Why Small Business Owners Are The Only Surefire Winners In This Election

In advance of Nov. 5th, owners of small businesses–the most trusted institution in America–report record levels of uncertainty. But both parties are playing to their concerns.

By Brandon Kochkodin, Forbes Staff

Despite the deep divide between the political parties, one patch of common ground remains: Small businesses are likely to benefit, no matter who wins the November 5th election. Politicians have long pandered to the sector, a tradition Ronald Reagan highlighted in 1983 when he joked in a radio address that “every week should be Small Business Week, because America is small business.” It makes sense. Small businesses not only employ 46% of all private sector workers, but since 1995 have generated more than 60% of new private-sector jobs.

Moreover, with the American public increasingly distrustful of nearly all institutions, small business retains its sheen. It scores the highest of any sector in Gallup’s latest “Confidence in Institutions” survey, with 68% of Americans saying they trust small business “a great deal or quite a lot.” That stands in stark contrast to the mere 16% who say the same for big business and (at the bottom) the 9% who have similar trust in Congress.

Yet small business owners have election jitters.

For 51 years, the National Federation of Independent Business (NFIB) has tracked small businesses’ uncertainty by counting “don’t know” and “uncertain” responses to six key questions about the economy and their own expansion plans. In September, the gauge jumped 11 points from August, hitting its highest level in the survey’s history—higher even than in September of 2020, when the country was in the grip of the Covid pandemic and facing another fraught presidential election. Meanwhile, the NFIB’s Optimism Index remained low at 91.5, marking the 33rd consecutive month below the 50-year average of 98.

On one hand, former President Donald Trump is a familiar choice for small business owners, with his record already established from his first term. Back in February 2020, a CNBC/SurveyMonkey poll showed 64% of small business owners approved of Trump—before the pandemic and lockdowns ravaged and then reshaped the business landscape. Now, by contrast, the latest survey from September 2024 shows only 38% of small business owners approve of President Joe Biden.

On the other hand, Vice President Harris has been vocal about her plans to encourage small businesses, emphasizing a significant tax deduction aimed at making it easier to start a new venture.

“Both parties want to appeal to the small business community,” says Todd McCracken, the President of the National Small Business Association (NSBA), a non-partisan advocacy group. “But they take very different approaches.” Republicans, McCracken says, go straight for tax cuts and slashing regulations. Democrats—Vice President Harris especially—want to make it easier to get small businesses going. “Who small business owners support depends on where they are in their life cycle.”

Jim Croley and his wife Jessica have run the Wooden Keg Tavern in St. Clair, Pennsylvania—part of the state’s anthracite coal region—since 2005. Croley says that while he’s managed to stay afloat despite rising costs (his fryer oil bill has surged from $130 to $300 a week), he often wonders how other local businesses without a dedicated clientele like his manage to keep going. “You have to run an ultra lean operation these days,” he says. “I’d love to have a full time manager, more cooks than I need, more waitstaff than I need, but you just can’t do that anymore.”

Croley says he’s uncertain how the election will ultimately impact small businesses. While he appreciates Harris’ focus on fostering new business growth, he points out that running a small business is challenging, with a high failure rate. Given the importance of small businesses to the economy, he believes, “it’s good to help people get off the ground, but better to support those who know how to operate”—a view he says that aligns him more with Republican proposals.

Harris has been actively courting small business owners—a traditionally Republican base—for good reason. According to a March 2024 study by American Progress, a think tank focused on progressive policy, the pandemic sparked a surge in entrepreneurship, startups, and new business formation. From 2021 to 2023, there were 5.2 million “likely employer business applications”—new business applications filed with the IRS as part of the process to obtain an Employer Identification Number (EIN). That’s a 34% jump compared to the three years before the pandemic. The small business surge has been particularly notable in zip codes with large Black populations and was evident in 49 out of 50 states (Alaska being the exception) as well as the District of Columbia, the study found. Then there’s this: Half of Gen Z (those aged 16 to 25) dream of starting their own businesses, according to a 2023 study from Samsung and Morning Consult.

During the Biden Administration, the Small Business Administration has made a big push to support smaller startups, but has also made a technical change that makes nearly unlimited funding available to successful entrepreneurs who want to own multiple small businesses.

Plus, as Democrats crack down on big corporations with antitrust suits, increased regulation and calls for raising the corporate tax rate to 28%, backing small business helps them fend off accusations of being anti-capitalist.

Richard Trent, executive director of The Main Street Alliance—a group advocating for fairer treatment of small businesses relative to big corporations—doesn’t think small businesses win either way. He believes his members would fare better under Harris but understands why many small business owners lean toward the GOP.

“One of the smartest aspects of how Republican officials have run their campaigns is to signal a commitment to small business owners,” he says. “But, I think the Harris campaign was pretty hip to this, she took some of their language and made it her own.” Among the ways Trent says Harris has tailored this message is by promoting policies she believes will help the smallest businesses and foster startup growth in traditionally underrepresented communities.

Trent believes that the choice becomes clearer when you look at the big picture. He argues–(as do many economists, as well as nonpartisan think tanks like the Committee for a Responsible Federal Budget) that the Trump tax plan will ultimately drive up the deficit, which, in turn, raises the cost of capital. Higher rates, he notes, hit individuals and small businesses hardest since they’re more sensitive to increases than large corporations. “There’s a million different issues you can run through,” Trent says. “But it’s always the same, Republicans are good at messaging, but their plans don’t map to a sustainable small business ecosystem.”

Whoever wins the White House and control of Congress, one of the NSBA and similar groups’ top tax priorities for the year ahead will look pretty much the same. For small businesses, a big unresolved question is the future of Section 199A, also known as the Qualified Business Income (QBI) deduction, which allows certain owners of pass-through businesses (sole-proprietorships, partnerships and S corps) to deduct up to 20% of their business income on their personal income tax returns. (As their name implies, rather than paying a separate corporate tax, pass-throughs pass all their profits and losses to individual owners’ 1040s.)

A part of Trump’s 2017 tax overhaul (officially known as the Tax Cuts and Jobs Act or TCJA), the QBI deduction was supposed to make the tax rates these mostly small businesses pay more in line with the reduced corporate income tax rate. TCJA cut the corporate rate from 35% to 21%, while the top individual rate only dropped from 39.6% to 37%. In 2020 alone, nearly 23 million small business owners claimed $166.1 billion in 199A deductions, according to the Congressional Research Service. But whereas the corporate cuts were made permanent, 199A and all the other Trump individual tax cuts, are slated to expire at the end of 2025.

Critics argue that the Section 199A deduction favors wealthier owners more than the smaller businesses it was meant to help. IRS data from 2020 shows that filers with over $1 million in adjusted gross income—just 2.2% of claimants that year—accounted for 39% of the amount shielded from tax, suggesting the bulk of tax savings landed with higher-income households.

Despite the criticism, the Congressional Research Service reports bipartisan support for extending the Section 199A deduction, though some reforms may be on the table.

Republicans aim to make it—and the broader 2017 Trump tax cuts—permanent.

“Small businesses flourished under President Trump’s leadership—with small business sentiment setting a record high in 2018—thanks in large part to his leadership on the Tax Cuts and Jobs Act and creation of the small business (199A) tax deduction,” said Brian Hughes, a senior advisor for the Trump Campaign, in an emailed statement. “Allowing this deduction to expire, would destroy small businesses who are responsible for creating 2 of every 3 new jobs, and thus annihilate Americans’ employment opportunities.”

Vice President Harris, for her part, has proposed simplifying tax filing for small businesses by creating a new standard deduction but hasn’t committed to extending Section 199A itself. The Harris campaign didn’t respond to a request for comment.

“Our position is that we should reform 199A,” says John Arensmeyer, the founder and CEO of Small Business Majority, a national small business public policy advocate. Arensmeyer says Harris hasn’t taken a clear position on 199A, though he notes that former President Trump isn’t talking much about small business in general leaving onlookers to “divine” what his plans entail.

Josh Radman, founder of Presidio Advisors—a Denver-based financial planning firm launched in 2023 that helps Millennials nationwide manage their equity compensation, especially stock options—says what matters most for his business is the fate of the TCJA’s temporary tax cuts, including its increase in the Alternative Minimum Tax (AMT) exemption (since the AMT can reduce the favorable taxation of incentive stock options). These provisions have been a boon for his clients, and any changes will directly affect how he advises them in the future. Still, Radman says, like restaurateur Croley, his vote isn’t strictly business-driven.

“I’m not voting based on that,” he says. “There are many other factors that will also influence my vote in November.”

Harris has specifically proposed increasing the tax deduction for business start-up expenses from $5,000 to $50,000—a potential boost for new entrepreneurs. However, this change won’t benefit established small business owners who aren’t looking to launch a new venture.

“Harris has gone out of her way to have a small business plan,” Arensmeyer says. “We don’t endorse her (or Trump), but we appreciate that she’s putting out small business focused policies.”

If Trump isn’t making small business a focal point in his campaign, it doesn’t seem to be costing him any support. A September poll by the Job Creators Network, an organization founded by billionaire Home Depot cofounder and GOP mega donor Bernie Marcus, showed Trump with a 12-point lead over Harris among small business owners. In that survey, 51% of respondents rated him as the better candidate for small business needs, compared to 39% for Harris. This support comes despite nearly even political affiliation among small business owners: 35% identify as Republican, 30% as Democrat, and 33% as Independent.

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