National Review: Tax-Cut Expiration Would Hurt Small Businesses

Small-business owners across the country have similar stories about the benefits from the TCJA small-business tax deduction. The owner of a pool-installation business in Missouri was able to begin covering 100 percent of his eight employees’ health-care costs and offering health-savings accounts (HSAs). A family rental company in Ohio raised wages and hired more seasonal workers for the busy season. A third?generation manufacturing company bought more factory space, upgraded equipment, and doubled — then tripled — workers’ annual bonuses.

…

To give small businesses a fighting chance to compete, the 2017 tax overhaul paired a lower corporate-tax rate with two key elements to help small-business owners — lower individual rates across the board and the 20 percent pass-through deduction.

…

But the changes to the rates and pass-through deduction did not just benefit the businesses’ owners. Able to keep more of their earnings, many small-business owners invested these profits back into their communities, fast-tracking expansions, buying new equipment, and hiring more employees. Top among the industries building those communities, according to the nonpartisan Joint Committee on Taxation, were retail, manufacturing, construction, and real estate.

…

While critics of the small-business tax deduction claim that the TCJA was a tax cut exclusively for “millionaires and billionaires” — including the small-business tax deduction — the facts tell a different story. A recent Ernst & Young analysis found that in 2021, 25.9 million businesses claimed the small-business tax deduction, with approximately 93 percent of those businesses having an income level under $500,000 — including accountants, contractors, landscapers, tutors, or family doctors. According to the same study, these businesses support 2.6 million jobs, contribute $161 billion to employee compensation, and add $325 billion to the economy.

…

If these provisions expire, Americans face a multitrillion-dollar tax increase, and small-business owners will be hit with a double tax hike from the elimination of the pass-through deduction coupled with a higher individual tax rate. The businesses hit hardest are the ones just starting out, finding success, and beginning to scale up. Many owners also say they will be forced to raise prices, postpone or cancel capital investments, and cut back on hiring.

Read the full opinion piece here.

###