By Nathan Garden, The Charlotte Observer (TNS)
It says a lot about our politics that very few of our leaders are talking about one of the most important issues.
The small businesses that anchor our economy are about to face a devastating tax hike that will hurt workers and weaken communities. As the owner of one of those job creators—a third-generation family-owned manufacturing company in Cuba, Missouri—I’m calling on Washington, D.C., to wake up and protect the tax cut that small businesses desperately need.
The tax cut in question is the small business deduction, also known as Section 199A or the qualified business income deduction. It’s part of the centerpiece of the 2017 federal tax reform, and while that law passed on a partisan basis, the small business deduction has bipartisan support. Basically, this tax cut lets small businesses like mine deduct 20% of our income. Without this relief, the 2017 tax cuts would have almost entirely benefited Wall Street corporations. The small business deduction was designed to help Main Street continue to compete.
But there’s a problem. The law’s corporate tax cuts are permanent, while the relief for small businesses is temporary. The deduction expires next year, and if it disappears, job creators like me will find it much harder to hire and grow and stay competitive. We won’t be able to do all the good things that the small business deduction has made possible.
I remember when I realized how transformative this tax cut is. We didn’t fully understand it when the 2017 law passed, but when we filed our business taxes the next year, we discovered that we’d been given a tremendous gift. Within days, we began reinvesting that money right back into the business.
The first thing we did was expand our factory and warehouse space to give us room to keep growing in the years ahead. We also began to upgrade our equipment, to keep us on the cutting edge. But the biggest and best benefits have flowed to our employees.
The tax cut has helped us boost starting wages, which are now about 50% higher than they were in 2018. Our annual wage hikes are also 50% higher. We’ve also covered more of our team members’ health insurance costs, while expanding coverage for their families. And since 2018, we’ve been able to offer bigger bonuses than ever before. At first, we doubled them, but since 2022, we’ve tripled our annual bonuses. Without the tax cut, our 100-plus employees wouldn’t be doing nearly as well.
Actions like ours are exactly why Congress created the small business deduction—to kick-start a new era of wage growth, job growth, and business growth. Yet that growth will begin to fade if the deduction expires next year. That’s basic math: When your taxes rise overnight by 25%, you have to cut back.
For my small business, the first step we’d have to take would be a hiring freeze. We’re currently looking for five full-time employees, but I’m not sure we could hire any of them. We’d probably also institute a wage freeze, since we wouldn’t have the money to keep giving raises. The same goes for new equipment and more manufacturing space. We wouldn’t have to put everything on pause indefinitely, but we’d have to do a lot less. That doesn’t benefit anyone who works for us or the community in which we live.
Washington can’t let this happen. Our leaders must save the small business deduction before it expires next year. I realize that politicians like to wait until the last minute, but their failure to act immediately is already hurting small businesses. We have to plan years ahead, and right now, we don’t have the certainty and confidence to make big investments. I simply don’t know if the small business deduction will continue to exist. Until I have that clarity, I can’t do all the things I want to do for my team and my hometown.
Our leaders—Republicans and Democrats alike—need to make the small business deduction permanent, and they need to do it as soon as possible. That means this year, or failing that, first thing next year. My small business and our workers are counting on it. So are millions of job creators in Missouri and across America. We can’t afford for our leaders to keep ignoring this critical issue. The longer they delay, the more damage they’ll do.
ABOUT THE AUTHOR:
Nathan Garden owns Versa Tags, a manufacturing small business in Cuba, Missouri. He’s a member of the National Federation of Independent Business.
_______
©2024 The Charlotte Observer. Visit charlotteobserver.com. Distributed by Tribune Content Agency LLC.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
Tags: Benefits, Income Tax, Legislation, Payroll, Small Business, Taxes
