Listen to this articleAs a small-business owner, I work with companies of all sizes to help them grow, network and collaborate with other businesses, reach new markets and consumers and position themselves for success. One thing that remains true across all the businesses I work with is that tax certainty is critically important, especially when it comes to ensuring financial stability and solvency.
Unfortunately, that certainty is also the last thing American businesses have right now as several key provisions of the 2017 Tax Cuts and Jobs Act are set to expire at the end of 2025. Lawmakers in Washington need to get ahead of this issue by working to extend—if not make permanent—these tax cuts and provisions, and help ensure a lower corporate income tax that benefits not just large companies, but also smaller- and medium-sized businesses, start-ups and entrepreneurs.
The Tax Cuts and Jobs Act passed during the first Trump Administration was essential in reducing corporate taxes and simplifying compliance for small businesses, helping to energize and grow the American economy. If Congress allows key provisions of the Tax Cuts and Jobs Act to sunset at the end of the year—or in 2026—then it would translate to a tax hike on taxpayers, job creators and American businesses.
Lawmakers need to work swiftly to extend key portions of the Tax Cuts and Jobs Act, as well as to restore other provisions in our tax code. That includes immediate expensing of R&D, which helps support innovation and investment in research and development by allowing businesses to deduct their full R&D costs in the same year they are incurred.
Critically, lawmakers must also ensure the corporate tax rate stays low—which means they can’t raise it to help pay for the needed extension of any of these expiring tax credits and provisions. One of the most impactful changes the Tax Cuts and Jobs Act had on American businesses and the U.S. economy was to reduce the corporate income tax rate from 35% to the 21% rate it is today. This lower tax rate incentivized many smaller businesses to restructure themselves as C-corps.
In fact, despite being considered the exclusive domain of big businesses, U.S. Census data shows that “the bulk” of C-corps are “small enterprises,” with nearly 85% having fewer than 20 employees. Increasing the corporate income tax rate for any reason would threaten not just larger companies, but also smaller and medium-sized local businesses.
Maintaining a competitive tax code is paramount to helping businesses succeed, particularly for smaller Main Street businesses, start-ups and entrepreneurs facing unique challenges. By helping small-business owners keep more of their hard-earned money, lower corporate tax rates provide some breathing room and makes it easier for them to expand, invest in their operations, and hire local workers.
One thing lawmakers have explored to help reduce their own problem of over-spending is removing the business SALT deduction or placing a cap on it? This would ruin small businesses in New York.
A strict SALT cap effectively imposes a higher after-tax cost for those staying in high-tax jurisdictions like New York where the talent is world-class. Over time, this can discourage individuals from starting new boutiques, restaurants, retail shops or tech startups in the state. If that hurts business expansion, job creation in local neighborhoods will also suffer, eroding one of the biggest reasons we fight to stay in New York in the first place—our incredible talent pool and diverse economy.
Congress has a responsibility to ensure American businesses and our economy aren’t ”pushed off a financial cliff” when provisions of the Tax Credits and Jobs Act start expiring at the end of the year. These provisions—along with a lower corporate tax rate—help give businesses the tax certainty and financial stability they need to continue growing, creating jobs, and contributing to a stronger U.S. economy.
Lawmakers must do everything in their power to preserve the competitive advantage that the Tax Cuts and Jobs Act gave American businesses of all sizes.
Tyler Tumminelli is the CEO of ScaleLocal, a Selden-based company, which promotes the advancement of small businesses across the country.
