New Report Shows U.S. Small Business Tax Deduction Drove Job Growth

Last week, the Metals Service Center Institute’s partners at the S-Corp Association issued a report that revealed just how important the Section 199A deduction for pass-through companies has been to the U.S. small business community. As readers may recall, this deduction was established by the federal tax reform bill signed into at the end of 2017. If U.S. lawmakers do not act before the end of 2025, this deduction will expire, an outcome that would present significant difficulties for the small business community.

EY authored the report and found the Section 199A deduction supports 2.6 million jobs, contributes $161 billion to employee compensation, and adds $325 billion to the U.S. economy. Regarding jobs, EY determined Section 199A supports 1.1 million jobs directly, 590,000 jobs through increased employee compensation and another 853,000 from related consumer spending increases.

To put those numbers in context, there are 140 million private sector jobs in the United States, of which 88 million, or 62 percent, are located at pass-through businesses.

Allowing Section 199A to expire would put more than one percent of all pass-through jobs and a significant number of all private-sector jobs at risk. Indeed, according to a recent National Association of Manufacturers survey, percent of pass-through manufacturers said they would be less able to hire or invest in their businesses if the Section 199A deduction expires.

Congress must protect small businesses and the people who work for them by approving H.R. 4721, the Main Street Tax Certainty Act, which would make the Section 199A deduction permanent. Read EY’s full report at this link.