Garden State Times

The National Federation of Independent Business (NFIB) has released two reports concerning the future of the federal 20% Small Business Tax Deduction, which is set to expire at the end of next year. These reports highlight potential outcomes for small businesses depending on whether Congress decides to make this deduction permanent.

In collaboration with NFIB, Ernst & Young (EY) conducted a macroeconomic analysis examining the effects of permanently extending the 20% Small Business Deduction. The findings suggest that such an extension would significantly benefit small businesses by creating 1.2 million new jobs annually for the first decade and 2.4 million jobs each year thereafter. Additionally, it would contribute a $750 billion increase in GDP within the small business sector over ten years, followed by an annual increase of $150 billion.

Specifically in New Jersey, projections indicate that 38,000 new jobs could be created each year during the first decade, with 73,000 new jobs annually thereafter. Eileen Kean, NFIB New Jersey State Director stated: “This study demonstrates the positive impact the Small Business Deduction has on New Jersey’s small businesses and why it’s so important that Congress makes it permanent.” She emphasized that maintaining this deduction allows local business owners to invest more in their communities and employees.

The analysis also highlighted that there are currently 33 million small pass-through businesses employing over 68 million workers across the United States. Of these businesses, 25.9 million claimed this deduction in 2021.

The NFIB's 2024 Tax Survey further assessed challenges faced by small business owners regarding tax policies. It revealed that eliminating this deduction could negatively affect operations for many owners; specifically, 59% reported adverse impacts if removed. Moreover, a significant number anticipated raising prices or delaying investments and hiring if faced with its expiration.

NFIB President Brad Close remarked: “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... If the deduction is allowed to expire at the end of next year, millions of small businesses will face a massive tax hike.”

For further information on these analyses and surveys visit nfib.com or access specific studies via provided links.