| The Trump tax cuts of 2017 were a boon for businesses of all sizes but particularly small businesses: - Around 85% of small business owners report benefitting from the Tax Cuts and Jobs Act.
- While 43% said it allowed their business to survive the Covid shutdown and inflation.
It’s no surprise, then, that most small business owners said that uncertainty around the tax law is making them rethink their business plans. They’re right to be cautious. Here’s the reality: If the Trump tax cuts are allowed to expire, America’s small businesses would be hit especially hard. They are already dealing with higher input costs and labor issues — they don’t need the added burden of higher taxes. Here are three ways the Trump tax cuts benefitted small businesses — and why Congress needs to renew them. First: Small businesses are usually organized as “pass-throughs,” which means the income from the business passes through to the owners. - It’s then taxed based on individual, not corporate, tax rates.
- Since letting the Trump tax cuts expire would raise individual tax rates across the board, it would also raise taxes on small business owners, leaving them less to reinvest in their businesses or hire additional workers.
Second: The TCJA created a 20% deduction for qualified business income, known as Section 199A. - This deduction was included to help make tax rates paid by pass-through businesses more in line with those paid by larger businesses and corporations.
- Section 199A effectively lowered the income tax rate on profits for many small business owners and helped them grow, hire more employees, and invest more in their communities. According to the House Ways and Means Committee, if this provision expires, some 26 million small businesses would see their tax rate balloon to 43.4%. As the committee put it, that is “more than 20 points higher than what businesses pay in Communist China.” Yikes!
Third: Not all small businesses are taxed at the individual tax rate — many are taxed at the corporate tax rate. - These are known as “C corporations.” The Trump tax cuts lowered the corporate tax rate from 35% to 21%, making American businesses more competitive globally.
- Before the Trump tax bill, America had one of the highest corporate rates in the industrialized world, putting American businesses at a distinct disadvantage. Now, our corporate tax rate is among the lowest.
Spot the inaccuracy: Some in Washington will try to raise the corporate rate to get corporations to “pay their fair share.” But here’s the truth: A higher corporate tax rate leads to a combination of three things: - lower wages for workers
- higher prices for customers
- lower returns for investors
These outcomes apply to small businesses as well as big ones. So, it’s important that Congress at least keeps the corporate rate at 21%. Small businesses are the lifeblood of our communities. If we’re going to protect prosperity for decades to come, then we need to keep taxes low. Please take a moment to ask your lawmakers to extend the 2017 Tax Cuts and Jobs Act. It only takes a moment, and we’ll walk you through it. | 
