GOP: US small businesses to pay more taxes than small businesses in China if TCJA expires

Republicans on the House Ways & Means Committee are sounding the alarm on the potential expiration of President-elect Trump’s tax cuts, warning that millions of small businesses in the United States could face a higher top tax rate than businesses in communist China. The key provision at risk of expiring is the Section 199-A deduction, which offers a 20% tax break for qualified trade or business expenses for non-corporate taxpayers.

If Trump’s tax cuts expire, small business owners could see their top tax rate skyrocket to 43.4%, which is significantly higher than the tax rate faced by businesses in China. House Ways & Means Chairman Rep. Jason Smith, R-Mo., emphasized the importance of making Trump’s tax cuts permanent during a recent hearing, highlighting the potential negative impact on small businesses.

Other Republicans on the committee echoed Smith’s concerns, pointing out that reverting to higher tax rates would hinder economic growth and job creation. Rep. Jodey Arrington, R-Texas, questioned the logic of raising taxes above those in communist China, while Rep. Kevin Hern, R-Okla., emphasized the need to maintain competitive tax rates in the global economy.

Witnesses at the hearing, including Allison Couch from Ignite Accounting, emphasized the significance of the Section 199-A deduction for small business owners. They argued that letting this deduction expire would effectively amount to a tax increase for millions of small businesses across the country.

Democrats at the hearing raised concerns about the potential benefits of extending Trump’s tax cuts, arguing that the wealthy would benefit disproportionately. They also highlighted the deficit impact of the tax cuts and called for more sustainable solutions to pay for them in the long run.

In response to the debate in Congress, Americans for Prosperity launched a $20 million campaign urging lawmakers to renew Trump’s tax cuts to protect prosperity for American families. The group emphasized the urgency of the situation, warning of a looming crisis that could impact the financial well-being of all Americans.

As the battle over tax policy continues in Congress, it is clear that the fate of Trump’s tax cuts will have far-reaching implications for small businesses and the overall economy. Republicans are pushing for permanent tax relief, while Democrats are calling for a more balanced approach that considers the impact on working Americans and the national debt. The decision on whether to extend Trump’s tax cuts will have significant consequences for the future of the U.S. tax code and the economy as a whole.