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The Urgent Need for Congressional Support of the Main Street Tax Certainty Act

In 2017, Congress introduced significant changes to the tax framework, notably cutting business taxes. While permanent tax breaks were granted to Wall Street corporations, small businesses on Main Street faced a different fate. Their tax benefits are not set to last indefinitely; rather, they are slated to expire unless there is a proactive vote from Congress to prevent this outcome. The looming expiration poses a grave risk to local businesses.

A Call to Action for Virginia’s Congressional Delegation

This situation underscores the importance of rallying more members of Virginia’s congressional delegation in support of the bipartisan Main Street Tax Certainty Act. Without this crucial legislation, many small businesses in Virginia could be confronted with an alarming 20% tax increase almost overnight. Given the current environment of rising inflation, which is driving up costs for everything from raw materials to employee wages, this sudden tax burden could become the final straw for many local businesses teetering on the edge of viability.

The Impact of Tax Deductions on Virginia’s Entrepreneurs

In 2017, Congress enacted a law that included a critical provision allowing small businesses to deduct an impressive 20% of their qualified business income from their federal taxes. This measure significantly bolstered local enterprises across the state of Virginia, acting as a financial lifeline during challenging economic times.

These tax deductions have not merely offered relief; they have empowered small businesses to reinvest those savings back into their operations and workforce. Consequently, these funds have been instrumental in addressing pressing issues such as inflation spikes, hiring difficulties, and supply chain disruptions that many small businesses have encountered in recent years.

Unfortunately, Congress has set a sunset clause for this valuable deduction, intending for it to expire in 2025. Given this uncertainty, small business owners face dire consequences without action.

The Necessity for Stability and Certainty

Virginia’s small business owners are now appealing to their congressional representatives to prioritize the passage of the Main Street Tax Certainty Act. Stability is essential for small business operators; without it, they face a climate of uncertainty that hampers growth and long-term planning. While there was a slight rise in the NFIB Small Business Optimism Index—evidencing a degree of renewed confidence—overall sentiment remains fragile. The index, while up 2.2 points in July to reach 93.7, continues to languish below the 50-year average for an astonishing 31 months.

By endorsing this act, Congress can put an end to the vicious cycle of unpredictability associated with temporary tax extensions. At present, small business owners are left in a precarious position, unsure whether they can count on the 20% small-business deduction remaining viable post-2025. This persistent ambiguity stifles their willingness to invest in essential areas like hiring and innovation, severely limiting their capacity to thrive and contribute to their communities.

Bipartisan Support is Key

The Main Street Tax Certainty Act has garnered wide-ranging support from both Democrats and Republicans on Capitol Hill—a notable rarity in today’s political climate. However, of the 11 U.S. representatives from Virginia, only four have stepped up to co-sponsor the bill thus far: Ben Cline, Bob Good, Jennifer Kiggans, and Robert Wittman. Alarmingly, neither of Virginia’s U.S. Senators has yet endorsed the legislation, which is deeply concerning for the small business owners who entrusted them with their votes.

The Economic Backbone of Virginia

Virginia’s economy is fundamentally supported by small businesses. According to the U.S. Small Business Administration, these enterprises constitute 99.5% of all businesses in the Commonwealth. Despite large corporations often dominating the headlines, over 45% of Virginians are employed by small businesses. These businesses are critical drivers of job creation, philanthropic efforts, and the provision of unique goods and services that cannot be found at chain retailers.

With notoriously thin profit margins, the mounting challenges posed by inflation leave small businesses vulnerable. The prospect of a sudden 20% tax hike could tilt the scales for many, leading to business closures that undermine local economies—and Virginia cannot afford to lose its indispensable small businesses.

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Conclusion: A Unified Call for Action

In light of the precarious situation small businesses face, it is imperative that our entire congressional delegation commits to making the small business deduction a permanent fixture by supporting the Main Street Tax Certainty Act. It is vital for us to communicate to our elected officials the significance of Main Street to Virginia’s economic well-being. By fostering an environment conducive to the growth of small businesses, we collectively ensure a more robust and resilient economy for all Virginians.

Julia Hammond of Richmond serves as the Virginia director of the National Federation of Independent Business, the leading small business association in the nation.

Originally Published: September 7, 2024, at 6:05 p.m.

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