On Saturday, the Senate passed their version of the Tax Cuts and Jobs Act, moving things one step closer to a final bill that would bring significant relief to Wisconsin’s hardworking taxpayers and small businesses, including the building and contractors with whom I work.
This bill is a once in a generation opportunity to turn ordinary Americans’ tax cut wishes into reality.
So how does the Senate bill help small businesses? Most importantly, it creates a new 23 percent small business tax deduction for all small businesses that earn $500,000 or less annually, and for all non-professional services businesses above that income level.
Consider how that would help an average Wisconsin business with $200,000 in earnings. The 20 percent deduction would protect $46,000 of these earnings from tax, allowing the business to keep more of their income necessary to survive and thrive. This would also keep more money in Wisconsin’s communities where it is needed and send less to Washington D.C. where it is not.
According to the Tax Foundation, 97 percent of small businesses earn less than this $500,000 threshold, meaning the overwhelming majority of the nation’s small businesses would see needed and long-overdue tax relief from the bill.
And the benefits to small businesses from the tax bill don’t end there. Like its House counterpart, the bill would double the income threshold under which small businesses and individuals pay zero tax to $24,000, eliminate the 15 and 28 percent tax brackets in favor of expanded lower rates, and significantly expand the child tax credit – a major benefit to Wisconsin’s working families trying to cover daycare costs. These changes would save ordinary Wisconsin families and small businesses thousands of extra dollars a year to help pay for the expenses of everyday life.
Then there are the tax bill’s more technical benefits that would simplify the code and save small businesses even more. These include immediate expensing for capital investment and full interest expensing, helping small businesses grow. By making expansion a little less expensive, these changes would have the added benefit of incentivizing economic growth.
Survey and economic evidence suggest most small businesses would use their tax cut savings to raise wages, create jobs, and expand. Certainly, some small business owners would use the savings for personal reasons like making home renovations or buying a new car, but such actions would also stimulate local economies and jobs.
Cutting taxes is not about lining the pockets of business owners with more money as critics contend. It’s about giving these vital players in the economy a little more room to help their customers, employees, and communities.
The holiday season is a tough time for small businesses, between working longer days and counting on increased revenue to jumpstart the new year. And with the rise of e-commerce, Wisconsin small businesses face an even more challenging business environment. This is all the more reason to provide our economy’s leading job creators with an early Christmas president: Tax Cuts.