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Wednesday, September 25, 2024

Iowa’s small businesses could be hurt if federal tax cut expires

Iowa’s small businesses could be hurt if federal tax cut expires

The federal Small Business Deduction will expire at the end of next year, and unless Congress acts, small businesses in Iowa and elsewhere will no longer be able to deduct up to 20% of what’s considered qualified income.

Jeff Brabant, with the National Federation of Independent Businesses, says that deduction is a big deal, benefitting more than nine in every ten small businesses across the country.

“This is almost every new business starts as a passthrough business,” Brabant says, “and if you’re going to increase taxes on them, while their larger competitors have their tax rate remain the same, you’re really making Main Street less competitive and that’s a real problem for them.”

Brabant says coffee shops, barber shops, and all sorts of small mom-and-pop businesses could have to pay more in taxes if the 2017 law is allowed to expire.

“That’s one thing we’re really trying to hammer home to people,” he says. “Is it a good idea for Congress to selectively increase taxes on small businesses while their larger competitors keep the same tax rate?”

An estimate from the U.S. Small Business Administration finds more than 95% of the businesses in Iowa are -small- businesses. Brabant says many small businesses in Iowa and nationwide have been struggling since the start of the COVID-19 pandemic.

“They were only allowing — in many states — just essential businesses to be open. Who was the essential business? It was Walmart. It wasn’t your local small retailer. They were shut down. So, they had no income coming in for a long time,” Brabant says. “That was the first challenge they had. Once the pandemic began to abate and the restrictions were lifted, they then had to deal with inflation.”

Inflation, Brabant says, remains the top issue small business owners face post-pandemic.

The Main Street Tax Certainty Act would make that deduction permanent for small and family-owned businesses, which Brabant says owners use to invest in their employees and growth for the future.

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