READ: Tax Cuts Could Mean Life and Death for My Small Business

August 19, 2024

Small business owner writes about the importance of the Small Business Deduction

READ: Tax Cuts Could Mean Life and Death for My Small Business

FOR IMMEDIATE RELEASE CONCORD, NH (August 19, 2024) – The Union Leader published an op-ed by Leighton Bates, president of New Hampshire Electric Motors in Laconia and an NFIB member residing in Gilford. He explains the importance of the 20% Small Business Deduction and calls on Congress to make the deduction permanent before it expires next year. Read his column below: Leighton Bates: Tax cuts could mean life and death for my small business MY SMALL business is staring at a disaster of someone else’s making and so are countless small businesses across New Hampshire. Why? Because Washington, D.C., has created another needless fight, instead of doing the right thing from the start. Now it’s not clear if our leaders will do the right thing at all, even though the future of the small business economy is on the line. While the rest of America is focused on this year’s presidential election, small business owners like me are profoundly worried about what happens next year. That’s when the centerpiece of the 2017 tax cut law will disappear. It’s called the Small Business Deduction. It allows us to deduct 20% of our business income. Without this relief, big businesses would have been the only ones to benefit from the tax cut law. Thankfully, small businesses got relief that helped level the playing field. But in classic D.C. fashion, our relief is temporary while big business tax cuts are permanent. What will happen if Congress and the White House don’t work together to extend the Small Business Deduction? The answer is a tax hike, and a tax hike means disaster. Our family business proves it. Our electric repair business has been in Laconia since 1962. My family has run it since the 1970s. We rebuild, rewind and replace electrical equipment for a wide variety of industrial and commercial clients. My dad used to tell me that running a small business doesn’t build character, it reveals it. Now it’s my turn to prove it. For the last few years, I’ve worked hard to keep serving our workers and hometown at the highest level. Taxes have always been our steepest challenge. Taxes hit small businesses a lot harder than big businesses. We don’t have the scale or the massive accounting teams that corporations do. When we pay taxes, it takes money and time that we’d much rather invest in our workers. That’s why the Small Business Deduction was a godsend. When it first passed, we weren’t exactly sure how much it would help us. But six years later, I can safely say it’s been the most helpful policy ever to come out of Washington, D.C. How has it helped? Let me count the ways. First off, it freed up money to hire more workers. We’re a small shop, with only seven people, but we’re now looking to hire at least two more. We could not afford the training or supplies of a new hire if we suddenly had to pay 20% more in taxes next year. Second, we’re boosting pay and benefits. We offered our biggest raises ever in the last few years. Last year we offered a 401k to our employees for the first time. We also pay for our employees’ sick days — as many as they need. That’s a huge cost for a small business but we take pride in putting “families first.” A 20% tax hike would make that so much harder. Third, we’ve bought new equipment to stay competitive, like a motor analyzer and an air dryer. We’ve paid to travel to training programs for our workers. These investments help us control costs, which we pass on to customers in the form of lower prices. With a 20% tax hike, a lot of people could find it cheaper to just buy new equipment on the internet instead of coming to us for repair or replacement. That could be the death of us. Some people may wonder: If our business survived over 60 years, wouldn’t we survive if taxes go back up in 2025? It would be a lot harder. In the last few years, everything has gotten more expensive, workers have gotten harder to find, and competition from the internet has become intense. These large corporations are limiting consumers’ choices and widening the gap between the majority and the top few. Throw a massive tax hike on top of that, and we’d have to stop hiring, raise prices, and cut back across the board. But those moves risk pushing customers away, leading to a doom loop that could force us to close. We’re already preparing for the worst. In preparation for a tax hike, we’re talking about closing our retail counter and hiring an answering service, instead of having someone answer calls at the front desk. But we wouldn’t have to do any of this if Congress does what it should have done from the start. Our leaders need to make the Small Business Deduction permanent now. There’s already bipartisan support. What’s the holdup? I understand that everyone’s focused on the presidential race. I understand that there’s a lot going on. But surely saving the small business economy should be a top priority. Every day D.C. waits brings disaster closer. It’s already too close as it is. Leighton Bates is president of New Hampshire Electric Motors in Laconia and is a member of the National Federation of Independent Business. He lives in Gilford. Background: The 20% Small Business Deduction (Section 199A) allows small businesses organized as pass-throughs (S-Corporations, LLCs, sole proprietorships, or partnerships) the ability to deduct up to 20% of qualified business income and is scheduled to expire in 2025. The Small Business Deduction was created in the 2017 tax law to bring small businesses’ tax rates closer to that of their large, corporate competitors. In an NFIB member ballot, 91% of NFIB members said they supported permanently extending the expiring provisions of the 2017 tax law. According to NFIB’s 2021 tax survey, nearly half of small business owners (48%) reported that uncertainty of expiring tax provisions is impacting their current or future business plans. Learn more information here.

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