February 22, 2015

MSCI Stands For Comprehensive Tax Reform Because It Affects Employers – And Employees

The U.S. Senate Finance Committee will hold a hearing on tax reform this week. MSCI is part of a coalition called the Coalition for Fair Effective Tax Rates that will argue any reform package considered by federal lawmakers must be comprehensive in nature – that is, it must reform both the corporate and individual sides of the tax code. Why does MSCI support comprehensive instead of corporate-only reform? Because the majority of its members, and the majority of U.S. job creators, file taxes through the individual rate system not through the corporate code. Consider these facts from a recent Tax Foundation paper:

  • Pass-through business income is taxed on the business owners’ tax returns through the individual income tax code.
  • Pass-through business income faces marginal tax rates that exceed 50 percent in some U.S. states.
  • Pass-through businesses face only one layer of tax on their profits compared to the double taxation faced by C corporations.
  • The number of pass-through businesses has nearly tripled since 1980, while the number of traditional C corporations has declined.
  • Pass-through businesses earn more net business income than C corporations.
  • Pass-through businesses employed more than 50 percent of the private sector work force and accounted for 37 percent of total private sector payroll in 2011.
  • Although pass-through businesses are smaller than C corporations on average, they are not all small businesses. Many people work for large pass-through companies.
  • The majority of pass-through business income is taxed at top individual tax rates.

Another reason to support tax reform? It will not only impact businesses, but employees as well. Employees understand this fact. According to a recent poll by the Winston Group, a majority of people (52 percent) believe that higher taxes on their employers negatively affect their own situation. Only 34 percent of respondents said business tax increases have no personal effect on them. 

To learn more about the Coalition for Fair Effective Tax Rates, visit the coalition’s website here. And, if you missed it when it was published last year, you can read MSCI President and CEO Bob Weidner’s thoughts on tax reform in his Roll Call op-ed. MSCI looks forward to continuing its work on tax reform this year. Stay tuned for more in the coming months!