Prior to the pandemic, the Tax Cuts and Jobs Act—passed in 2017—ushered in an era of strong economic growth, notably for the small business community. Provisions within the law allowed Arizona entrepreneurs to invest financial savings back into businesses, which translated to expanded operations, upgraded facilities, and employee raises.
But key provisions from the law have or are expiring, and it’s creating a pounding financial headache for small business owners. A recently introduced federal legislative package called the American Families and Jobs Act (AFJA) would be a good first step in helping to alleviate the pain. Arizona’s elected leaders in Washington should support it.
The package includes several key elements that will give small businesses a boost while bolstering innovation.
For one, the bill would ensure businesses can deduct a bigger portion of borrowing costs from their taxes. Given small businesses often finance operations by temporarily taking on debt and that interest rates have increased dramatically during the ongoing war to combat inflation, the fix couldn’t come at a better time.
The bill would also extend the tax cuts’ provision to immediately expense research and development investment—helping to foster innovation by lowering tax liabilities. Entrepreneurs lost this financial benefit in 2022, forcing them to slow walk growth, cut back on workforce expansion, and borrow more to cover a growing IRS bill. Unlike large corporations, small businesses rarely have access to easily accessible capital to stabilize cash flow.
As an added benefit, reinstating the immediate expensing policy will ensure the U.S. sustains its status as a global innovation leader.
The legislation also builds on the expanded standard deduction that was included in the 2017 tax cuts package—a benefit that an estimated 9 out of 10 households take advantage of. The AFJA adds an additional $4,000 Guaranteed Deduction bonus for the next two years. When working families can save more on taxes, small businesses benefit from increased consumer spending, further fueling economic growth.
While the American Families and Jobs Act is a good first step, more needs to be done to make components of the Tax Cuts and Jobs Act permanent. Extending the 20 percent small business deduction is a prime example. That provision is set to sunset in 2025—an economic cliff that a separate piece of legislation called the Main Street Tax Certainty Act will help us avoid.
As the owner of a small raw materials distributor in Tucson, I understand firsthand the economic pressures facing entrepreneurs. We are struggling under an economy that has been riddled with inflation for two years. And although the news media has largely moved on from covering it, worker shortages and supply chain malfunctions continue to plague businesses like mine.
Efforts to alleviate financial burdens by extending provisions of the Tax Cut and Jobs Act will go a long way to helping entrepreneurs navigate these rough economic waters. Arizona’s elected leaders in Washington should take note.
Carlos Ruiz is the owner of HT Metals in Tucson and a partner of the Job Creators Network Foundation.
