Thousands of potential Maine jobs at stake if federal tax deduction expires, study says
Maine stands to gain thousands of new jobs if a federal tax deduction for small businesses becomes permanent, according to a study recently conducted by Ernst & Young and released by the National Federation of Independent Business.
Currently, the 20% Small Business Tax Deduction — created by tax reform legislation in 2018 — is set to expire at the end of 2025.
Ernst & Young measured the impact of permanently extending the deduction, and concluded that small businesses across the U.S. would expand by creating 1.2 million new jobs each year for the first 10 years. After that, according to the study, the deduction would lead to the creation of 2.4 million jobs annually.
In Maine, 6,000 new jobs would be created annually for the first decade, and 11,000 new jobs each year afterward.
The analysis also estimates a permanent tax deduction would increase the gross domestic product from U.S. small businesses by $750 billion over the first 10 years, and then by $150 billion annually.
The National Federation of Independent Business, a nonpartisan advocacy group headquartered in Washington, D.C., is lobbying for lawmakers to prevent the deduction from expiring.
“This study demonstrates the positive impact the Small Business Deduction has on Maine’s small businesses and why it’s so important that Congress makes it permanent,” said David Clough, NFIB Maine state director.
“The deduction allows Maine small business owners to invest in their communities, employees, and businesses, which only strengthens our local economy. We urge our federal lawmakers to support the Main Street Tax Certainty Act to make the Small Business Deduction permanent and avoid a massive tax hike on Maine’s small business community.”
In a separate study, the NFIB surveyed small business owners across the country to identify their biggest tax challenges, implications of potential changes to the tax code, and how tax policy impacts business operations.
Among the small business owners, 59% said eliminating the Small Business Tax Deduction would have a negative impact on their business. Of those who said predicted that effect, 61% said they would likely raise prices, 44% said they would postpone or cancel capital investments, and 36% said they would postpone or cancel hiring additional employees.
The 20% Small Business Tax Deduction was created by the Tax Cuts and Jobs Act, the massive tax reform law that took effect six years ago. It allows owners of pass-through businesses, such as sole proprietorships, partnerships and limited liability companies, to deduct up to 20% of their qualified business income.
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