Harris To Propose Huge Expansion Of Startup Tax Deduction To Boost Small Businesses

Vice President Kamala Harris will propose a massive expansion of a key tax break Wednesday as part of a plan to see 25 million new small businesses created by the end of her term if she wins the White House, according to a campaign official.

The plan is to be publicly proposed at a speech in New Hampshire on Wednesday, the official said. The official declined to be identified in order to freely share details of the plan before its formal debut.

The centerpiece of the plan would be a 10-fold increase in the value of the tax deduction small business owners can take for their startup expenses. Under the plan, the deduction would rise from $5,000 currently to $50,000.

The average cost to start a new business is about $40,000, according to Shopify.

The proposal would be a further detailing of Harris’ signature pledge to build an “opportunity economy” that would make it easier for people to own a home, start a business and build wealth. That message is meant to blunt criticism that her policies would hurt the economy, as her opponent, former president Donald Trump, claims.

Small business formation has blossomed in the wake of the onset of the COVID-19 pandemic in 2020. While they’ve dropped off from the peak seen in 2020, levels of new small business applications have remained well above where they were before the pandemic, according to U.S. Census Bureau data.

A record 19 million new small businesses have been started since President Joe Biden took office, and Harris’ goal would be to build on that.

Her proposal would also give small businesses added flexibility in how to utilize the tax break: Business owners would be allowed to use part of the $50,000 deduction immediately, if their business is profitable right away, and conserve the rest for a later year ― or, if they operate at a loss, they could wait to claim the deduction later.

Other ideas Harris will propose, according to the official, include creating a standard small business deduction to simplify tax filing; making it easier for workers to work across state lines; helping businesses to grow by expanding across state lines; and giving incentives to states to cut their own red tape.

She will also propose creating a small business “expansion fund” that would help local banks or nonprofits aid small businesses by encouraging them to locate to and create jobs in economically disadvantaged areas. Harris will also ensure one third of federal contracting dollars go to rural and underserved communities by expanding their contracting opportunities, according to the official.

The official did not disclose how much these proposals would cost and whether they would be offset with spending cuts or tax increases elsewhere in the budget.