Congressional Budget Office,
Taxing Businesses Through the Individual Income Tax:

Since the individual income tax was instituted in 1913, the profits
of most businesses have been allocated, or “passed through,” to their
owners and subjected to that tax—rather than to the corporate income
tax. However, most business activity (specifically, the total revenue
that businesses receive as receipts from sales of goods and services)
has occurred at firms subject to the corporate income tax (C
corporations) because those firms tend to be larger than pass-through
entities.

Over the past few decades, the proportion of firms organized as
pass-through entities and their share of business receipts have
increased substantially: In 1980, 83% of firms were organized as
pass-through entities, and they accounted for 14% of business
receipts; by 2007, those shares had increased to 94% and 38%, respectively.

This report examines those shifts in organizational structure, the
effect they have had on federal revenues, and the potential effects on
revenues and investment of various alternative approaches to taxing
businesses’ profits.