WESTCHESTER, N.Y. – New York ranked as the No. 3 state in the countyr for the highest marginal tax rates for pass-through businesses, which include non-corporate businesses that have their profits passed directly through to the owners and taxed on the owner’s individual tax return, a tax impact report by the Tax Foundation said.
New York’s tax rate, 50.2 percent, was listed at No. 3 for sole proprietorships, which are owned by one individual who receives all profits and has full responsibility of all losses. The U.S. average rate paid by S-Corporations is 47.5 percent, the report said.
The state’s tax rate for S-Corporations, 47.4 percent, also was No. 3 in the nation. S-Corporations do not pay federal income taxes and their income or losses are divided through its shareholders, who must report the income or losses on their individual income tax returns. The U.S. average rate paid by S-Corporations is 44.5 percent, according to the Tax Foundation's report.
Only California and Hawaii exceeded New York’s tax rates for pass-through businesses.
Between 1980 and 2010, the report said the total number of pass-through businesses nearly tripled in the nation, from about 10.9 million to 30.3 million. The number of sole proprietors grew from 8.9 million to 23 million, while the number of S-Corporations and partnerships, which include LLCs, grew from 1.9 million to more than 7.3 million, the Tax Foundation reported.
The Tax Foundation is a nonprofit organization that provides research and analysis on federal and state tax policy.
To read the full report, click here.