Op-Ed: Rosemary Becchi: Why the 199A provision is a tax cut worth saving
The arena of tax policy rarely excites people, but here’s a case in which the expiration of a single provision, something called the 199A deduction, would be felt not only on the shop floor, but at every kitchen table in America.
Unless Congress acts to save it, we are about to sunset a tax policy that has helped to stimulate nine-out-of-ten American businesses and has supported millions of jobs.
The 199A provision was part of the Tax Cuts and Jobs Act of 2017. It has allowed pass-through businesses to employ a 20 percent tax write-off. The 199A provision has tremendously helped “S” Corporations, partnerships, and LLCs that provide the largest number of jobs in the United States.
A study on behalf of the National Federation of Independent Business found that making the 199A deduction permanent would lead to the creation of roughly one million new jobs every year over the next decade. Additionally, it would increase U.S. GDP by an average of $75 billion per year during the same period.
Put simply, the economic upside of Section 199A extends far beyond business owners and their workers. The deduction plays a crucial role in strengthening our broader economy, which keeps America competitive on the world stage.
When our economy is robust, U.S. businesses and entrepreneurs are inspired to lead the charge on innovation and productivity. Alternatively, placing an additional tax burden on businesses has the potential to disrupt our economy and negatively impact our international reputation.
What’s more, with international markets roiled by a tariff war, we need to reshore American manufacturing. The 199A deduction will take on an important role in making certain the enterprises (most of which are family owned) that make up 95 percent of U.S. companies will be able to do their part.
At the end of the day, the 199A deduction has enabled millions of businesses to reinvest in growth, improve wages and benefits, and plan ahead. But if Congress allows 199A to expire, the consequences will be far-reaching. Removing this deduction will ultimately feel like a tax hike for business owners, forcing them to reconsider the future and put growth on pause.
Companies of varying sizes across the country, many still recovering from the disruptions caused during the COVID-19 pandemic, cannot afford a sudden spike in their tax liability. And this tax incentive ensures that entrepreneurs, family businesses, and large organizations alike can continue to serve Americans.
The U.S. House Committee on Ways and Means has held several hearings on the issue, allowing average Americans from around the country to make their voices heard. One business owner in Georgia explained the potential impact:
If 199A expires, it will feel like a tax increase…What you will see as a result of that is the inability to provide raises, the inability to invest in new equipment, and the inability to invest in research and development.
In addition to testimony from those who will feel the impact most intensely, new data underscores the argument that the benefits of keeping 199A intact greatly outweigh any potential costs.
Protecting American jobs and businesses is not a partisan issue. To lose 199A in a partisan standoff would make American business vulnerable at a time when international trade is being reconfigured in ways that make domestic business growth essential.
Congress will either support us by extending Section 199A for all pass-through businesses, ensuring that we have the resources we need to thrive — or they can allow a vital tax deduction to disappear, jeopardizing growth, wages, and economic stability.
Lawmakers must consider the consequences and do what’s right for the future of American families and businesses. Congress must extend this commonsense policy.
Rosemary Becchi leads the PROTECT Coalition, an alliance of businesses that oppose the expiration of Section 199A, the Qualified Business Income Deduction. The coalition’s mission is to defend vital tax incentives that support the growth and sustainability of successful businesses across the nation.
