Bay State News

The National Federation of Independent Business (NFIB) has released two reports concerning the potential expiration of the federal 20% Small Business Tax Deduction. The deduction is set to expire at the end of next year, and these reports highlight the economic impact if Congress either makes it permanent or allows it to lapse.

An Ernst & Young (EY) macroeconomic analysis, conducted in partnership with NFIB, examined the effects of extending the deduction permanently. The study suggests that making the deduction permanent would result in 1.2 million new jobs each year for the first decade and 2.4 million annually thereafter. Additionally, it would boost GDP by $750 billion in the small business sector over ten years, with a $150 billion increase annually after that period.

In Massachusetts alone, projections indicate 27,000 new jobs each year for the first ten years and 52,000 annually thereafter. Christopher Carlozzi, NFIB Massachusetts State Director, stated: “This study demonstrates the positive impact the Small Business Deduction has on Massachusetts’s small businesses and why it’s so important that Congress makes it permanent.” He urged federal lawmakers to support legislation that would make this deduction permanent to avoid a significant tax increase on small businesses.

The analysis also noted that 33 million small pass-through businesses employ over 68 million workers across the United States. In 2021, approximately 25.9 million of these businesses claimed the deduction.

The NFIB's 2024 Tax Survey assessed various challenges faced by small business owners related to taxes. It found that eliminating this deduction could negatively affect businesses; 59% of respondents said its removal would be detrimental. Moreover, 61% indicated they might raise prices if it expired, while others suggested postponing investments or hiring.

NFIB President Brad Close emphasized: “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." He stressed the importance of making this deduction permanent to prevent a substantial tax hike for millions of small businesses.

For further details on these studies and their implications for small businesses nationwide, readers are encouraged to visit nfib.com.