Big Sky Times

Depending on whether Congress decides to let the 20% Small Business Deduction in the federal tax code expire or make it permanent, Montana's economy could experience significant changes, according to two reports released last week.

Ronda Wiggers, state director for NFIB in Montana, commented on the reports: “One report put some hard, Montana-specific numbers on this decision, and the correct course to take is unmistakably clear.”

The NFIB released its 2024 NFIB Tax Survey alongside another report prepared with the consulting firm EY (Ernst & Young), which emphasized the importance of maintaining the Small Business Deduction from the 2017 Tax Cuts and Jobs Act (TCJA). While the corporate tax benefits from the TCJA were made permanent and do not expire, the status of the Small Business Deduction is still undecided.

EY's analysis indicated that “the tax change is estimated to increase US job equivalents at small businesses by approximately 1.2 million jobs, on average, in each of the first ten years and growing over time to 2.4 million each year after that.” Additionally, it noted that “permanently extending the Section 199A deduction is estimated to increase US GDP at small businesses by $75 billion annually, over the first 10 years; and growing over time to $150 billion annually each year thereafter.”

The impact on Montana could mean an increase of 5,000 jobs and $244 million in GDP each year for the first decade, with a potential growth to 10,000 jobs and $500 million annually after 2035.

The NFIB’s Tax Survey showed potential challenges if the Small Business Deduction expires, with 61% of small businesses planning to raise prices, 44% considering postponing or canceling capital investments, and 36% possibly delaying hiring additional employees. Other possible actions include freezing wages or reducing benefits for 16%, and becoming more productive for 10%.

Further asserting the case, Jeff Brabant, NFIB’s vice president of Federal Government Relations, testified before the Senate Committee on Finance, saying, “Members of Congress should ask themselves if they really believe it when they say, ‘small businesses are the backbone of America.’ If they truly believe that statement and value small businesses in their communities, then making the 20% small business deduction permanent should be an easy decision.”

NFIB members typically employ between one to nine individuals and report gross sales of approximately $500,000 annually.

For more Montana small business news, updates can be found at www.nfib.com/montana or on X at @NFIB_MT.