Taxes, Regulations of Businesses, and Evolution of Income Inequality in the US
The US economy has experienced two secular shifts since the 1980. First, the shares of top income groups in total income have been increasing steadily over the last thirty-five years contributing largely to the increase in the overall income inequality. At the same time the structure of income within the top groups has shifted: entrepreneurial income has become more important for shaping income inequality. Second, this period coincides with the evolution in the structure of legal forms of organization of US businesses. Since 1980 the share of pass-through entities (S corporations, partnerships, and sole proprietorships), which are taxed based on the individual income tax code (rather than corporate income tax code), in total business receipts almost tripled and accounts now for more than one-third of them. Motivated by these two observations this project aims to address two questions: What are the causes and characteristics of the shift in the way US businesses are organized? and How much has the change in the distribution of the organizational forms of businesses contributed to the rapid increase in income inequality? The researchers will use restricted-access US Census data to provide a detailed empirical characterization of the shift in the organizational forms of US businesses.
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