Harris's Tax Cut Plan and Its Impact on Entrepreneurs

Harris's Tax Cut Plan: A New Hope for Startups

The good news is that there are policy solutions to the challenges entrepreneurs face that local and state governments can enact without waiting for a new tax bill to get through Congress. Kamala Harris announced her latest economic proposal last week — an increase in the maximum up-front tax deduction for new business startups to $50,000.

This higher deduction is intended to offset the costs that entrepreneurs face in their first year of operation. Those costs, according to widely cited research by Shopify, can climb to $40,000 when accounting for everything from product and shipping costs to staff payroll and marketing.

While the debate around Harris’s proposal will likely center around the question of 'Is this tax deduction a good idea,' it might be more productive to ask two questions: 'How did we get to that $40,000 figure in the first place? And can government do anything to bring that number down?' It turns out that’s a question many cities and states are finally beginning to ask, as the cost, complexity and frustration of the licensing, permitting, and inspection processes at the state and local level continue to climb for new small businesses.

High Costs of Startup Regulations

• According to the Cities Work project, starting a small mom-and-pop restaurant could cost over $5,000 in permit and license fees.
• In cities like San Francisco, that number can jump to more than $20,000.
• A barbershop can require an average of 55 different regulatory steps across eight different government agencies.

Shopify research found that nearly a quarter of all small business startups cite these licenses and permit fees as 'unexpectedly costly,' expressing surprise at often duplicative requirements.

Policy Solutions and the Path Forward

Yet, there is hope. This year, Washington, D.C. funded the BEST Act, cutting duplicative and unnecessary business license categories. Meanwhile, in Maryland, a bipartisan coalition introduced a bill to cut first-year filing fees, though it died in committee. This shows the challenges reformers face, yet the evidence from previous efforts suggests it's a sacrifice worth making.

As Chicago demonstrated in its significant business licensing reform effort, streamlining and reducing licensing requirements can lead to long-term economic growth. After reform, revenues were already bouncing back, showcasing the resilience of the entrepreneurial spirit.

When it comes to helping entrepreneurs in America, city officials can act swiftly to ease startup pains without waiting for federal intervention. Streamlining outdated regulatory burdens is the first step.