East Idaho Times

Small-business owners across the country have shared stories about the benefits from the TCJA small-business tax deduction. The owner of a pool-installation business in Missouri began 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.

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.

Many small-business owners invested these profits back into their communities, fast-tracking expansions, buying new equipment, and hiring more employees. According to the nonpartisan Joint Committee on Taxation, top industries benefiting from these changes included retail, manufacturing, construction, and real estate.

Critics of the small-business tax deduction claim that the TCJA was a tax cut exclusively for “millionaires and billionaires,” but recent analysis tells a different story. Ernst & Young found that in 2021, 25.9 million businesses claimed the small-business tax deduction, with approximately 93 percent having an income level under $500,000 — including accountants, contractors, landscapers, tutors, or family doctors. 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. 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. Businesses just starting out or beginning to scale up will be hit hardest. Many owners say they will be forced to raise prices, postpone or cancel capital investments, and cut back on hiring.

###