Permanently reauthorizing tax credit will help small businesses retain strong workforce
The American economy is powered by small businesses. According to the U.S. Small Business Administration (SBA), there are over 33 million small businesses nationwide that employ more than 61 million Americans – accounting for nearly 46% of all U.S. employees and more than 43% of our nation’s Gross Domestic Product (GDP). American businesses stand at the cutting edge of new breakthroughs, innovative technologies, and enhanced efficiency that make our country one of the most competitive in the world. That being said, it is vital that Congress pass legislation that helps small businesses keep their doors open, their employees on payroll, and our economy growing – all while strengthening our competitive position against countries like China.
A major impediment for businesses is a reliable workforce. We’ve traveled across our districts in both Iowa and Oklahoma and the message that we’ve heard repeatedly from business owners and entrepreneurs is that they want to hire workers, but the desired workforce simply does not meet demand. As a result, small businesses often have to stall planned expansions, cut their hours of operation, or – in the worst case – close their doors entirely. This isn’t the outcome we want for our economy, our main streets, or our communities. Adding salt to the wound, a two-year tax credit – which was authorized as part of the Tax Cuts and Jobs Act of 2017 and established to help small businesses hire employees – is set to expire next year absent congressional action.
That’s why, together, we introduced the Paid Family and Medical Leave Tax Credit Extension and Enhancement Act to permanently reauthorize this tax credit and help small businesses offer paid family and medical leave (PFML) to their employees. This legislation specifically extends and reforms the 45S tax credit for employers that voluntarily offer up to 12 weeks of PFML. It also expands the credit to include PFML provided through an insurance company or in a state that mandates coverage.
The purpose of this credit is to level the playing field for small businesses that may lack the necessary resources to offer PFML with large corporations that can readily provide generous leave for family commitments and medical emergencies without breaking the bank. The facts support this initiative. Per data from the Bureau of Labor Statistics, more than 41% of workers employed by businesses with over 500 employees have access to PFML while only 20% of employees at businesses with fewer than 99 employees have access to PFML. Our legislation seeks to close this glaring gap and support small businesses that make up 99.9% of all American businesses.
Workers – especially young families – need flexibility and support when a newborn arrives, a family member requires additional care, or a medical condition occurs unexpectedly. PFML offers that flexibility and helps people hold a job even when starting a family, caring for a loved one, or recovering from a medical episode. However, not every small business owner has the budget to provide these increasingly important benefits. By extending this successful tax credit exclusively for small businesses, job creators can make PFML a financially feasible benefit, retain skilled and capable employees, keep workers healthy, and help parents re-enter and stay in the workforce.
Another aspect of this legislation is education and outreach about this tax credit. Our bill calls on the SBA and the IRS to raise awareness about this credit for small businesses and ensure that small businesses can take advantage of this provision of the tax code to support their employees and make themselves even more competitive when hiring workers. Ultimately, legislation makes no impact if the people intended to benefit are unaware of its existence.
Building a stronger economy and a more resilient workforce depends on supporting our nation’s small businesses. By helping job creators and entrepreneurs offer PFML to their employees, we can encourage people to join and re-enter the workforce, deliver certainty for our small businesses, and strengthen our families and communities.
This op-ed was originally published in the Washington Times on September 13, 2024.