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The importance of Extending the 20% Pass-Through Deduction for Small Business

Since the enactment of the Tax Cuts and Jobs Act in 2017, the corporate tax landscape has undergone significant changes. One of the most notable alterations was the permanent reduction of the corporate income tax rate from 35% to 21%. However, for pass-through businesses – including sole proprietorships, partnerships, and S corporations – Congress introduced a lifeline in the form of a 20% deduction for qualified business income under section 199A of the Internal Revenue Code.


This deduction was a crucial measure to ensure that pass-through entities weren't left behind in the tax reform efforts, aiming to maintain parity with C corporations. However, unlike the permanent reduction for C corporations, the 20% deduction for pass-through businesses is slated to expire at the end of 2025.


As representatives of the North Valley Regional Chamber of Commerce, it's imperative for us to address the potential implications of this expiration on our local businesses. The looming question arises: Is the expiration of the 20% pass-through deduction a threat to small businesses?


Small businesses form the backbone of our economy, driving innovation, job creation, and economic growth in our communities. Pass-through entities, in particular, constitute a significant portion of these enterprises. For many small business owners, the 20% deduction has provided much-needed relief, enabling them to reinvest in their businesses, expand operations, and hire more employees.


However, with the deduction set to expire in just a few years, uncertainty looms over the future tax burden of pass-through businesses. Without the extension or permanency of this deduction, many small businesses could face higher tax liabilities, constraining their ability to grow and thrive in an already challenging economic environment.


Furthermore, the potential expiration of the 20% pass-through deduction may exacerbate disparities between pass-through entities and C corporations, creating an uneven playing field that favors larger corporations over smaller enterprises. This could stifle competition and innovation, hindering the vibrancy of our local business ecosystem.


As advocates for our members, it is incumbent upon us to voice our concerns and advocate for policies that promote the growth and prosperity of small businesses. We urge policymakers to consider the ramifications of allowing the 20% pass-through deduction to expire and to take proactive steps to support small businesses through targeted tax policies.


In conclusion, the expiration of the 20% pass-through deduction poses a significant threat to small businesses, potentially hampering their ability to thrive and compete in the marketplace. It is imperative that we address this issue collectively and work towards solutions that foster a favorable environment for entrepreneurship and economic prosperity in our region.

Homelessness, Drug Addiction and Retail Theft Reduction Act

We hear in the news every day about the homelessness problem, drug and alcohol abuse and break ins, ‘smash and grabs’ in our community. Something needs to be done to protect the individuals and businesses in our community that are the lifeblood of living here. Californians for Safer Communities, a grass roots organization, is promoting an initiative for the November 2024 ballot to make revisions to Prop 47, that many think have contributed heavily to our current situation. There have already been close to 1,000,000 signatures collected to put this on the ballot in November. The Homelessness, Drug Addiction and Theft Reduction Act has to be passed in order to make these changes. Sacramento cannot unilaterally make changes since Proposition 47 was originally put in place by a vote of the people.  Changes also need to come from a vote of the people. Watch for this proposition on the November 2024 ballot.

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