Empire State Today

The National Federation of Independent Business (NFIB) has released two reports concerning the federal 20% Small Business Tax Deduction, which is set to expire at the end of next year. The studies highlight potential outcomes for small businesses if Congress either makes the deduction permanent or allows it to lapse.

A macroeconomic analysis by Ernst & Young (EY), in collaboration with NFIB, assessed the impact of permanently extending this tax deduction. According to their findings, making the deduction permanent could result in the creation of 1.2 million new jobs annually for the first decade and 2.4 million jobs each year thereafter. Additionally, it could lead to a $750 billion increase in GDP within the small business sector over ten years and a $150 billion annual increase following that period.

In New York alone, 71,000 new jobs could be created each year during the first decade, with an increase to 138,000 jobs annually after that. Ashley Ranslow, NFIB New York State Director, emphasized: “This study demonstrates the positive impact the Small Business Deduction has on New York’s small businesses and why it’s so important that Congress makes it permanent.”

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

The NFIB's 2024 Tax Survey explored challenges faced by small business owners regarding taxes and potential changes to tax policy. Notably, 59% of respondents indicated that removing this deduction would negatively affect their operations. Additionally, many reported they might raise prices or delay investments and hiring.

NFIB President Brad Close stated: “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 warned that if Congress does not act to make this deduction permanent by next year’s end date, millions of small businesses will face increased taxes.

For further information about these reports and NFIB's advocacy efforts on behalf of American small businesses since its founding in 1943, visit nfib.com.