The National Federation of Independent Business (NFIB), the nation’s leading small business advocacy organization, today released two impactful reports regarding the 20% Small Business Tax Deduction, which is scheduled to expire at the end of next year.
The reports illustrate what will happen to the small business economy if Congress makes the 20% Small Business Deduction permanent or if it fails to act.
- The Ernst & Young (EY) macroeconomic analysis, released in conjunction with NFIB, measured the impact on small business of permanently extending the 20% Small Business Deduction. The analysis concluded that small businesses would flourish by making the deduction permanent, creating 1.2 million new jobs each year for the first 10 years and 2.4 million annually every year thereafter. It would also result in a $750 billion GDP increase in the small business sector over the first 10 years, and a $150 billion increase annually after that. Without an extension, those benefits to small businesses and the broader economy would be lost. The analysis also found that 33 million small pass-through businesses employ more than 68 million workers in the United States. Of those 33 million small pass-throughs, 25.9 million claimed the deduction in 2021.
- The 2024 NFIB Tax Survey assessed small business owners’ biggest tax challenges, implications of potential changes to the tax code, and how tax policy impacts business operations. Most notably, 59% of small business owners reported that eliminating the 20% Small Business Deduction would have a negative impact on their business, with 61% reporting they would likely raise prices, 44% reporting they would postpone or cancel capital investments, and 36% reporting they would postpone or cancel hiring additional employees.
State-specific data is unavailable, but NFIB State Director Julia Hammond said, “Congress passed this deduction in 2017 to level the playing field between local businesses and large corporations. This deduction empowered Main Street businesses to overcome the economic challenges of the past few years. If this deduction is allowed to expire, 90% of small businesses will see a massive federal tax increase that hurts their ability to create jobs and support their communities.”
NFIB President Brad Close said, “By allowing small business owners to keep more of their hard-earned money, the 20% Small Business Deduction empowers middle-class small business owners to grow their businesses, hire employees and raise wages, and give back to their communities. If the deduction is allowed to expire at the end of next year, millions of small businesses will face a massive tax hike. It is crucial that Congress and the Administration take a strong stand for local small businesses and make the Small Business Deduction permanent.”
Click here to read the 2024 EY Small Business Deduction Macroeconomic Analysis.
Click here to read the 2024 NFIB Tax Survey.