A group of small business owners, including one from Chicago, led by advocacy group Small Business Majority met with members of Congress in Washington, D.C., last week to discuss tax reforms they say would help smaller firms.
The 31 business owners from 15 states and Washington, D.C., are part of the national Small Business Tax Fairness Coalition. The group seeks to make the tax code more supportive of small firms rather than giving more benefits to bigger businesses, said Simon Brown, spokesperson for nonprofit Small Business Majority, based in Washington, D.C.
The delegation pressed for a standard $25,000 deduction that would help firms making $125,000 or less, which form the majority of the country’s small businesses, according to SBM. The current 20% business deduction under 199A of the tax code was created by the 2017 Tax Cuts and Jobs Act, which expires at the end of 2025.
“Anyone who makes more than $125,000 would not benefit from our proposal — but the majority of small businesses earn less than $125,000,” Brown said. “As it stands, the 20% deduction means that the more you earn the more you can deduct — there is no cap. The wealthiest 4.5% of entities benefit overwhelmingly as it is now.”
The business owners who met with members of Congress included Nikki Bravo, owner of Momentum Coffee, as well as ones from Michigan, Idaho, Oklahoma, Virginia, Maryland, Utah, North Carolina, Colorado, New York and New Hampshire.
The proposed standard deduction helps smaller businesses, she said. The 20% deduction is helpful for some but disproportionately assists larger businesses.
“If I make $50,000 the deduction is $10,000. For a larger business who makes $500,000, the deduction is $100,000,” Bravo said.
Bravo said tax reform is important because “any time a business like ours can keep more dollars, we can use that money to reinvest in our business, in our team and our communities.”
Last week, she met with a number of politicians such as Sens. Tammy Duckworth and Dick Durbin, as well as Reps. Danny Davis and Bad Schneider.
“Small business voices need to be heard,” Bravo said. She especially wanted to represent newer firms that launched to serve their communities. “I went to speak to members of Congress so they understand that we are not just selling coffee. We hire grandmas and granddaughters, college students and parolees. We are the backbone of our country but can only take so much weight without support. We want our [elected officials] to understand our challenges in a real way.”
Momentum Coffee opened in 2019 and has five locations, including in Millennium Park, South Loop, Austin, Englewood and Garfield Park Conservatory.
Section 199A of the tax code applies to “pass-through entities,” which are about 95% of all small businesses, Brown said. The most common example is someone who is self-employed.
“A pass-through entity means that a small business owner treats their business income like personal income. They are taxed as if their business income is individual income,” he said.
Any small business that qualifies as a pass-through entity can deduct 20% of its income from taxes. But that deduction overwhelmingly benefits the top 5% of pass-through entities, Brown said.