News Summary
A recent NFIB report highlights the critical need for California to permanently establish a 20% Small Business Tax Deduction. Without it, small businesses face inflated tax rates that could jeopardize economic growth. The deduction, part of the Tax Cuts and Jobs Act of 2017, supports 4.2 million small businesses in the state, with a projection of creating 141,000 new jobs annually. A significant 80% of Americans back the initiative, emphasizing its importance in maintaining a robust local economy.
California – A report from the National Federation of Independent Business (NFIB) released on April 15, 2025, emphasizes the importance of making the 20% Small Business Tax Deduction permanent in California. Without this deduction, which is currently part of the Tax Cuts and Jobs Act of 2017, small businesses in the state could be faced with significantly higher tax rates that may lead to a decline in economic growth and local business viability.
As it stands, California is home to approximately 4.2 million small businesses, which play a crucial role in the state’s economy. If the deduction is not made permanent by the end of the year, small businesses will face a tax rate of 52.9%, compared to the 29.84% tax rate for C-Corporations. This disparity raises concerns about creating an uneven tax playing field, which could hinder small business operations.
The report projects that if the deduction is maintained, California could see an introduction of around 141,000 new jobs annually over the next decade. Additionally, the annual increase in gross domestic product (GDP) could reach $9.78 billion during the first decade and further expand to $20.2 billion per year after 2035. These figures underline the potential economic benefits that could arise from supporting small businesses through favorable tax policies.
The NFIB warns that allowing the tax deduction to expire may trigger a considerable tax hike for small businesses, impacting the overall job market and economic stability. A concerning statistic is that the expiration could affect nine out of ten small businesses across the nation, which rely on such tax relief to sustain and grow their operations. The organization has long advocated for small businesses and has highlighted that the 20% deduction has previously empowered these entities to expand, hire new employees, and increase wages.
Support for preserving the Small Business Tax Deduction appears robust among the general populace. A recent poll reveals that over 80% of Americans deem it crucial for the federal government to back small businesses, with 93% of respondents citing that making the deduction a permanent fixture should be a top priority for Congress. The poll also indicates that 95% of survey participants express concern regarding the negative impacts that would stem from the expiration of the tax deduction.
With small businesses representing 99.9% of all businesses in California and employing around seven million people, the stakes are considerably high. As these businesses navigate the challenges posed by current tax policies, the decision to either maintain or eliminate the deduction will have significant ramifications on the overall economy, employment rates, and the financial stability of local enterprises.
The NFIB, a nonprofit organization dedicated to advocating for small and independent businesses for over 80 years, emphasizes the necessity of unwavering support from policymakers to ensure that small businesses can thrive amid challenging economic climates. The report serves as a call to action for lawmakers to prioritize legislation that will foster a healthy economic environment for California’s small businesses.
Deeper Dive: News & Info About This Topic
- NFIB Report on Small Business Tax Deduction
- LendingTree: Small Business Tax Rate
- ADP: Retirement Plans for Small Businesses in California
- Forbes: PTET Tax Strategy for California Business Owners
- Wikipedia: Small Business
