A "hypothetical". Let's just say..for the sake of argument and example...a small engineering firm, an "S" corporation, in sothin Merlin grosses 2 million a year. Let's say they make a modest 15% net profit on those sales. That's $300,000. Further, let's say the owner of the company also owns the building that the company operates in and thus is paid a - paltry and below average in this case - $25,000 in annual lease payments for a nearly 5000 sf engineering and production facility. And finally..because Uncle Same frowns mightily on him doing otherwise..said owner must pay himself a "fair and representative" salary over the course of any year. $100,000 only barely avoids the inquiry known as "The Business Audit". Of course DCAA has their fingers in all this too...because said company also works on gummint contracts.
So..kiddies..let's do the math...clickety clickety ching ching..well..waddya know??!! The owner of said company has a gross income on his 1040 of $425,000. GTFO! Not only does that put him in some of the highest tax brackets and make him a permanent member of the "Top 1%"...it means he has a tax liability..Fed and state..that approaches 100 grand! I'd like to know...how many people like Sappy and Bacon pay 100 grand of taxes on 100 grand of gross personal income.