Effective Federal Individual and Corporation Income Tax Rates

Chapter 3 illustrates trends in federal individual, dividend, and corporation income taxes resulting from 2012 CPI adjusted annual taxable income of $10,000, $100,000, and $1,000,000 during the hundred years ended 2013. Changes in tax laws, rates, and income brackets often affected the federal income tax cost of higher levels of CPI adjusted taxable income significantly more than lower levels of taxable income. Consequently, it was tax advantageous for businesses with CPI adjusted annual taxable income of $10,000 to operate as a pass-through entity during each year in the period 1913–2013; for businesses with CPI adjusted annual taxable income of $1,000,000, it was tax advantageous to operate as a PTE during 1936–1939 and after 1953 but not 1913–1935 and 1940–1953. Thus, tax year, level of income, and entity form dramatically impact after-tax cash flows to the investor and value.