A Question I Have Been Asking For Years -- Effect of Passthrough Entities on Income Equality Numbers
Greg Mankiw wonders how much the growth of pass-through corporations like sub-chapter S corps are skewing income trends, particularly for the highest earners. With a C-corp, an owner only recognizes corporate income when it is passed through as dividends or when they sell the company. With an S-Corp or LLC, there are no corporate taxes and corporate income is declared in that year, in full, on one's individual 1040. I asked about this as far back as 2006 and 2007.