Prairie State Wire

The National Federation of Independent Business (NFIB) has issued a new report regarding the potential implications for small businesses in Illinois if the 20% Small Business Tax Deduction is not made permanent. According to the organization's findings, the state’s 1.3 million small businesses could encounter significantly higher taxes, posing adverse impacts on both the local economy and the larger U.S. economic landscape.

The report points out the stark tax rate discrepancies that may arise between small businesses and larger corporate entities should the deduction lapse. In Illinois, current C-Corp tax rate caps at 30.50%, whereas the small business rate may rise to 44.55% without the deduction’s permanence.

Alternatively, the report suggests that the permanent establishment of the deduction would yield substantial economic benefits. This includes balanced tax rates between small businesses and their larger competitors. Additionally, the state of Iowa could potentially see the creation of 12,000 new jobs annually over the next decade, with significant GDP growth initially projected at $562 million annually and $1.16 billion a year post-2035.

NFIB Illinois State Director Noah Finley stated, "Illinois small businesses are the backbone of our communities. Congress cannot allow the 20% Small Business Deduction to expire. A massive tax hike will endanger Illinois’ small businesses and limit business owners’ ability to hire and make further investments. Lawmakers must act quickly to protect small businesses.”

The 20% Small Business Tax Deduction, part of the Tax Cuts and Jobs Act of 2017, has reportedly enabled numerous small businesses to extend operations, employ workers, and raise wages. Yet, if not renewed this year, many small businesses may face increased tax burdens, potentially threatening employment and overarching economic health.

More information concerning the NFIB’s advocacy initiatives and the full Illinois report can be found at the provided link.