Where are the Household Entrepreneurs?
Glancing through the CBO survey that only checked one side of the ledger, and therefore made Greg Mankiw happy, I came across the data on Corporate Taxes paid, by Quintile of Income.
Now, there has been a groundswell of declarations that people aren’t “leaving the job market”; instead, they are supposedly being “entrepreneurs,” starting their own businesses voluntarily (as opposed to because firms won’t contract with an individual), and reaping the benefits of the ownership society. This was the alleged basis for preferring the smaller, more subject to “population control” changes household survey to the payroll survey when measuring unemployment. (See here for a sample discussion.)
As noted in the sample discussion, the household survey doesn’t jibe with Social Security payments. So we are left with the possibility that the income of those entrepreneurs is being maintained at their corporate level, for some reason.*
Which should mean that Corporate Tax payments, as a percentage of all corporate tax payments, would have also risen among the “new entrepreneurs.”
It doesn’t look that way. I can’t find a single level of earnings that isn’t down at least 25% over the past ten years—and that’s the lowest quintile of earnings, not exactly the type of people you hear about being “success stories.”
So if you really think there are a lot of new S-corps out there, it appears that they’re either (1) in the group averaging more than $231,300 a year in income (see Table 1A), or (2) so poor that their tax bills are falling behind those paid by everyone else, and they’re clearly being irrational having a corporation in the first place.
Unless I’m missing something. If so, what?
*Since the highest marginal tax rate for individuals equals the corporate tax rate, that reason (especially for them levels, most of whom would not pay a marginal rate of 35%) is unlikely to be tax-related, except possibly as a matter of timing payments, which would not significantly alter a long-term trend.