The 2017 Tax Cuts and Jobs Act alleviated some of the financial burdens that were slowing the productivity of small businesses. By lowering rates and raising the threshold for every tax bracket, the legislation allowed small businesses to deduct more of their income, putting more money back in their pockets.
“We worked as part of a coalition of businesses at the Hill to develop what is now in law, Section 199A — that’s an important deduction that allows small businesses (S-corporations, LLCs, Sole Proprietorships) to deduct 20 percent of their income,” National Federation of Independent Business (NFIB) Arizona State Director Chad Heinrich said. “That allows them to claim up to $315,000 of deductions on their tax returns. The issue with that is that the individual tax cuts that were included in the jobs act are not permanent — they expire after 2025.”
Heinrich and his allies believe it’s time for Congress to consider making these reforms permanent. The U.S. is home to 30 million small businesses, which employ more than 60 million people. Small businesses make up over 99 percent of companies in the nation, and employ roughly half of all national workers.
According to NFIB research, 87 percent of small businesses believe a permanent tax cut will have a positive impact on the economy, and 75 percent believe it will positively impact their business. This translates to the state level, as well.
“During the election cycle when we were dealing with the income tax [increase] proposition, Rounds Consulting did some research for us and we looked at 2015 IRS data, and we found that 166,000 small business filers are established as LLCs or S-corps,” Heinrich said. “When you’re looking at impact to Arizona, that has the potential to impact — I would argue — over 166,000 small businesses.”
In an editorial for Fox Business, NFIB CEO Juanita Duggan emphasized the impact a permanent tax cut would have on small businesses. “Congress’ Joint Committee on Taxation estimates this deduction saved small businesses some $27 billion in 2018,” she said. “Over 10 years, it will enable small businesses to put an estimated $414 billion back into their employees, their communities, and their futures.”