Senate’s ‘Big, Beautiful Bill’ is a Disaster for Small Businesses

“The version of the ‘Big, Beautiful Bill’ passed today by the U.S. Senate brings Congress one step closer to ushering in the most unfriendly small business environment in recent memory. Instead of supporting small businesses through policies that would give a boost to Main Street, the Senate’s bill would actually make it much harder for many small firms to survive. This is primarily because the legislation would make healthcare more expensive while delivering almost no tax savings for the vast majority of small firms. Along with those deficiencies, the Senate version would also add trillions of dollars in debt with nothing to show for it from a small business perspective.

Our biggest concern comes down to Medicaid. If the Senate gets its way, it’s projected that more than 11 million people would lose access to healthcare due to $1.1 trillion in Medicaid cuts. Many of those people would be small business owners, their employees and their families. In fact, a new analysis from Small Business Majority and Georgetown University found that one-third of all people enrolled in Medicaid nationwide are connected to small businesses, including approximately 11 million children with parents who are self-employed or work for small businesses. Our research also found that 57% of small business owners oppose cuts to Medicaid while only 23% would support cuts to the program.

In addition to Medicaid cuts, the Senate proposal allows for the expiration of enhanced premium tax credits (PTCs) that have made healthcare more affordable for those who purchase plans through the Affordable Care Act (ACA) Marketplace. Numerous small business owners have told us that these credits are a lifeline that helps them meet their healthcare needs. That’s why nearly three-quarters (74%) of small businesses favor extending the credits rather than letting them expire, according to Small Business Majority's research. 

When combined with the expiration of enhanced PTCs, the Congressional Budget Office estimated previously that nearly 14 million people would lose their health insurance as a result of slashing Medicaid. This outcome would be nothing less than a national disaster, particularly for small businesses. More than 21 million small business owners, employees and their dependents rely on Medicaid for affordable healthcare coverage. In fact, nearly half of working Medicaid recipients in 2023 were employed at small businesses with fewer than 50 employees. When states expanded Medicaid eligibility between 2013 and 2022, Medicaid coverage increased by 2.5 million for employees of small businesses and 1.3 million among self-employed workers. Additionally, the uninsured rate of small business employees and self-employed individuals dropped to record lows in 2022 thanks in part to premium tax credit improvements and the expansion of Medicaid. As for the ACA Marketplace, more than half of all enrollees are small business owners, self-employed entrepreneurs or small business employees. What’s more, the ACA contributed to the number of uninsured self-employed entrepreneurs falling by 1.3 million between 2013 and 2022.

While we’re dismayed by the proposed cuts to Medicaid, we’re deeply disappointed that the Senate is moving forward with a proposal to make permanent the current 20% deduction for pass-through entities under Section 199A. And even though the newly proposed $400 minimum deduction for pass-through entities with at least $1,000 in qualified business income is a start, it doesn’t go nearly far enough to deliver meaningful benefits for the majority of Main Street. Although many have argued that the 2017 Tax Cuts and Jobs Act would help average Americans, 74% of the current Section 199A pass-through tax deduction benefit flows to the wealthiest 5% of businesses, while increasing the deficit by $737 billion. And while the highest earning pass-through entities claimed an average deduction of over $1 million in 2021 due to Section 199A, pass-throughs with adjusted gross incomes below $100,000 took home an average deduction of just $1,997. That’s why the majority of small businesses support an amendment championed by U.S. Rep. Gwen Moore (Wisc.-04) and U.S. Sen. Ben Ray Lujan (N.M.) known as the Mom and Pop Tax Relief Act, which would reform Section 199A to permit pass-through entities to deduct the first $25,000 in qualified business income from their annual tax obligations. 

While small businesses would see little in the way of tax benefits, the Senate-passed version of the bill would increase the deficit by $3.3 trillion while also jeopardizing Medicaid access and providing little tax relief to the vast majority of Main Street businesses. This is particularly irresponsible at a time when small business owners are already battling economic headwinds thanks to tariffs. Now, they also have to be concerned about what a growing budget deficit will do to the economy in terms of the impact on interest rates and inflation.

Since the Senate and the U.S. House of Representatives still must come to an agreement before the ‘Big, Beautiful Bill’ becomes law, we implore congressional leadership to take advantage of this final opportunity to help small businesses. This includes protecting access to health insurance and offering true tax reform that genuinely benefits the smallest firms. If nothing is done to address small business concerns, the future of millions of small businesses will be in question. Fortunately, the loss of an entire generation of small firms isn’t yet inevitable. If Congress decides to harm countless entrepreneurs and their enterprises mainly to further enrich the wealthiest Americans, that is a conscious choice. It’s also one we don’t have to make.”