Monday, September 2, 2019
Tax Foundation, Marginal Tax Rates for Pass-through Businesses Vary by State
Pass-through businesses—businesses like sole proprietorships, S corporations, and partnerships that “pass” their income “through” to their owner’s income tax returns and pay the ordinary individual income tax—make up a majority of U.S. businesses. Marginal tax rates vary for pass-throughs depending upon the state in which they operate because of differences in how states tax individual income.
Pass-through businesses’ marginal tax rates vary by state, from a low of 32.7 percent (in seven states) to a high of 46.1 percent (in California). These rates include both state and federal taxes.
See also Libin Zhang (Roberts & Holland, New York), Marginal Income Tax Rates of the Passthrough Business Deduction, 159 Tax Notes 1139 (May 21, 2018).