Newly confirmed Treasury Secretary Scott Bessent has warned that America is facing an economic crisis if Congress fails to extend the 2017 Tax Cuts and Jobs Act (TCJA). If the law expires on December 31, small businesses and American taxpayers will face a massive $4 trillion tax hike. Bessent and conservative lawmakers are pushing for a permanent extension of the TCJA to prevent economic hardship and ensure stability for the nation’s small businesses.
The TCJA has been a lifeline for America’s 33 million small businesses, offering lower tax rates, a 20% income deduction, and incentives for capital investment. Small businesses overwhelmingly support making the tax cuts permanent by a 5-to-1 margin. House Speaker Mike Johnson (R-LA) and President Donald Trump have committed to advancing a tax cut package that prioritizes small business relief while addressing broader issues like border security and energy policy.
Lawmakers are considering several key improvements to the TCJA to further benefit small businesses. One priority is reinstating 100% immediate expensing, which allows businesses to deduct the full cost of investments in equipment and property upfront. This provision, which has been phasing out since 2023, is a critical tool for small businesses needing access to capital. The Congressional Budget Office (CBO) estimates that restoring full expensing would cost $378 billion over ten years. However, these costs could be offset by ending the temporary expansion of Obamacare subsidies, a move that would save an estimated $335 billion.
Another issue is the state and local tax (SALT) deduction cap, which limits how much individuals and small businesses can deduct from their federal tax returns. The TCJA capped this deduction at $10,000, but it did not apply to large corporations, creating an unfair advantage. A proposed compromise would double the SALT deduction to $20,000 for individuals and small businesses while limiting corporate SALT deductions to level the playing field.
Expanding the 20% small business tax deduction is also on the table. Currently, this deduction phases out for certain businesses earning over $197,300, leaving many small business owners without relief. Raising or eliminating this income cap would allow more Main Street businesses to compete fairly with corporations.
Finally, if corporate lobbyists succeed in lowering the corporate tax rate to 15%, small businesses must also see tax relief. Lawmakers are considering expanding the small business tax deduction from 20% to 25% to ensure parity between large corporations and small entrepreneurs.
Bessent has described the push for tax cuts as a “generational opportunity” to spark a new era of economic growth. Conservative lawmakers are rallying behind this effort, aiming to pass a tax reform package that preserves the TCJA’s benefits and strengthens small business protections.
