The Main Street math problem: Why America's small businesses are counting on tax relief

Taxes are a once-a-year headache for most, but for small business owners, it’s a daily purgatory. The average American? A W-2. Maybe a 1099. Done. Small business owners face a labyrinth of quarterly estimates, biweekly payroll taxes, sales tax across multiple states, self-employment tax, and an alphabet soup of tax forms. And that's before they even get to the question of deductions.

The 199A deduction is a lifeline for the millions of small businesses that power America's economy. This simple deduction has allowed LLCs and other 'pass-through' businesses to deduct 20% of their business income, narrowing the tax gap between small shops and big corporations. 

And now it could disappear at the end of 2025. Unless Congress acts to make this deduction permanent, it’s gone the moment the 2017 Tax Cuts and Jobs Act expires on December 31. 

The beneficiaries of this tax cut aren't rich corporations. They're your local entrepreneurs, your neighbors—the ones who are creating jobs, building their communities, and just trying to get by. The current uncertainty is forcing businesses to play defense instead of dreaming big. This hurts everyone. 

“We’re constantly looking at our finances, and figuring out taxes takes up such a huge amount of resources,” says Erin Myles, the founder of Brave Daughters, a sustainable fine jewelry brand. “For small businesses, any amount of money we’re able to deduct is helpful.”

The federal tax code shouldn’t make competition harder for small businesses. They already operate at a disadvantage compared to their larger competitors. While corporations can hire departments of tax attorneys and accountants to minimize their tax burden, small business owners maybe have a part-time CPA if they’re lucky. More than 80% of small business owners say the current federal tax code creates an “unequal playing field” between large and small businesses. 

The Section 199A deduction has been a rare equalizer in this lopsided fight. It doesn't level the playing field—nothing could do that—but it at least acknowledges that the field exists. 

The myths behind tax benefits for small businesses

"We’ve lived through a lot of administrations, a lot of tax code changes, a lot of chaos,” says Nic Trapani who owns Door County Candle Company with his wife Christiana. “But 199A is something we’ve been able to take advantage of, and it’s part of our strategy.”

Their strategy? Not what critics might imagine. No fancy trips. No vacation homes. Just machinery upgrades. Additional staff. The unglamorous investments that keep businesses alive.

Their reality debunks one of the biggest myths about 199A, that it's a personal windfall for small business owners. This couldn’t be further from the truth. To even be eligible for the deduction, a person’s taxable income must be below a certain threshold.

“We're not these massive Fortune 500 companies, but a lot of us little guys still make a huge impact."

The deduction from 199A allows businesses to grow, to survive. This reinvestment cycle—from tax savings to business growth to job creation—represents the kind of economic multiplier effect that makes the U.S. better for all Americans.

“There’s this idea that small businesses don't pay enough in taxes or that we’re financially okay,” says Angel Johnson, the founder of ICONI, an activewear brand that champions size inclusivity. In the past, she has used her tax savings from 199A to purchase inventory, launch new collections, and offer buyer incentives like free shipping. “Even if you’re generating revenue, you have to constantly be reinvesting to get to the next level. Every dollar matters.”

When a business uses tax savings to buy new equipment, give bonuses or keep prices down for shoppers, employees and the public don't always connect those benefits to tax policy. That makes it easy to dismiss the deduction as a handout rather than recognizing it as economic support that flows through to workers and communities. 

The local ripple effect of the 199A deduction

Door County Candle Company employs roughly a dozen people year round. Come autumn—aka peak candle season—they hire even more. The 199A deduction means they can employ additional staff during their busiest times. Because Nic and Christiana are unsure of the future of 199A, it’s become harder to make decisions about their business. 

“We're not these massive Fortune 500 companies, but a lot of us little guys still make a huge impact. We’re now having to be a lot more conservative and take a look at our staffing,” says Nic. “Depending on how [the 199A decision] pans out, we may have to draw back on staffing at the end of the year or not give people as many shifts.”

Small businesses drive the American economy, employing over 61 million individuals—that’s 46.4% of all private sector employees. Moreover, they have played a crucial role in job creation, generating more than 17 million net new jobs between 1995 and 2021, which is more than 60% of new jobs created during that period.

More than 80% of small business owners say they don’t think small businesses are a priority in Washington right now.

But numbers only tell half the story. Angel knows the other half. When ICONI has financial breathing room, she doesn't hoard cash. She sponsors events and partners with community organizations.

“Small businesses are the businesses that pour back into their neighborhoods,” says Angel. When you see a kids’ bake sale or a church car wash, that’s usually not being propped up by a corporation, but by a small business.”

Those Little League uniforms? The scholarship fund? The holiday toy drive?

Says Angel, "That's what happens when small businesses have extra money. They're the ones more likely to give back."

More than a line of tax code

Here's what’s particularly galling: 199A isn't particularly divisive in Congress. The Main Street Tax Certainty Act (which would make 199A permanent) has more co-sponsors and supporters than any other piece of legislation introduced by this Congress. Yet the fate of U.S. businesses hangs in the balance as policymakers debate endlessly. 

While Washington calculates and recalculates, small business owners across America are left doing their own grim arithmetic: How many more hits can they take? How many more obstacles can they hurdle? 

“When you’re a small business owner it can feel like there are so many things in your way and so many hoops to jump through. Small businesses just get hit from all sides,” says Erin of Brave Daughters. 

So far, the jewelry designer has had to overcome the rising price of gold and a circuitous SBA loan process. The potential end of 199A is yet another thing to add to the list. Entrepreneurship is a boon to the economy and communities—it deserves an easier pathway. 

“There's a lack of visibility or maybe even empathy for smaller businesses,” says Angel of ICONI. “Entrepreneurs don't have the crazy amount of endless resources that 10-figure corporations have. We don’t have anyone lobbying for us on the scale of large corporations, so policymakers may not hear our voice.”

More than 80% of small business owners say they don’t think small businesses are a priority in Washington right now. Entrepreneurs like Angel, Erin, and the Tripanis want Congress to know that the 199A deduction isn't just another line in the tax code. For millions of small businesses, it's the difference between growth and stagnation, between hiring and firing, between contributing to their communities and barely keeping the lights on. 

Congress faces a simple equation: Support the businesses that employ half of America, or watch them drown in red tape and tax burden. The merchants have done the math. They're creating jobs, sustaining communities, and building the future. It’s time for Washington to make it all add up.