WASHINGTON — As Congress prepares to negotiate before the expiration of the 2017 tax law, economists and miniature business owners on Thursday called on U.S. lawmakers to extend or make enduring the Trump-era tax cuts.
Business owners from West Virginia and Wisconsin testified at a hearing before members of the House Committee on Ways and Means and argued for maintaining the deductions, which they said allowed them to reinvest in their businesses.
The Tax Cuts and Jobs Act of 2017, which expires at the end of 2025, allowed Some business owners must deduct up to 20% of qualified business income. The bill also temporarily reduces taxes on purchases of recent equipment and other qualifying assets, but those incentives expire.
For Individualsthe TCJA temporarily lowered marginal tax rates across most income levels and expanded the standard deduction and child tax credit, among other things.
The highest corporate tax rate permanently applies to vast corporations fall from 35% to 21%.
“Seven years ago, Republicans under President Trump passed the Tax Cuts and Jobs Act, providing relief to millions of families and small businesses and creating the best economy of our lifetime,” said committee Chairman Jason Smith, a Republican from Missouri, during his opening remarks.
“Here’s the bottom line: Congress must act soon to prevent the largest tax increase in history on workers, families, farmers and small businesses,” he later added.
Democrats on the committee called the bill a “corporate tax giveaway.”
“We knew their tax fraud would disproportionately benefit the rich and well-connected. We knew it wouldn’t pay for itself. We knew that big companies, not their workers, would get the most benefit from this,” said the committee’s ranking member, Richard Neal of Massachusetts.
Democratic witness Kathryn Anne Edwards, a labor economist at the RAND Corporation, said: “If the intent of the 2017 tax law was not to transfer income directly to the wealthiest Americans at incredible costs to the average citizen, it was a failure.”
Expanding the law could cost the government between $3.3 trillion and $3.6 trillion over the next decade, Edwards told the panel, citing estimates from the Committee for a Responsible Federal Budget and the Tax Policy Center.
A “groundbreaking” change
But miniature business owners say the law has been a financial lifeline.
Michael Ervin, founder of Coal River Coffee Company in St. Albans, West Virginia, told the panel that his five-year-old company benefited from 2017 tax law changes, particularly the fleeting income deductions for sole proprietorships, partnerships and S-corporations.
“After the passage of the Tax Cuts and Jobs Act, LLCs and other pass-through entities like mine were able to benefit from the newly implemented Small Business Deduction, also known as the 199(a) Deduction. This arrangement has allowed me to deduct up to 20% of my business income, allowing me to invest in my business, my employees and my community,” said Ervin, who employs about a dozen people.
If Congress doesn’t extend the special deduction or make it enduring, Ervin told lawmakers he will face a “significant tax increase” and will be put at a disadvantage compared to vast nearby companies.
“Down the street from my location is a larger competitor, Tim Hortons. If my taxes go up in two years, the corporate tax rate will remain at 21%. Tim Hortons will pay a 21% federal tax rate and a 6.5% state corporate tax rate, for a total combined rate of 27.5%, while my total combined rate will be closer to 45%. This inequality will make it extremely difficult for me to compete,” Ervin told lawmakers.
Austin Ramirez, president and CEO of Wisconsin-based Husco International Inc., also told the panel that the pass-through deduction “leveled our playing field with those of our corporately organized colleagues.”
Husco, a privately owned family manufacturer of hydraulic and electromechanical parts for vehicles, employs around 1,600 people.
Ramirez said the TCJA enabled his company to complete the “most significant renovation of our headquarters in Waukesha, Wisconsin in 70 years.”
The company invested $50 million in renovating its offices and production halls, increasing its revenue by nearly $150 million since 2017, Ramirez said.
Temporary extension of Trump tax cuts
Looking forward, Smith said tax writers in Congress should note that the law “provided a critical blueprint upon which Congress can build to make lasting improvements to our tax code.”
“The House of Representatives has already demonstrated strong bipartisan support for key provisions of the 2017 law with the passage of the Tax Relief for American Families and Workers Act earlier this year. But there is still work to be done,” he said, pointing to a bill he sponsored and negotiated with Democratic Sen. Ron Wyden of Oregon.
The hearing took place against this background stalled Negotiations in the U.S. Senate over the bill Smith mentioned, a short-term tax bill that has rarely enjoyed widespread bipartisan support Support in the House of Representatives in January.
The bill that would be fleeting invigorate expired or expiring trade tax relief and expand the child allowance, passed on a 357-70 Poll.
While House Republicans overwhelmingly supported the bill, Republican senators oppose provisions of the bill that would temporarily expand the refundable portion of the child tax credit and allow households to calculate the credit based on their prior year’s income, if that higher than that of the current year.
Entrepreneurs in February Hear before the Senate Finance Committee implored the upper chamber to pass the bill.
Ramirez, the Waukesha business owner, also expressed his support for it to the committee on Thursday Tax Relief for American Families and Workers ActThis would revive an expired 2017 incentive for companies that allowed them to immediately write off research and development costs.
“Husco’s inability to expense these costs since 2022 has cost us more than $20 million in liquidity, negating much of the TCJA benefits and creating a disincentive to invest in innovation.” said Ramirez.
Other fleeting measures enacted under the TCJA expire on December 31, 2025.