A new study released on Monday supports the Section 199A deduction for small and family-owned businesses, mirroring a bipartisan, bicameral bill led by U.S. Rep. Lloyd Smucker (R-PA) and U.S. Sen. Steve Daines (R-MT) that would make the deduction permanent for such qualified business income. Under current law, the deduction expires Dec. 31, 2025.
“It’s no surprise that when we provide our small businesses with much-needed tax relief, they not only thrive, but they help the whole economy grow,” Sen. Daines said. “It’s time this tax deduction is made permanent so that Montana small and family-owned businesses can continue to create jobs, serve their communities and spur economic activity.”
Sen. Daines in May 2023 sponsored the Main Street Tax Certainty Act, S. 1706, alongside 14 original Republican colleagues, including U.S. Sens. Bill Cassidy (R-LA), Marsha Blackburn (R-TN), Thom Tillis (R-NC), and Roger Wicker (R-MS), to make permanent the tax deduction for qualified business income. The bill currently has a total of 34 GOP cosponsors.
Rep. Smucker sponsored the same-named, bipartisan H.R. 4721 in July 2023 alongside 91 original cosponsors, including lead original cosponsor U.S. Rep. Henry Cuellar (D-TX). The bill now has 186 cosponsors.
The new study — released Sept. 9 by the S Corporation Association and authored by Robert Carroll at Ernst and Young — focuses on the economic footprint of the 199A deduction and answers the question: “Just how much economic activity is supported by Section 199A?”
“This report underscores what I have heard directly from small and family-owned businesses in my community and across the nation — Section 199A allows main street businesses to grow, create jobs, and invest in their community,” Rep. Smucker said.
The Section 199A deduction, which was created under the 2017 Tax Cuts and Jobs Act, provides a 20 percent deduction for pass-through businesses, allowing these businesses to reinvest their hard-earned capital, increase wages, and hire more employees.
Specifically, the new study found that 2.6 million jobs and $325 billion of the GDP are supported by the deduction. Smucker’s bill would make the 20 percent pass-through business tax deduction permanent.
“Making Section 199A permanent will prevent a massive tax hike and provide small business owners and their employees the certainty they need to thrive,” said Rep. Smucker.
Brian Reardon, president of the S Corporation Association, which requested the study, said Section 199A permanency is essential to blocking a massive tax increase on Main Street businesses, while ensuring they remain competitive with the lower rate applied to larger, public corporations.
“This study makes clear that 199A supports millions of jobs located in thousands of communities around the country,” said Reardon. “Without it, those communities would have fewer jobs, lower wages, and smaller economies.”
Reardon also said that the Main Street Certainty Act should be part of any tax package considered by Congress next year.