While the budget proposal released from the White House last week has led to some partisan bickering, there is at least one provision of the Trump administration’s budget proposal that already has bipartisan backing: the extension of the 2017 small business tax cuts.
In fact, there’s already a bill in Congress - called the Main Street Tax Certainty Act - that would do just that and it enjoys support from both Republicans and Democrats, with more than 50 co-sponsors. Congress should take it up as soon as possible for the sake of America’s Main Street job creators.
Surprising as it may seem, many of the provisions of the Tax Cuts and Jobs Act that lowered tax rates for small businesses were not made permanent. They are set to expire in 2025. One of the cuts these businesses especially rely on is the small business deduction, which allows most small businesses to deduct up to 20percent oftheir taxable income.
According to the IRS, 15.6 million small businesses claimed the critical deduction by mid-July. That number increased as small businesses that filed for extensions completed their taxes late last year. In a Gallup survey on small businesses conducted last week, the vast majority - 69 percent - benefitted from the small business deduction. Combined with the lower individual income tax rates, this deduction begins to put millions of small firms on a more level playing field with larger corporations.
The result has been a Main Street renaissance. Last week, the National Federation of Independent Business released 2020’s first Small Business Optimism Index. We found that owner optimism remains near record levels, an unprecedented trend this far into an economic expansion. Two years after the tax cuts’ passage, small business job creation is surging, earnings are rising, and investment is up across the board.
In a separate NFIB survey last year, more than 80 percent of small businesses told us that tax relief is helping the economy. More than a quarter of small firms have raised wages. A similar number invested in new equipment or expanded. About one-in-six hired more workers. One-fifth paid down debt, putting themselves on the path to a bigger contribution to their communities in the years ahead.
Those are real victories for businesses and workers. But our members also tell us that they need the tax cuts made permanent, especially the small business deduction. Without it, they won’t be able to keep doing what they do best.
The small business tax cuts are scheduled to expire in 2025. That may seem far away, but for small business owners in the back office, that’s just around the corner. Companies-especially Main Street businesses with only a handful of employees-won’t be willing to make big investments or hire new people unless they’re sure they’ll be able to afford it in the near future. They depend on certainty. Yet every year the tax cuts come closer to expiring, uncertainty grows.
This matters for every state, city and town in America. These firms and these families need tax relief not just this year, but for years to come. If taxes suddenly spike in just a few years, millions of small businesses, communities and workers will feel the pain.
The president’s budget proposal calls for a solution to the looming problem for small businesses, and the Main Street Tax Certainty Act is that bipartisan solution everyone should get behind. The tax cuts may not expire until 2025, but it’s not too early to extend them permanently.