Bluegrass Times

NFIB, a prominent advocacy group for small businesses in America, has issued a report on the significant effects a potential tax increase could have on Kentucky's small businesses. The report underscores the advantages that would ensue if the 20% Small Business Tax Deduction were to become a permanent fixture in Kentucky’s tax landscape.

According to the report, the expiration of this deduction could raise taxes significantly for the 380,000 small businesses in the state, potentially leading to an economic decline and heightened financial challenges. In Kentucky, small businesses could see their tax rate rise to 43.6%, while larger corporations would maintain a 26% rate if the deduction is not upheld.

The report further details that making the deduction permanent would equate the tax rates of small businesses with larger competitors, resulting in considerable economic benefits. Projections include the creation of 15,000 new jobs annually for a decade, with an anticipated GDP growth of $646 million per year for the first ten years and an annual increase of $1.33 billion beyond 2035.

Tom Underwood, NFIB State Director, expressed concerns stating, “The 20% Small Business Tax Deduction has been a tremendous help to Kentucky small businesses. Local businesses already are dealing with inflation, labor shortages, and rising costs. If this deduction is allowed to expire, Main Street businesses will be faced with a steep tax hike on top of everything else, making it even harder for them to create jobs and support their communities.”

Implemented as part of the Tax Cuts and Jobs Act of 2017, this tax deduction has been instrumental for millions of small businesses to grow, hire, and raise wages. Should the deduction not become permanent, nine out of ten small businesses in the country could face substantial tax increases, potentially affecting employment and economic stability on a national scale.