State Rep. Julie Calley and the Michigan House recently approved a plan to help protect Michigan jobs by boosting savings for small businesses on their federal taxes.
Calley, of Portland, said the measure deals with job providers classified as “flow-through entities.” These are job providers who personally pay taxes on income rather than the business itself. Thousands of small businesses creating jobs in communities across Michigan use this classification.
“This common-sense reform will provide much-needed relief to many small businesses who have been hit so hard this past year,” Calley said. “It also solves a problem that was unintentionally harming small job providers due to a federal policy change a few years ago. Our plan makes sure the small businesses that line Main Street and create so many jobs in our communities are no longer at a disadvantage to large C-corporations.”
A change to the federal tax code in 2017 capped individual state and local tax deductions at $10,000. Because businesses filing on the entity level can continue to claim an uncapped deduction, the change places small flow-through entities at a disadvantage.
House Bill 4288 would compensate for the federal change by allowing qualifying employers to pay a new flow-through entity tax. Without a change to their overall state and local tax burden, a business that opted into the new tax would be eligible for an uncapped state and local tax deduction at the federal level.
The plan received bipartisan support in the House, advancing it to the Senate for further consideration.
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