In 2018, President Trump signed the Tax Cuts and Jobs Act into law. The Act provided tax relief for small businesses and changed key individual tax provisions. Many of those provisions are set to expire at the end of this year without an extension.
Texas Senator John Cornyn held a roundtable with Waco small business owners Tuesday to learn about the impact a potential expiration would have on the local economy.
In that roundtable discussion, Republican Senator John Cornyn was adamant that the 2017 Tax Cuts and Jobs Act provisions set to expire this year could not run out.
“I will tell you upfront, failure is not an option,” he said. “62% of Americans would see a tax increase.”
For Texans, that would mean an average increase of about $3000.
“And of course, small business owners would see tax rates increase by about 50%,” Cornyn added.
The 2018 law doubled the standard deduction for individuals, expanded the child tax credit and realigned tax brackets for individuals, decreasing the tax rate in most cases.
For businesses, it allowed increased tax credits for expenses like new machinery and equipment and provided a 20% deduction for pass-through businesses, which are typically smaller.
Cornyn said that helped raise the median household income by $5,000 and helped small businesses grow.
That’s something the Waco business owners at the roundtable echoed.
“We were able to grow, in part from the tax credit, from a team of six to a team of nine,” John Peel said. He is the owner of Sticker Universe, where the roundtable was hosted.
He said that growth and retaining those employees would not be possible without the continued tax credits.
But if the tax credits were to stop, “expenses will definitely go up, our material costs will go up because that’ll just trickle down,” Peel said. “And that just makes everything more expensive. Then, of course, the take home pay will be more challenging.”
The bill containing these tax extensions has already passed the US House of Representatives and heads to the Senate for approval.
In addition to the changes to the tax code, the “One, Big, Beautiful Bill” includes changes to Medicaid and SNAP eligibility criteria, repeals previous tax credits for electric vehicles and clean energy and introduces deductions for overtime and tip wages.
Of the bill Senator Cornyn admitted “there’s a lot of competing interests [in the Senate].”
He highlighted three main interests: the tax provisions from 2018, accomplishing some of President Trump’s campaign promises (like the deductions for overtime and tip wages), and handling the nation’s debt.
“I think we have a once in a generation opportunity to deal with all three of those and begin to reduce our national debt, which calls for decreasing spending,” Cornyn said.
The bill is estimated to add nearly $4 trillion to the nation’s debt over the next eight years.
