According to a recent article by Juanita Duggan, President and CEO of the National Federation of Independent Business (NFIB), small business owners are happy with the new Tax Cuts and Jobs Act which came into law December 2017 under President Trump. The legislation which “was the biggest tax overhaul in more than three decades,” has
“dramatically changed the landscape for many small businesses” and will now leave many entrepreneurs with more capital to invest in their business.
According to Duggan, “for small business, the centerpiece of those changes is the new Section 199A, or the pass-through deduction – important because more than 90 percent of small businesses are organized as pass-throughs, not as corporations. Under the law, a pass-through business owner – regardless of the type of business they own – can now claim a full 20 percent deduction on their share of the business’s income up to $315,000 for those filing jointly.”
If true this is fantastic and should lead to growth in the small business market.
The thing about the recent puff piece from the NFIB is that things are still unclear. While Duggan mentions the record levels of confidence small business owners have, the truth is over the past 13 months(ish) we’ve continued to reach high levels of confidence even before the tax reform was passed. In fact confidence dropped a little when the reform was passed.
As a small business owner myself I had felt that 2018 was going to be a good year for my company based on a strong 2017 economy and many customers telling me mid to late 2017 that they were looking to purchase more. While I do believe the tax law may be a positive, it is too soon to know exactly what this means. I will admit that the NFIB’s March Small Business Economic Trends survey, that indicated that “the fewest number of small-business owners in 35 years reported taxes as their number one problem” is a positive, we are still dealing with unknowns for at least another year.
The NFIB very well may be right about an increase in capital, but for now we won’t know until we begin to fill out our taxes and seeing just how much we’ve saved.
My verdict is still too early, and with legislation like this a year is needed to properly know exactly what this is, but for now small businesses which already were expecting to grow before the tax reform went through are continuing their trajectory and that is good.