Number of Corporations in U.S. Hit Lowest Level Seen in 40 Years
February 19, 2015 - 2:20 PM
The Tax Foundation’s report titled, “America’s Shrinking
Corporate Sector” states that “recently released IRS data shows that
there were 1.6 million C corporations in 2011. This is the lowest number
of traditional corporations since 1974 and 1 million fewer than there
were at the peak in 1986.”
“In other words, in every year since 1986, roughly 40,000
U.S. corporations have disappeared from the tax rolls,” states the
report. “However, the losses have accelerated since 2006 to a rate of
about 60,000 per year.”
C Corporations, according to the Tax Foundation, face
double taxation due to the corporate tax and shareholder taxes on
dividends on capital gains.
According to the Tax Foundation, while C corporations have
seen a decline in number over the years, the number of partnerships and S
corporations have increased.
“The decline of the traditional corporate sector has
generally coincided with the rise of the pass-through sector, comprised
of businesses such as partnerships and S corporations that pass profits
to owners who report them on their individual tax returns,” explains the
report. “Pass-through businesses are subject to just one layer of tax,
the individual income tax, while C corporations face double taxation due
to the corporate tax and shareholder taxes on dividends and capital
gains.”
In addition to a decline in the number of corporations,
business sector growth and profits have taken a dip as well. “The
recession and subsequent slow recovery have led to slow overall growth
in the business sector,” explains the Tax Foundation. “As a result, the
growth rate of pass-through entities have tapered off in recent years.”
“Since 2006, S corporations have grown at a rate of about 1
percent a year, down from a rate of about 8 percent in the 20 years
prior,” states the report. “Likewise, partnerships have grown at a rate
of about 2 percent a year since 2006, down from a rate of about 3
percent in the 20 years prior.”
“Not only has the total number of traditional corporations declined,
so has the total of their profits,” states the Tax Foundation. “C
corporation profits, while extremely volatile, have generally trended
downward as a share of GDP in recent decades, while the profits of S
corporations and partnerships have trended upwards.”
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