Small business owner writes about the importance of the small business deduction

FOR IMMEDIATE RELEASE

CONCORD, NH (August 19, 2024) – The Union leader published a comment by Leighton BatesPresident of New Hampshire Electric Motors in Laconia and NFIB member who lives in Gilford. He explains the importance of the 20% small business tax deduction and calls on Congress to make the deduction permanent before it expires next year.

Read his Split below:

Leighton Bates: Tax cuts could mean life and death for my small business

MY SMALL business is facing a disaster of someone else’s making, and so are countless small businesses across New Hampshire. Why? Because Washington, DC, picked another unnecessary fight instead of doing the right thing in the first place. Now it’s not clear whether our politicians will even do the right thing, even with the future of small businesses at stake.

While the rest of America is focused on this year’s presidential election, small business owners like me are deeply concerned about what will happen next year. That’s when the centerpiece of the 2017 tax cut bill will disappear. It’s called the Small Business Deduction. It lets us deduct 20% of our business income. Without this relief, only large businesses would have benefited from the tax cut bill. Fortunately, small businesses received relief that helped level the playing field for more equal opportunity.

But as is typical in Washington, our relief is only temporary, while the tax cuts for big business are permanent. What will happen if Congress and the White House don’t work together to extend the small business tax credit? The answer is a tax hike, and a tax hike spells disaster. Our family business proves it.

Our electrical repair business has been in Laconia since 1962. My family has been running it since the 1970’s. We rebuild, rewind and replace electrical equipment for a variety of industrial and commercial customers. My dad always told me that running a small business doesn’t build character, it reveals it. Now it’s my turn to prove that. Over the past few years I’ve worked hard to continue to serve our employees and our hometown at the highest level.

Taxes have always been our biggest challenge. Small businesses are much more affected by taxes than large ones. We don’t have the size or the huge accounting teams of corporations. When we pay taxes, it costs money and time that we would rather invest in our employees.

That’s why the small business tax credit was a godsend. When it was passed, we weren’t quite sure how much it would help us. But six years later, I can safely say it’s the most helpful policy to ever come out of Washington, DC.

How did it help? I would like to list how it helped.

Firstly, it freed up money to hire more staff. We are a small shop with only seven employees, but now we want to hire at least two more. We wouldn’t be able to afford the training or staff costs for a new employee if we suddenly had to pay 20% more in taxes next year.

Second, we are increasing salaries and benefits. We have offered the largest raises ever in recent years. Last year, we offered our employees a 401k pension for the first time. We also pay our employees’ sick days – as many as they need. That’s a huge cost for a small company, but we pride ourselves on “putting families first.” A 20% tax increase would make that much harder.

Third, we have purchased new equipment to remain competitive, such as an engine analyzer and an air dryer. We have paid for our employees’ travel to training programs. These investments help us control costs, which we pass on to our customers in the form of lower prices. With a 20% tax increase, many people may find it cheaper to simply buy new equipment online rather than bring it to us for repairs or replacement. That could be the end of us.

Some people may ask: if our business has survived for over 60 years, would we not survive if taxes went up again in 2025? That would be much more difficult. In recent years, everything has become more expensive, it has become harder to find workers, and competition from the internet has become more intense. These large corporations are limiting consumer choice and widening the gap between the majority and the wealthy few. Add to that a massive tax increase and we wouldn’t have to hire new employees, raise prices, and cut corners everywhere. But these measures run the risk of driving away customers, leading to a vicious spiral that could force us to close.

We’re already preparing for the worst. In preparation for a tax increase, we’re talking about closing our store counters and hiring an answering service instead of having someone at the front desk to answer the calls. But we wouldn’t have to do any of that if Congress did what it should have done in the first place. Our politicians need to make the small business tax deduction permanent now. There’s already bipartisan support. What’s stopping us?

I understand that everyone is focused on the presidential campaign. I understand that there is a lot going on. But saving the small business economy should be the top priority. Every day that Washington waits brings disaster closer. It is already too close.

Leighton Bates is president of New Hampshire Electric Motors in Laconia and a member of the National Federation of Independent Business. He lives in Gilford.

Background:

The 20% small business deduction (Section 199A) allows small businesses organized as pass-through entities (S corporations, LLCs, sole proprietorships, or partnerships) to deduct up to 20% of qualified business income. This deduction expires in 2025. The small business deduction was created in the 2017 tax law to bring small businesses’ tax rates closer to those of their large, commercial competitors.

In a vote among NFIB members, 91% of NFIB members favored a permanent extension of the expiring provisions of the 2017 Tax Act. According to NFIB’s 2021 Tax Survey, nearly half of small business owners (48%) said that uncertainty about expiring tax provisions affects their current or future business plans.

Further information can be found here.

###

For 80 years, NFIB has advocated for the interests of America’s small and independent business owners in Washington, DC, and all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-supported organization. Since our founding in 1943, NFIB has been and remains exclusively dedicated to small and independent businesses. For more information, visit nfib.com.