Thanks to the 2017 Tax Cuts and Jobs Act, small businesses are at long last enjoying some economic relief. But is it here to last?
Under the law’s Small Business Deduction, businesses organized as pass-throughs—that’s 90 percent of small businesses—can claim a 20 percent deduction on their business income up to $160,700 (individual) and $321,400 (filing jointly) when filing jointly. The Joint Committee on Taxation estimates that small businesses claiming this deduction saved $27 billion for tax year 2018.
America’s entrepreneurs have put those savings to good use by reinvesting in their businesses with higher wages, job creation, and new equipment and development. This has had a profound impact on optimism and growth. Last year, small businesses broke a four-decade long job creation record, adding an average of .52 workers per company. It’s notable that, when surveyed, “taxes” has not been the Single Most Important Business Problem among most NFIB members since December 2017.
Despite the good news, uncertainty remains because the Small Business Deduction could disappear. Unless Congress acts soon, the pass-through provision will expire at the end of 2025. If that happens, expect the added economic growth and optimism to disappear with it.
NFIB does not want to see that happen, which is why we’re working with members of Congress on a bipartisan plan to ensure the pass-through deduction becomes a permanent feature of the tax code. Reps. Jason Smith (R-Mo.) and Henry Cuellar (D-Texas) have introduced the Main Street Tax Certainty Act, H.R. 216, which would make the Small Business Deduction permanent. The Senate version of the bill, S. 1149, is being championed by Sen. Steve Daines (R-Mont.).
Passage of these bills must be a top priority for anyone who wants to see the economy continue to grow. Please call your lawmakers today to urge them to cosponsor this critical legislation.