from 35% to 21%, allowing firms to markedly increase their profitability. Previously, to avoid the higher corporate rate, business owners steered clear of the traditional C-corporation and instead opted for pass-through treatment that allowed them to pay at lower individual tax rates. In fact, as recently as 2014, 95% of the 26 million businesses in the United States chose pass-through status.

The new tax plan provides an incentive for...

About the Author

Adam Looney is a senior fellow in economic studies at the Brookings Institution.


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