Any tax reform effort must be comprehensive in nature – taking into account changes to both personal and corporate tax rates. In recent years, there have been attempts to force most pass through entities – S corporations, partnerships, limited liability corporations, etc. – to become C corporations.
Former Ways & Means Committee Chairman Dave Camp’s discussion draft dramatically increases the way in which some pass through entities are taxed. The proposal alters the tax formula for S Corporations by imposing payroll taxes on investment income. The so-called “70/30” rule treats all income the same whether it is invested business capital or shareholder wages. This change from current law would force WSWA members structured as S Corps to pay taxes in excess of the 35% rate cap for those filing as individuals.
WSWA believes that any tax reform legislation must take into account S Corporations, partnerships, limited liability corporations, and sole proprietorships as well as C corporation rates. Any tax reform legislation must not lower the corporate rate at the expense of American family-owned businesses.