Overhead Costs for Private Firms

The graph displays an estimate of overhead costs ($1.16 trillion total) for all non-financial S-corporations based on aggregate data from tax returns. Overhead costs are meant to include required expenses for firms, like interest, rents, utilities, maintenance, and so on. They do not include payments to workers, nor profits for shareholders, nor new capital expenditures.

Three points deserve note. First, overhead costs are important for private firms (approximately 14% of total revenues or 38% of gross profits). Second, we can estimate such costs relatively easily using information from past tax returns, which points toward feasible policy solutions designed to help firms cover these costs quickly during the coronavirus crisis. Third, aggregate overhead costs are especially important in retail and wholesale trade. These industries have many small private firms likely to be hardest hit by the crisis.

[1]Source data are aggregates from the SOI corporate sample for the tax year 2014, aged to 2018 using the growth of nominal GDP. The year 2018 is the latest year for which tax returns would be readily available to the IRS to implement a policy.

[2] S-corporations likely account for between 1/4 and 1/3 of all overhead among non-financial private business, which includes partnerships, sole proprietorships, and private C-corporations.