News Summary

California’s 4.2 million small businesses could face a significant tax hike to 52.9% if the 20% Small Business Tax Deduction is not made permanent. The NFIB warns that allowing this deduction to expire could stunt job growth, with an estimated loss of 141,000 jobs annually and a potential $9.78 billion decrease in California’s GDP within the next decade. Public support for this tax measure remains strong, highlighting its critical role in maintaining economic stability in the state.

California is facing potential economic challenges as the National Federation of Independent Business (NFIB) has reported on the importance of making the 20% Small Business Tax Deduction permanent. This critical financial measure plays a key role for the state’s 4.2 million small businesses, which could face significantly higher tax rates if the deduction is not extended this year. Without this deduction, small businesses could see their tax rate soar to 52.9%, compared to the lower 29.84% tax rate for C-Corporations, which creates an uneven playing field for entrepreneurs.

The consequences of allowing the 20% deduction to expire are serious and could lead to economic slowdown and increased financial strain on local businesses. The NFIB estimates that keeping the deduction would support approximately 141,000 new jobs annually over the next decade and inject $9.78 billion into California’s GDP within the first ten years. Beyond 2035, the annual economic boost could rise to an impressive $20.2 billion.

John Kabateck, NFIB California State Director, has expressed concerns about the potential tax hike on small businesses if the deduction is not made permanent. He emphasizes that the expiration of this tax benefit could jeopardize not only small businesses but also the overall economic stability in California. This situation concerns a significant portion of small businesses, with estimates suggesting that nine out of ten small businesses nationwide could be affected by the elimination of the deduction.

A recent poll further highlights public sentiment on this issue, showing strong bipartisan support for small businesses and the call for the tax deduction to be made permanent. More than 80% of Americans view governmental support for small businesses as essential, while an overwhelming 93% of respondents believe that making the deduction a Congressional priority should be of utmost importance. Interestingly, 95% of Americans surveyed expressed apprehensions surrounding the potential impact of the deduction’s expiration.

In California, small businesses are not just vital to the economy; they constitute 99.9% of all businesses in the state, employing over seven million people. By supporting the permanent establishment of the 20% Small Business Tax Deduction, California can ensure a more equitable tax system that aids small businesses in their growth efforts, including expanding operations, hiring new employees, and raising wages.

The 20% Small Business Tax Deduction is part of the Tax Cuts and Jobs Act of 2017, which aimed to stimulate the economy by providing tax relief to small businesses. Advocates argue that the deduction has enabled numerous entrepreneurs across California to thrive and create jobs, thereby contributing to the state’s economic prosperity.

Founded over 80 years ago, the NFIB is a nonprofit organization advocating for the interests of small and independent businesses. The organization’s report and calls for policy changes underscore the importance of small businesses in the U.S. economy, as they continue to be significant job creators and pivotal players in local communities.

As this situation evolves, the decision surrounding the future of the 20% Small Business Tax Deduction remains a critical point of discussion among policymakers and citizens alike, highlighting the essential role of small businesses in California’s economic landscape.