According to the most recent private sector employment report, small businesses that employ 49 or fewer workers created 79,000 jobs during the month of October. Interestingly, a majority of that expansion originated from very small businesses—defined as having 19 or fewer employees.
This economic growth isn’t new. Small businesses in America have historically been responsible for two-thirds of all new job creation. It’s not surprising why. There are 29 million of them—employing 56 million people. They are the entrepreneurs that create, innovate, and strengthen Main Streets across the country. Thus, it’s important to make sure that this economic engine is in a healthy fiscal environment.
Lawmakers in Washington are attempting to make this goal a reality by pushing for measures that will reduce the nearly 40 percent federal tax rate that currently plagues small businesses from coast to coast. There are two versions of the proposed tax relief legislation at the moment—both known as the Tax Cuts and Jobs Act. One originates in the House of Representatives, while the other in the Senate.
Below are some of the key takeaways from each bill for our country’s largest job creators:
House version of the Tax Cuts and Jobs Act:
- 25 percent small business rate that can be applied to the first 30 percent of marginal income.
- 9 percent tax rate for the first $ 75,000 on very small businesses.
- The elimination of the 15 and 28 percent brackets in favor of the newly expanded 12 and 25 percent brackets.
- Doubles the standard deduction to $ 24,000—meaning you pay zero tax on the first $ 24,000 of earnings.
- Immediate expensing, which means write-off savings will apply during the purchase year, rather than being spread over a longer period.
Senate version of the Tax Cuts and Jobs Act:
- A 17.4 percent small business income deduction—which includes professional service providers who earn $ 150,000 or below annually.
- A significant expansion of the standard deduction.
- A simplification of the code—which eliminates the 15 and 28 percent tax brackets.
- Immediate business expensing.
- The ability to fully deduct business interests.
Small businesses are the backbone of the American economy. So when they’re strong, America is strong. Learn more about how you can support small business tax relief efforts at TaxCutsNow.com.