It’s a new year and new Congress. While most legislation we’ll see this term has yet to be introduced, some of the early bills are out of touch with the needs of most Americans.
Although many voters supported Donald Trump in the hope that he’ll address practical concerns like tightening border security, ending taxes on tips and lowering the price of eggs, some lawmakers are drifting in a distinctly different direction.
In just the first few weeks of the 119th Congress, members have introduced bills to buy the Panama Canal, seize Greenland, and abolish the Bureau of Alcohol, Tobacco, Firearms and Explosives. Unfortunately, there’s not much to gain from splashy proposals that will amount to little more than newspaper headlines and partisan bickering. Instead, Congress should work this year to help America’s small businesses thrive.
Supporting entrepreneurs is the perfect mission for Congress, in part because it’s one of the few remaining bipartisan issues. After all, the nation’s more than 34 million small businesses create jobs in every congressional district, employing 59 million Americans from all backgrounds. Most important, small businesses benefit their communities by creating jobs and boosting local economies. That’s why Congress must try to solve some of the biggest problems holding small businesses back: skyrocketing healthcare costs and a tax code that overwhelmingly favors large corporations.
When it comes to healthcare, the problem is straightforward. Small businesses can’t attract and retain top talent without offering healthcare benefits, but they’re struggling to access coverage for employees that is both high quality and affordable. According to Small Business Majority’s research, most small businesses that provide health benefits have been forced into making changes to their health coverage offerings, with 51 percent increasing employee contributions to their health plans, 47 percent moving to an insurance plan offering more limited coverage, 29 percent cutting other employee benefits and 24 percent dropping coverage altogether due to high costs.
Unfortunately, one of the few solutions to this affordability problem is expiring this year. The American Rescue Plan Act increased the amount of premium tax credits available to purchase health plans on the Affordable Care Act marketplace, expanding eligibility to individuals with income levels above 400 percent of the federal poverty level.
The Inflation Reduction Act made these tax credits available through 2025. Notably, small-business owners, their employees and self-employed individuals are significantly more likely to rely on the ACA marketplaces for health coverage. If Congress can’t come to a bipartisan agreement, small-business owners and their employees will shoulder the cost of their inaction through prohibitively high premiums.
When it comes to taxes, we know major changes could be in store this year as key provisions of the 2017 Tax Cuts and Jobs Act are set to expire, including the Section 199A pass-through standard tax deduction, which allows pass-through entities (about 95 percent of small businesses) to deduct 20 percent of their qualified business income from their federal taxes. The trouble is that this deduction primarily benefits the wealthiest business owners, with 4.5 percent claiming 69.2 percent of all pass-through deduction benefits. While the richest entities claimed an average deduction of over $1 million in 2021, filers with adjusted gross incomes below $100,000 took home an average deduction of just $1,997.
It’s obvious that the 20 percent standard deduction doesn’t help the average Main Street business. Instead, 199A should be reformed so that small businesses can deduct their first $25,000 of qualified income. This would benefit the vast majority of small businesses with a net income of less than $125,000 yearly, leaving them with more money to reinvest in their business. Reducing inequities in our tax code that disadvantage small businesses will ultimately lead to more economic innovation, local job growth and boost the larger economy.
Instead of indulging expansionist fantasies and dismantling entire government agencies, let’s hope Congress uses its power to improve the lives of average Americans, tens of millions of whom are small business owners. After all, when Congress fails to support small businesses, our entire nation suffers — not to mention the fact that voters elected this Congress with the expectation that it would make a positive difference in their bottom lines. Let’s make 2025 the year in which politicians pledge to put some of their differences aside to help more Americans realize their entrepreneurial dreams.
