Volunteer State News

NFIB has published a report discussing the possible impact of a potential tax hike on Tennessee's small businesses. The report emphasizes the importance of the 20% Small Business Tax Deduction and its benefits. It warns that Tennessee's 711,000 small businesses might face higher taxes if the deduction is not made permanent this year. NFIB suggests that the provision's expiration could harm small businesses in Tennessee and the broader U.S. economy, causing an economic slowdown and financial strain.

The report points out that if the deduction is not extended, small businesses could experience a significant increase in tax rates compared to larger corporations. In Tennessee, the C-Corp tax rate is projected to stay at 27.5%, while the rate for small businesses could increase to 39.6%. On the other hand, making the deduction permanent could create economic benefits, maintaining a fair playing field between small businesses and larger competitors. Tennessee stands to gain 23,000 new jobs annually over the next decade, with a GDP growth of $1.16 billion annually for ten years and $2.4 billion per year beyond 2035 if the deduction remains.

NFIB State Director Jim Brown stated, “The 20% Small Business Tax Deduction has been a lifeline for Main Street businesses across our state. Without it, countless small business owners will face a steep tax hike at a time when they’re already dealing with labor shortages and rising costs. Making this deduction permanent isn’t just good tax policy. It’s critical to ensuring small businesses can continue creating jobs and supporting local communities.”

The deduction, a significant part of the Tax Cuts and Jobs Act of 2017, has enabled small businesses to grow, hire, and raise wages. Failure to make it permanent could result in nine out of ten small businesses facing a higher tax burden, threatening jobs and economic stability across the United States.