SACRAMENTO, Calif., April 15, 2025—The National Federation of Independent Business (NFIB), the nation’s leading small business advocacy organization, released a new report outlining the benefits the 20% Small Business Tax Deduction will bring to California if made permanent.
The report also spotlights that the 4.2 million small businesses in California could face significantly higher taxes if Congress does not make the 20% Small Business Tax Deduction permanent this year. The report outlines the severe consequences for small businesses in California and the broader U.S. economy that would result from the provision’s expiration, highlighting potential economic slowdown and increased financial strain on local businesses.
The report also highlights a stark contrast in tax rates between small businesses and their larger corporate competitors if the deduction is not made permanent. In California, the C-Corp tax rate would remain at 29.84%, while the small business rate would surge to 52.9%.
However, making the deduction permanent would lead to significant economic benefits, leaving the small business tax rate on a level playing field with its competitors. Additionally, California is projected to gain 141,000 new jobs annually over the next 10 years if the deduction remains in place, including an annual GDP increase of $9.78 billion for the first decade and $20.2 billion per year beyond 2035.
View the report for California here. For a two-page graphic of the California numbers, click here.
“If Congress allows the 20% Small Business Deduction to expire, a massive tax hike on small businesses will take effect,” said NFIB California State Director John Kabateck. “If that lapse occurs, it will be felt more profoundly in California, where the deduction has helped small businesses weather the actions of a very small-business-unfriendly Legislature. With the deduction set to expire this year, lawmakers must act quickly to protect small businesses and the communities they support.”
The 20% Small Business Tax Deduction, a key provision of the Tax Cuts and Jobs Act of 2017, has empowered millions of small business owners to expand, hire employees, and increase wages. If Congress does not act to make it permanent this year, nine out of 10 small businesses will face a significantly higher tax burden, threatening jobs and economic stability nationwide.
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MARK SMITH
Smith Policy Group
1001 K Street, 6th Floor
Sacramento, CA 95814
(916) 335-5072
mark@smithpolicygroup.com
smithpolicygroup.com