PASS-THROUGH ENTITY RESPONSES TO PREFERENTIAL TAX RATES

2018/11/05 by Jason DeBacker, Lucas Goodman, Bradley T. Heim +3 · 10 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Business #Corporate Taxation and Avoidance #Economics #Finance #Fiscal Policy and Economic Growth #Gross income #Income tax #Investment (military) #Labour economics #Monetary economics #Payment #Public economics #State income tax #Tax deduction #Tax reform #Taxation and Compliance Studies

paper · doi:10.17310/ntj.2018.4.05

published in National Tax Journal 71(4), 687-706 (University of Chicago Press)

openalex publication_date 2018/11/05 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30

Abstract

We consider the question of how pass-through businesses respond to differentials in tax treatment across sources of income. In particular, we use federal tax return data from partnerships and S corporations and a synthetic control methodology (SCM) to analyze the 2012 income tax reforms in Kansas to see how pass-through businesses respond to preferential rates on pass-through business income. We find no effect on economic activity proxies such as gross receipts, capital investment, or employment. We do find that partnerships, but not S corporations, reduced the amount of guaranteed payments to partners when the preferential rate on such payments was repealed.

Cited by

• The impact of state taxes on pass-through businesses: Evidence from the 2012 Kansas income tax reform

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