Small businesses at risk due to significant tax increase. Here’s how Congress can address the issue

As Congress prepares to return to Washington, Main Street has an important message: Remember America’s small businesses. It is crucial to make the Small Business Deduction permanent.

For Main Street, the Small Business Deduction is the most significant aspect of the 2017 Tax Cuts and Jobs Act. It allows nine out of 10 small businesses to deduct up to 20% of their business income.

The Small Business Deduction has already provided billions of dollars in tax relief to America’s small businesses. This relief has enabled them to reinvest in their businesses, employees, communities, and most importantly, create jobs. Without this provision, the 2017 law would have given an unfair advantage to large corporations.

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However, while the tax relief for corporations is permanent, the relief for Main Street is temporary. The Small Business Deduction is set to expire in 2025. Though this may seem distant in terms of Washington D.C., it is rapidly approaching for small businesses.

FILE: People walk by a sign that reads, “support a small business” outside of a store in Chelsea on March 21, 2021, in New York City.  (Noam Galai/Getty Images / Getty Images)

As the expiration of the deduction approaches, small businesses are scaling back. In 2021, almost half of NFIB members reported that the uncertainty surrounding the deduction was already impacting their business plans, resulting in reduced investment in workers and local communities.

In the past year alone, I have spoken with numerous small business owners who have emphasized the importance of this tax provision to their businesses. For many of them, the tax savings are critical for increasing wages, improving benefits, creating new jobs, and acquiring necessary equipment.

Small business owners have consistently explained to Congress members the positive impact of the Small Business Deduction. In June, Stephanie Camarillo, owner of Molly Maid of Boise and Treasure Valley in Idaho, testified before the Senate, sharing how the tax cut enabled her to invest in a promising employee: “Jasmine is a single mom who felt trapped and unable to advance in her life. Because of the tax savings through the 20% Small Business Deduction, we were able to give Jasmine the raise and promotion she had earned, and now she is on our management team.”

Kelly Moore, a small business owner from Zanesville, Ohio, also testified before Congress, expressing how the Small Business Deduction enabled her to expand employee benefits. Kelly stated, “I am glad to tell you that because of those changes made after… 2017, we were able not only to reinstitute health insurance but also pay 100% of the life insurance policy for our employees and cover all of their dental and vision needs.”

These stories have been repeated since 2017. We are talking about millions of small businesses that are saving thousands of dollars annually. However, if Congress fails to act soon, these savings will be taken away, resulting in fewer raises, fewer new jobs, and fewer small businesses investing in the future.

Congress must stand in support of Main Street. Having spoken with many members of Congress, I am aware that they want to make this sensible policy permanent. The “Main Street Tax Certainty Act” has bipartisan support and would achieve just that.

In the past year alone, I have spoken with many small business owners who have emphasized the importance of this tax provision to their businesses. For many of them, the tax savings are critical for increasing wages, improving benefits, creating new jobs, and acquiring necessary equipment.

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However, many lawmakers do not fully comprehend the urgency of this matter. Extending the Small Business Deduction now would have immediate and significant effects, providing millions of small businesses with the confidence to promote growth.

The Small Business Deduction simply allows small business owners to keep more money within their businesses instead of sending it to Washington. It helps them compete with larger corporate competitors. Main Street already contributes to about half of the economy and creates two-thirds of net new jobs. Small businesses are eager to contribute even further to the economy by creating jobs and giving back when the country needs it the most.

For the sake of America, it is time to make the Small Business Deduction permanent.

Brad Close is the president of the National Federation of Independent Business.