As we all get back to the daily grind following a hard-fought election, America’s small business owners know that, regardless of the outcome, it is time to get back to business.
Small businesses are facing a handful of major sources of instability: Will our taxes skyrocket at the end of 2025? Could we be facing jail time for accidental mistakes once the Corporate Transparency Act takes hold? Will our lawmakers be able to work together toward the common good?
The National Small Business Association (NSBA) has been around for nearly 90 years. In that time, we have weathered a World War, a global pandemic, massive economic downturns and recessions, and much more. However, the major challenges we face today can be avoided altogether. Here’s how.
Tax reform
In 2017, lawmakers passed the Tax Cuts and Jobs Act (TCJA) which included significant tax cuts for individuals and corporations alike. However, the cuts to individuals — which is where 83% of small businesses pay their business taxes — are temporary and will expire after 2025. This gives lawmakers the biggest opportunity to rewrite the tax code in nearly a decade. The guiding principles for any reform must be predictability, parity, and permanency.
If Congress fails to act, here’s what’s ahead for small businesses: a significant increase in their business tax rates, increased estate taxes, the elimination of the Qualified Business Income deduction, a continued prohibition against deducting R&D investments in the year that they are made, and decreases to bonus depreciation and business expensing.
If we don’t get something done now, the 70 million people in the United States who work for or run a small business will feel the long-term negative effects for the months and years ahead. I want to repeat: this tax increase is something only small businesses will feel; large businesses were protected by the original law.
Financial reporting
The Corporate Transparency Act (CTA) was passed into law in January 2021 and will go into full effect on January 1, 2025. This law will require only businesses with fewer than 20 employees to disclose beneficial owners’ information to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
While we support the goal of stemming money laundering, this law is not just bad policy, it is unconstitutional. Failure to comply — intentional or not — could result in up to $10,000 in fines and up to two years in prison. While NSBA has filed suit against the Treasury over the regulations implementing this law, we continue to press lawmakers to delay and repeal the CTA.
Politics versus progress
America’s small businesses are as politically diverse as our country, yet we are able to be pragmatic and put our politics aside when our businesses and our communities need it.
The American people are sick and tired of electing — and paying for — lawmakers whose primary goal is to win at all costs. Lawmakers must embrace the importance of small business as well as bipartisanship to prevent massive hardships in the coming year.
