More than 2.4 million Pennsylvanians earn paychecks in shops, offices, manufacturing plants, restaurants and other small businesses with fewer than 500 employees. On Thursday, Congressman Jim Gerlach (PA-6th District) supported legislation aimed at encouraging those small businesses to retain existing jobs, create new ones, buy more equipment and grow.
Gerlach voted in favor of H.R. 9, the proposed Small Business Tax Cut Act. The bill would allow small business owners to deduct 20 percent of their business income before calculating their federal tax bill.
The measure passed the U.S. House of Representatives by a 235-173 margin with 18 Democrats supporting the bill. It awaits consideration in the U.S. Senate.
"This pro-jobs strategy focuses on encouraging small businesses to issue more paychecks rather than forcing them to write bigger tax checks to the Internal Revenue Service," Gerlach said. "When small businesses thrive, workers and their families prosper and our communities grow stronger. That's why I will work with anyone who has good ideas to put more of our neighbors and family members back to work and spark sustained economic growth that will make America a great place to start a business."
Here's how the strategy would work. If a small business owner earns $100, he or she would be allowed to deduct $20 and then calculate the tax obligation based on $80 of business income rather than the full $100. Small business owners also would be allowed to deduct 50 percent of workers' wages under this proposal.
The U.S. Census Bureau reported that as of 2009, Pennsylvania had nearly 229,000 small businesses with 500 or fewer employees. Those businesses employed a total of more than 2.4 million workers.
From 2005 to 2008, small business created a net total of 112,171 new jobs in Pennsylvania, according to figures provided by the Small Business Administration. However, a net total of 111,003 small business jobs were lost from 2008 to 2009.