Pass-through businesses are defined as sole proprietorships, partnerships or other firms whose owners are allowed to “pass” the businesses’ income through the individual income tax system. Such companies represent more than 50% of the states’ private-sector workers, according to the Tax Foundation.
Louisiana’s marginal tax rate for its pass-through businesses is 36.5%.
These rates represented the combined state and federal burden on pass-through companies, according to the analysis. Much of the amount these businesses pay is set by the federal government’s rules, but they also pay state taxes on individual income, which are highest in California at 46% and lowest in those states that don’t levy taxes on individual incomes.
The states without individual income taxes are Alaska, Florida, South Dakota, Texas, Washington and Wyoming. Read the full story.