With National Small Business Week upon us, President Trump and Republicans in Congress are accelerating their work on pro-growth tax reform to deliver for family-owned and Main Street businesses.
The first step to preserving and making permanent the Tax Cuts & Jobs Act of President Trump’s first term is agreeing to a budget approach that allows the tax cuts to move through Congress faster and by a simple majority vote. Faced with a razor-thin majority, Congressional Republicans impressively beat all expectations by vaulting that difficult legislative hurdle in April.
The stakes are high. As chairman of the House Ways and Means Chairman and author of the TCJA, I saw first-hand how Republicans in Congress were determined in 2017 to tackle the daunting tax challenges facing Main Street businesses.
Tax rates for small businesses were stiflingly high, topping out at 39.6 percent plus a 3.8 percent “surtax” imposed by the Affordable Care Act on most of a successful family business’ profits. Businesses could write off half of the cost of investments in the first year, but the other half had to be slowly written off over 5, 7, or even 20 years. The alternative minimum tax (AMT) clawed back business owners’ profits in a parallel tax nightmare. To make it worse, the death tax kicked in at just $5.5 million of assets, which sounds like a lot of money unless you own a family farm or ranch, or a vibrant family business with land and buildings.
We ended all of that with the passage of TCJA. Together Republicans reduced the top marginal income tax rate, which is really the successful small business tax rate, from 39.6 percent to 37 percent. In addition, Congress created the first-ever 20% Small Business Deduction so many small and pass-through businesses could deduct one-fifth of their business profits.
The result was an effective top rate of 29.6 percent, a full ten percentage points lower than before and more in line with the corporate rate.
To help small businesses quickly recover the costs of their vehicles, equipment and technology, Congress adopted full and immediate expensing of these tangible assets – one of the strongest pro-growth provisions in the tax code. In addition, Section 179 small business expensing was increased to $1 million plus inflation, and categories were expanded to include building interior improvements, roofs, HVAC systems, and other essential costs businesses incur every day. Business vehicles could also be written off far faster than before. In a major simplification, businesses with average annual income of $25 million per year could do “checkbook accounting” and be nearly free of meddlesome tax complexity.
Republicans eliminated the AMT for 99% of taxpayers, no longer giving Washington a second bite at their profits. The TCJA doubled the death tax exemption to $11 million which inflation has grown to nearly $14 million in 2025 - meaning most family-owned businesses and farms no longer fear having to sell off large chunks of their life’s work to pay the IRS.
We knew that small businesses require capital – often lots of it - for start-up, survival and growth. So we took action to ensure the tax code continues to incentivize investment in new and existing businesses across America.
One of those sources is private equity, whose tax treatment is called carried interest. In 2017 Congress made thoughtful changes such as lengthening the holding period to reward responsible long-term investment while continuing to make crucial capital available to drive small business growth. It worked, and today 85% of all private equity funding is invested in businesses with fewer than 500 employees. Congress got it right and should preserve it and the other key small business tax cuts just as they are.
The challenge facing lawmakers in Washington is that key provisions of the TCJA are not permanent and expire at the end of this year. Worse, some crucial business provisions – including immediate expensing and research and development investment that drive U.S. innovation, growth and competitiveness - have already begun to phase-out with serious consequences that are currently being felt in our economy.
Small businesses will be especially harmed if Congress doesn’t act, resulting in higher income taxes, the loss of the 20% Small Business Deduction and full and immediate write-off of business investments, the return of AMT and a death tax that shrinks back to a punitive, confiscatory level for generational small businesses and farms.
Thankfully, tax-writers like Chairman Jason Smith of the Ways and Means Committee and Senator Mike Crapo who leads the Senate Finance Committee are committed to helping small businesses. They are working round-the clock with their Republican colleagues and President Trump to ensure that vital small business provisions of the TCJA are preserved and made permanent to the fullest extent.
Small and family-owned businesses on Main Streets across America are rooting for them, as am I.
