What a difference a couple of years can make.
Two years ago my organization released a white paper detailing the many hurdles facing small businesses. By a wide margin, the paper found that the biggest obstacle was over-taxation.
Today, this obstacle has been overcome thanks to recently passed tax cuts. Now, small business sentiment is at a record high, and taxation doesn’t even rate as a major concern. This is something to celebrate during National Small Business Week this week.
Though largely overlooked by the media, the tax cuts signed into law late last year delivered the biggest small business tax cut in U.S. history. In addition to lowering rates and simplifying filing, the new tax code creates a 20 percent small business tax deduction.
As a result, the top marginal federal tax rate effectively drops from 40 percent to 30 percent, a 25 percent cut. The ability to protect one-fifth of earnings from taxes allows small businesses to focus more resources on what they do best: providing the products and services that make our lives better.
And that’s exactly what’s happening. Small businesses across the country are reinvesting their tax cut savings in their companies and employees. The Rabine Group, an Illinois manufacturer, is venturing into new product lines, purchasing new computer systems, and increasing R&D spending with its tax cut savings. This means hiring dozens of new employees, and significantly increasing pay for top employees.
Joseph’s Lite Cookies, a Florida cookie-maker, ls purchasing new computer systems, creating new product packaging, and launching a new marketing campaign with its tax cut savings. It’s using part of its savings to give at least $3,000 raises to half its workforce.
No wonder a recent Job Creators Network nationwide poll of small business owners found respondents support the tax cuts by a margin of ten-to-one.
It’s not only small business owners who benefit. Fewer tax dollars extracted by Washington D.C. means more money left on Main Streets, the beating hearts of communities across the country. That means more investment, more spending, and more jobs at home where these are needed.
As a result of this tax cut stimulus, the nonpartisan Congressional Budget Office recently upped its economic growth rate estimate for the year to 3.3 percent. That’s more than double the last year of the Obama Administration. It wasn’t too long ago that leading economists, including former Obama chief economic advisor Larry Summers, scoffed at President Trump’s three percent growth projections. At this rate of growth, ordinary Americans can actually notice the benefits in terms of higher living standards.
Despite the good that small business tax cuts are doing for entrepreneurs, employees, and the economy, they are already under threat. Leading Congressional Democrats have promised to repeal them if they retake Congress this fall. According to The Hill, House Minority Leader Nancy Pelosi has promised to “replace and repeal” them. And Senate Minority Leader Chuck Schumer has promised a “drastic overhaul.”
Meanwhile, Congressional Republicans are considering introducing legislation to make the tax cuts permanent. (They are currently set to expire at the end of 2025.) This would give small businesses the certainty they need to make long-term investment decisions, helping the economy even more.
According to Gallup, small businesses are the second most favorably viewed U.S. institution after the military. Supporting them is a bipartisan cause if there ever was one. Between these hundreds of millions of Americans who support small businesses and the 85 million Americans who work for or own one, this is a powerful constituency to preserve and make permanent small business tax cuts. They should make their voices heard this National Small Business Week.
Alfredo Ortiz is president and CEO of the Job Creators Network.