My last set of graphs shows the decline of C corporations since the 1980s while the share of pass-through businesses increased. Pass-through businesses do not pay taxes through the corporate tax code but through individual tax code. Here are the three main sources of federal revenue (% of GDP) and you can see how corporate income tax receipts were greater in the decades between 1940-1980 but with very little change in the individual income tax receipts.
Share of returns filed by C corporations has dropped 16.6% to 4.9% 1980-2012 with sole proprietorships filing the majority of business returns. At the same time, the net income reported by C corporations has dropped since 1980 from 68.0% to 37.1% in 2012.
The majority of companies in the United States are pass-through businesses. These businesses are not subject to the corporate income tax; instead, their income is reported on their owners’ tax returns and subject to the individual income tax.