Small businesses endangered by massive tax hike. Here’s how Congress can fix it

As lawmakers prepare to return to Washington, Main Street has an important message for Congress: Don’t forget America’s small businesses. The Small Business Deduction needs to be made permanent. 

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

The Small Business Deduction has already given America’s mom-and-pop businesses billions of dollars in tax relief, allowing them to reinvest back in their businesses, employees and communities, and most importantly, create jobs. Without this crucial provision, the 2017 law would have unfairly tilted the playing field toward big businesses and large corporations. 

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Yet, while the Tax Cuts and Jobs Act’s relief for corporations is permanent, this relief for Main Street is temporary. The Small Business Deduction is scheduled to expire in 2025. That could be considered an eternity in Washington D.C. time, but for small businesses, this massive tax hike is coming up fast. 

The closer it gets, the harder it will be for small businesses to do what they do best: Create jobs, grow the economy, and invest in their communities. 

As the deduction’s expiration comes closer, small businesses are pulling back. In 2021, nearly half of NFIB members said that uncertainty over the deduction was already affecting their business plans, meaning less investment in workers and local communities. 

I’ve talked with many small business owners in the past year alone, and they all tell me how important this tax provision is to their business. For many of these owners, the tax savings are the only way they can raise pay or benefits, create new jobs and purchase much-needed equipment. 

Small business owners have consistently explained to members of Congress the difference the Small Business Deduction makes. In June, Stephanie Camarillo, who owns Molly Maid of Boise and Treasure Valley in Idaho, told the Senate that the tax cut let her 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." 

Another small business owner, Kelly Moore of Zanesville, Ohio, recently testified before Congress that the Small Business Deduction let her expand benefits. Kelly said, "I am glad to tell you because of those changes made after … 2017, we were able not only to reinstitute not only health insurance, but also pay 100% of the life insurance policy for our employees and all of their dental and vision." 

Such stories have played out repeatedly since 2017. We’re talking about millions of small businesses that are saving thousands of dollars a year. Yet if Congress doesn’t act soon, that money will be taken from them, meaning fewer raises, fewer new jobs, and fewer small businesses building for the future.

Congress needs to stand with Main Street. Having talked with many members of Congress, I know they want to make this commonsense policy permanent. The "Main Street Tax Certainty Act" would do just that, and it has bipartisan support.

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Yet many lawmakers don’t fully grasp how urgent this is. Extending the Small Business Deduction now would have immediate and massive effects, giving millions of small businesses the confidence that sparks growth. 

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

For America’s sake, it’s time to make the Small Business Deduction permanent. 

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