The National Federation of Independent Business (NFIB), the nation’s leading small business advocacy organization, released two new reports on September 12, 2024, concerning the potential expiration of the 20% Small Business Tax Deduction at the end of next year. The reports detail the economic impacts if Congress either makes this deduction permanent or allows it to expire.

An Ernst & Young (EY) macroeconomic analysis, conducted in collaboration with NFIB, evaluated the effects of permanently extending the 20% Small Business Deduction. According to the analysis, making this deduction permanent would significantly benefit small businesses by creating 1.2 million new jobs annually for the first ten years and 2.4 million jobs each year thereafter. Additionally, it would result in a $750 billion GDP increase in the small business sector over the first decade and a $150 billion annual increase subsequently. Without an extension, these benefits would be lost.

The EY analysis also revealed that there are 33 million small pass-through businesses employing more than 68 million workers in the United States. In 2021, approximately 25.9 million of these businesses claimed the deduction.

The NFIB's 2024 Tax Survey assessed various tax challenges faced by small business owners and explored how changes to tax policy might impact their operations. Notably, 59% of respondents indicated that eliminating the deduction would negatively affect their business. Furthermore, 61% reported they would likely raise prices, while 44% said they would postpone or cancel capital investments, and 36% stated they would delay or cancel hiring additional employees.

“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, hire employees and raise wages, and give back to their communities,” said NFIB President Brad Close. “If the deduction is allowed to expire at the end of next year, millions of small businesses will face a massive tax hike. It is crucial that Congress and the Administration take a strong stand for local small businesses and make the Small Business Deduction permanent.”