Lawmakers Must Protect Tax Cuts That Strengthen Rural Small Businesses

By Mike Limberhand

Small businesses are the backbone of our nation’s economy, especially in rural America, creating jobs, supporting growth and providing vital tax revenue to support a range of critical services. 

However, rural small-business owners like me need greater clarity and stability when it comes to our tax code to help ensure our businesses’ long-term success and to enable us to continue investing in ourselves and our communities.

This is especially true now, as several key components of the 2017 Tax Cuts and Jobs Act (TCJA) passed during the first Trump administration are set to expire at the end of the year, while others already need to be restored. 

Lawmakers in Washington, D.C. must work quickly to extend these tax cuts and help ensure rural small businesses and Main Street job creators nationwide have the tax certainty they need and deserve.

Included in the 2017 tax law was a 100 percent bonus depreciation tax credit for equipment and machinery and 100 percent research and development tax credit in the year the expense occurred. Both of these provisions were immensely helpful to businesses, but sadly, they have been phased down and will expire at the end of 2025. 

There was also the popular 20 percent small business deduction and the reduction of the corporate income tax rate from 35 percent to 21 percent.

These deductions have given smaller, mom-and-pop businesses the flexibility needed to reinvest in growing their operations, opening new locations, creating more local jobs and contributing to stronger local economies.

Renewing and extending these important tax provisions will help protect and build on the gains small businesses have seen since passage of the TCJA.

In fact, a report by the National Federation of Independent Business (NFIB) found permanently extending the 20 percent small business deduction would enable small businesses to create an estimated 1.2 million new jobs each year over the next decade and 2.4 million jobs annually in the years after. 

Extension of this deduction would also contribute hundreds of billions of dollars to the U.S. economy. Keeping the corporate tax rate at its permanent 21 percent level while restoring bonus depreciation would also be a powerhouse to the U.S. economy.

Conversely, failing to extend the small business deduction would amount to a massive tax hike for nine in 10 small businesses, according to NFIB. Without it, the top federal tax rate will increase to over 43 percent for 26 million small businesses nationwide. 

This would make it harder for rural small businesses to compete – both with larger companies in the U.S. and with foreign competitors – and stay afloat in these uncertain economic times.

As lawmakers work to extend key tax cuts and deductions, they must also help ensure rural small businesses, particularly those working in the agriculture or manufacturing industries, can immediately expense their investments in research and development and equipment. 

Being able to do so helps support innovation and ensures rural farmers and farming businesses which use heavy machinery can invest in new equipment to improve efficiency and productivity, enhance workplace safety and reduce their costs and operating expenses.

The TCJA helped lower the tax burden for tens of millions of small businesses, many of them operating in rural communities. Retaining a competitive tax code, including the small business deduction, immediate research and development and equipment expensing and a low corporate tax rate, is critical for rural and Main Street small businesses like mine.

Rural small businesses have survived years of inflation, economic turbulence, supply chain disruptions and tightening margins. Now is not the time for lawmakers to push us off a fiscal cliff by massively raising taxes. 

Congress needs to pass legislation to extend the 2017 tax cuts and reforms to help provide some much-needed greater certainty and confidence for small business owners in Montana and across the country.

Mike Limberhand is the policy chair for the Rural and Agriculture Council of America and a small business owner. This opinion column was originally published by AgriPulse on May 9.