“Lower Taxes, Stronger Main Street: The Benefits of the Working Families Tax Cuts.”

Before we begin this important hearing, I'd like to briefly note for all members that Representative Van Duyne and I will be hosting a roundtable in Fort Worth, Texas on Monday, May 4. So please contact committee staff if you have any questions about the logistics and the schedule of that. That's for your information. Good morning to everybody. I now call the Committee on Small Business to order. Without objection, the chair is authorized to declare a recess of the committee at any time. I ask unanimous consent to name Mr. Wied from the great state of Wisconsin as chairman of the Subcommittee on Contracting and Infrastructure. Without objection, so moved. I now recognize myself for my opening statement. Welcome to today's hearing titled, Lower Taxes, Stronger Main Street: The Benefits of the Working Families Tax Cuts. To begin with, I'd like to start off and I'd like to ask who in this room wants to pay more taxes? Raise your hand if you do. Okay, I see none. We're going to move on. So, which is why we will discuss how Americans and small businesses can keep more money in their pockets. I want to also thank our witnesses for joining us today and sharing their expertise and experiences. It is important to hear about the practical realities of impact of the Working Families Tax Cuts Act the congressional Republicans and the Trump administration delivered for the American people. Your perspectives will help the committee continue to craft policy that serves the needs of small businesses, and I also thank my colleagues for joining us as we learn how the Working Families Tax Cut Act is benefiting Main Street America. Today the committee will examine the provisions of the Working Families Tax Cuts Act, the largest tax cuts in American history, that are especially beneficial to small businesses and Main Street America. We will hear how these provisions provide greater stability and predictability, enabling small businesses to make strategic long-term business decisions with confidence. In addition, the committee will explore how the Working Families Tax Cuts Act supports broader economic recovery by putting more money back in the hands of small businesses, expanding their capacity to invest in their businesses and strengthening the economy. From 100 percent expensing to no tax on tips, this bill is already putting more money back into the hardworking American pockets. In fact, just the other day, I was dining at a restaurant in my district, and a waitress came up to me to tell me that the no tax, no tips was allowing her to send her daughter to cheerleading camp. This is a simple yet impactful story of how this bill supports Main Street. Small business owners have demonstrated remarkable grit and resilience in the face of ever-evolving challenges. As a car dealer myself, I've experienced many of these challenges right alongside them. The Working Families Tax Cuts Act offers critical support and stability at a time when small businesses need it most. For a small business to thrive, they must have the agency and flexibility to allocate their capital and resources in ways that reflect their unique priorities and circumstances. The Working Family Tax Cuts Act provides that freedom, empowering small businesses to make the strategic decisions necessary to grow, invest, and succeed. This hearing is an important opportunity for the committee to deepen its understanding of how the tax policy directly shapes the success and stability of small business and to identify where our work must continue. We are committed to ensuring that our tax code works for small business, entrepreneurs, workers, and their families who drive this economy. I want to thank all of our witnesses again today for coming up here, leaving your homes, and I look forward to the conversation ahead. Now with that, I yield to my friend and our distinguished ranking member from New York, Ms. Velázquez, for her opening remarks.

Good morning, everyone. Thank you, Mr. Chairman, and welcome to all witnesses this morning. Republicans have called this hearing to celebrate the one big, beautiful bill, or according to their second or third rebranding attempt, the Working Families Tax Cut. It is their only policy achievement in the past year, and it is a total disaster. The centerpiece of this law's supposed benefit for small business is the pass-through deduction, costing nearly $736 billion over the next 10 years. While framed as a small business tax cut, it mostly delivers six-figure windfalls to the already wealthy and relatively little to middle-class small business owners. The top 1 percent captures 55 cents of every dollar under this provision. The only rigorous academic research on the pass-through deduction found no measurable increases in investment, employment, or wages. It is another example of failed trickle-down economics. It gets worse. To help pay for those tax cuts for the rich, Republicans cut Medicaid, stripping 7.8 million people of health insurance. On top of that, they refused to extend the enhanced premium tax credits, resulting in an average premium increase of $1,500 for over four million small business owners. For most middle-class small business owners, that premium increase alone wipes out the entire benefit of the pass-through deduction. Then they cut $187 billion from SNAP, taking food assistance from four million people in a typical month. These are the customers that small grocers, farmers markets, and local food businesses depend on. Tax cuts don't mean a thing if your customers disappeared. It gets worse. While Congress was passing this bill, the president was unilaterally imposing the largest middle-class tax hike in a generation. According to new analysis, the average small business importer paid $306,000 more in tariffs over the past year than the year before. Large corporations can absorb tariff volatility. They have supply chain teams, capital reserves, and Washington lobbyists that can score them exemptions. But the restaurant owner, the small manufacturer, the retailer with one supplier must absorb it directly in their margins and by raising prices on their customers. Most of these tariffs were ruled unconstitutional, but the refunds small businesses are owed have yet to be paid. But wait, it gets even worse. Trump's illegal war in Iran has sent energy costs soaring, from the gas prices that fuel our commute to the diesel prices that move every product in our economy to the fertilizer prices that determine the cost of our food. Multiple analysts are warning of a global recession. Small business owners cannot plan, hire, or invest in this environment. The higher tax refunds that families are receiving will be swallowed whole by higher gas prices, redirecting the so-called Working Family Tax Cut directly to big oil. While there are many provisions Democrats have supported in the past, like bonus depreciation and expensing for R and D, we could not support this abomination in its totality. The one big, beautiful bill adds over $4 trillion to the national debt while transferring wealth from working families to millionaires and billionaires. Whatever relief people did get has been offset by tariffs, by healthcare, by gas, and by the growing cost of living crisis that Republicans have refused to address. Republicans called this hearing to celebrate their sole accomplishment, but small businesses are not celebrating today. They are surviving, barely. I yield back.

Gentlelady yields back. I now want to introduce our witnesses. Our first witness today is Mr. Garrett Watson. Mr. Watson is the director of policy analysis at the Tax Foundation. He's an expert in federal and state tax policy, and his work has been featured in the Washington Post, the Atlantic, Politico, and other major outlets. Mr. Watson previously worked as a senior program manager at a think tank where he conducted policy research on economic opportunity and labor markets. He earned a Bachelor of Arts degree in economics and philosophy from St. Lawrence University and is a leadership network member at the American Enterprise Institute. I want to thank you for being here today very much. Look forward to our discussion. Our next witness is Ms. Traci Tapani. Ms. Tapani is the co-owner of Wyoming Machine, a manufacturing company based in Stacy, Minnesota. She has spent more than three decades leading operations across sales, engineering, production, and quality in the manufacturing sector. Ms. Tapani currently serves on the Small Business Policy Council for the U.S. Chamber of Commerce, is a member of the Fabricators and Manufacturers Association, and is a board member at the Women in Manufacturing Association. She earned a Bachelor of Science in business from the University of Minnesota and has been recognized by the Manufacturing Institute with the STEP Ahead Award. Appreciate you being here today and look forward to our discussion. Our next witness today is Becky Renfro Borbolla, who is my good friend, as her family is, from the great state of Texas. Ms. Renfro Borbolla is the senior vice president of Renfro Foods, a family-owned manufacturing company in Fort Worth, Texas. A third-generation leader, she has played a key role in expanding the company's distribution across the U.S. and international markets while leading operations, logistics, and export sales to grow the brand's global presence. Ms. Renfro Borbolla has received numerous honors, including induction in the Specialty Food Association Hall of Fame and the 2016 Businesswoman of the Year Award from the Fort Worth Hispanic Chamber of Commerce. She's earned an Associate of Arts degree from Tarrant County College and a Bachelor of Science from LeTourneau University, and I look forward to hearing your words today and say hello to your family. I now recognize the ranking member, Ms. Velázquez, to briefly introduce our last witness appearing before us today.

Thank you, Mr. Chairman. Our final witness today is Michael Negron, senior fellow for economic opportunity at the Center for American Progress, with a focus on economic development, consumer protection, and small business policy. Prior to joining American Progress, Negron served as a special assistant to the president for economic policy in the Biden-Harris administration, where he worked with several federal agencies to develop, coordinate, and implement small business policy, consumer protection initiatives, and other policy areas. A former U.S. naval officer, he also served in the White House Office of Management and Budget and the U.S. Department of Defense. He earned a J.D. from Harvard Law School, a Master's from the University of Memphis, and a Bachelor's in Foreign Service from Georgetown. Thank you, Mr. Negron, for being here today. Welcome.

Gentlelady yields back, and again we want to thank all of you and appreciate all of you being here today. Before recognizing the witnesses, we've got some rules we've got to adhere to. And I would like to remind all of you that your oral testimony is restricted to five minutes in length. If you see the light in front of you turn red in front of you, it means your five minutes is concluded and you need to you need to shut it down. And your and you should wrap up your testimony if you continue to go you'll hear this to remind you your time is up, okay? So with that in mind, I now recognize Mr. Watson for his five-minute opening remarks.

Chairman Williams, Ranking Member Velázquez, and members of the committee, thank you for the opportunity to testify today on the impact of the 2025 reconciliation law on small businesses and opportunities for future reform. The 2025 law delivered important improvements by making permanent key provisions from the 2017 Tax Cuts and Jobs Act. This provided much-needed certainty for small business owners in making long-term decisions about investment, hiring, and expansion. Notably, the law made permanent the Section 199A deduction and the lower individual tax rates that apply to small pass-through businesses, which comprise most small businesses in the United States. The law also strengthened incentives for investment by restoring full expensing for short-lived assets like equipment and expensing for domestic research and development. These provisions reduce the tax penalty on investment by allowing businesses to deduct costs immediately rather than over time. As a result, they support higher levels of capital investment, productivity, and wages, and are expected to contribute meaningfully to long-run economic growth. Tax Foundation estimates that permanence for 100 percent bonus depreciation and R&D expensing will increase long-run economic output by about 0.7 percent and create about 180,000 full-time jobs. However, despite these improvements, the tax code does remain overly complex and costly to navigate for smaller firms. Small business owners must devote significant time and resources to compliance, resources that could otherwise be used to grow their operations. Provisions like Section 199A, while beneficial, are also among the most complex in the tax code, particularly for higher-income filers who must navigate detailed wage and capital limitations. There are clear opportunities for further reform. Policymakers should prioritize simplifying the existing provisions, expanding full expensing to a broader range of investments, including all structures, and improving the treatment of business losses. Many small businesses face delays in realizing the full value of deductions because losses must be carried forward, reducing their real value over time due to inflation and the time value of money. In addition, broader policy uncertainty continues to weigh on small businesses in 2026. Recent tariffs, for example, increase input costs for firms and they rely on imported goods that can reduce their ability to invest, hire, and grow. Even when tax policy moves in a positive direction, uncertainty in other areas can offset those gains and lead businesses to delay or scale back their plans as we've seen over the past few years. Looking ahead, policymakers should focus on creating a more stable, predictable, and neutral tax environment that includes simplifying the tax code, ensuring consistent treatment across different types of investment and across different sizes of firms, and reducing barriers to claiming incentives like research and development credits, which small businesses often underutilize due to administrative complexity compared to larger firms. Ultimately, a simpler and more stable tax system would allow small business owners to spend less time navigating compliance and more time doing what they do best: innovating, investing, and creating jobs for our communities. The 2025 reconciliation law was an important step forward, but more can be done to reduce complexity, expand those investment incentives, and provide certainty for small businesses needing that are needed to grow and succeed. Thank you, and I look forward to your questions.

Gentleman yields back and before I I go to our next witness, I want to want to clarify something you don't see a lot of our colleagues here right now. People are going to come and go today. You haven't made anybody mad, but they we have other hearings and so they'll come and go as we as we continue this hearing. So with that in mind, I now recognize Ms. Tapani for her five-minute opening remarks. Gentleman yields back and before I go to our next witness I want to clarify something you don't see a lot of our colleagues here right now people are going to come and go today. You haven't made anybody mad but they'll we have other hearings and so they'll come and go as we as we continue this hearing so.

Thank you, Chairman Williams, Ranking Member Velázquez, and members of the committee for the opportunity to testify today. My name is Traci Tapani and I am co-president and owner of Wyoming Machine, a manufacturing company in Stacy, Minnesota. My family-owned company specializes in sheet metal fabrication and we offer a variety of services to clients from laser cutting to welding. I also serve on the board of directors for the U.S. Chamber of Commerce and I'm the incoming chair of the Chamber's Small Business Policy Council. The U.S. Chamber serves and supports more than five million small businesses through membership, a nationwide federation, and digital platforms, giving small business representation resources and a powerful voice at national scale. Anyone who has operated a business knows that long-term investment requires certainty. On this tax day, small businesses like mine are already benefiting from the certainty provided by the Working Families Tax Cuts, which strengthen cash flow, enhance predictability, and empower Main Street to plan for growth. The Working Families Tax Cuts also support workforce training and helps hardworking Americans keep more of their wages. Today, I'll highlight how these policies are helping small businesses in sectors like manufacturing. First, tax policy that provides permanency and immediate immediate expensing reduces risk and unlocks investment. Manufacturing is capital intensive. When we invest in equipment, we're not buying nice-to-have items. We're buying capability to compete and to keep production here at home. Nearly all U.S. manufacturing firms are small businesses. Because these firms are capital intensive, full and immediate expensing directly enables investment in equipment that drives productivity, stable jobs, and U.S. manufacturing competitiveness. Specifically, the 100 percent bonus depreciation for new equipment contained in the tax law is hugely helpful. Before this reform, smaller manufacturers could only deduct 40 percent of the cost of major technology purchases in the first year and 20 percent in the second, meaning we had to carry more of that cost for longer. The new rules allow full deduction upfront, giving a business like mine the ability to invest in advanced manufacturing technology like handheld laser welding and other productivity tools. In 2025, our welding department was running about five weeks behind schedule for months. The kind of backlog puts a small manufacturer in a tough position. When you can't deliver on time, customers have to look elsewhere, including overseas. I struggled to find skilled TIG welders we needed to keep up with this demand. Fiber laser welding lets less experienced operator do the work that normally requires a top-tier TIG welder. That's why investing in fiber laser welding became urgent for us so we could clear the backlog, meet delivery dates, and keep customers from sourcing elsewhere. Full expensing and the certainty that it will remain in place helped us make that investment faster before delays turned into lost customers. Just as important as equipment is the workforce needed to run it. The workforce training and short-term Pell that will begin this summer under the Working Families Tax Cuts have also had a positive impact on small businesses like mine. While we eagerly await that funding option, I have confidence it will help lead more Americans directly into the workforce, filling in-demand jobs like welding. I have this confidence thanks to partnerships like the one we've established with Pine Technical and Community College in Pine City, Minnesota. We currently partner with students in short-term programs by providing internships and part-time jobs that add real-world experience to their classroom training. Even before short-term Pell is available, I currently have a student working at Wyoming Machine who is enrolled in short-term training and she is already contributing on the shop floor using our handheld laser welding technology. For small manufacturers, short-term Pell can accelerate the pipeline into welding and machining jobs by helping students afford short programs and by strengthening employer-connected work-based learning. Congress also made a common-sense decision to remove taxes on overtime. In my metal fabrication business, overtime happens when we're responding to customer demand on short notice. For example, when a customer lands an unexpected sale of equipment and needs a rush order for filled, our team may put in extra hours to meet that demand and they should be able to keep more of their hard-earned money for stepping up. When my employees can keep more of that hard-earned money in terms of wages, they're more inclined to continue stepping up, ultimately leading to a happier and stronger workforce. Thank you again for the opportunity to testify. The Working Families Tax Cuts are enabling small businesses to do what we do best: build, innovate, and create jobs. I look forward to answering your questions.

Gentlelady yields back. I now recognize Ms. Renfro Borbolla for her five-minute opening remarks.

Good morning, Chairman Williams, Ranking Member Velázquez, and members of the committee. My name is Becky Renfro Borbolla of Fort Worth, Texas, and I am the senior vice president of Renfro Foods, a third-generation family business that produces Mrs. Renfro's salsa, salsas and relishes. Mrs. Renfro's was started by my grandparents shortly after the Great Depression when my grandmother and grandfather, Arthurine and George Renfro, began creating delicious spices and vinegars in their home on Gould Avenue in Fort Worth. Mama Renfro preferred to be called Mrs. Renfro, so it was a natural that their products, which soon expanded to syrups and the Southern relish commonly known as chow-chow, were named in her honor. During the 1960s, my grandparents sold Mrs. Renfro's products at fruit and vegetable stands in Fort Worth and eventually expanded our product line to include hot salsas and picante sauces. This is when our family's business truly began to the brand that it is today. Before long, my grandparents' company outgrew their home and they purchased a building nearby on Stella Street where our company is still headquartered today. Mrs. Renfro's products are now sold in supermarkets, gourmet food stores, and gift shops in all 50 states and in more than 30 countries worldwide. Family has always been central to Renfro Foods. We just recently lost my uncle, so... Okay, so my father Bill and his siblings Jack and Linda spent much of their childhood at the building on Stella Street. As a childs, they joined the company devoting their time to growing Renfro Foods. Dad was the company's long-term long-term CEO leading corporate strategy functions of the business and his brother Jack was the COO handling the manufacturing. Today, my cousin Doug, my brother James, and I are the third-generation management of our family's company. Through it all, we've remained a small family company in the same building in the fast-growing Texas city known as where the West begins. It we've made it because we stayed true to the things Mama and Papa Renfro cared about from the beginning: true to family, true to flavor. This passage of the Working Families Tax Cuts in July of last year was critical for businesses like ours. Family-owned small businesses whose products can be found around the world, yet remain deeply rooted in our local communities. What began as a modest enterprise has over generations of hard work and reinvestment become the foundation of our family's livelihood, past, present, and future. The certainty provided by permanently extending key provisions of the Tax Cuts and Jobs Act that support small businesses has helped ensure that this work can continue into the next generation. As other on the panels will discuss today today, the permanency of provisions like the 20 percent small business deduction under Section 199A, along with policies that support growth and investment, such as full bonus depreciation, helps businesses like ours to continue to compete with much larger companies operating in the same market space. Small businesses are grateful that Congress acted to prevent a massive tax increase and to provide the stability necessary to plan, invest, and hire without the uncertainty of temporary tax policies. For family-owned businesses, the increase in permanence of the estate and gift tax exemption was especially meaningful. It provided long-overdue certainty and allows families like mine to focus on long-term planning, reinvestment, and succession, rather than costly estate planning to prepare for a sudden tax change that can disrupt decades of work. That stability has been invaluable. As Congress considers ways to continue strengthening the support, there are opportunities to build on that success. Ideally, eliminating the estate tax, often called the death tax, altogether would be the most complete solution to allow family-owned businesses to grow, reinvest, and transition across generations without disruption. I appreciate the committee's consideration of these issues and the opportunity to share my family's experience today. I look forward to any questions you may have. Thank you.

Gentlelady yields back. On a personal note, you did very good under tough circumstances.

Thank you. I fly home tomorrow for his services. Sorry.

I now recognize Mr. Negron for his five-minute opening remarks.

Thank you. Thank you to Chairman Williams, Ranking Member Velázquez, and members of the committee for the opportunity to address you today. I also appreciate being on a panel with small business owners and Garrett and hearing their stories. First, just a little about my background. I've been fortunate to have small business owners throughout my direct and extended family. My father-in-law had a successful chiropractic practice in Northern Michigan for decades before he retired to work now as a real estate agent in Florida. His brothers and sisters all own or owned small businesses, in some cases multiple businesses, in Northern Michigan. Decades ago, my mother and her sisters unsuccessfully tried their hand at opening a small Guatemalan restaurant underneath an L stop in Chicago, and my sister is a small landlord in Providence. I've also been able to work on policies to try and help small businesses at every level of government: state, federal, local. As policy director to Chicago Mayor Rahm Emanuel, some of our first actions in office in 2011 focused on small businesses. We eliminated 70 percent of business licenses to reduce red tape. We eliminated a decades-old per-employee head tax that was charged to businesses that the current mayor has tried to bring back. At the state and the federal level during the pandemic, I was able to work on emergency relief programs to help keep small business doors open. I'm here to talk about what the One Big Beautiful Bill Act and the broader Trump agenda has meant for small businesses. The reality is that the benefits of this bill, while there are good stories here and there, have flowed to a minority of small businesses, primarily wealthier and larger businesses, while most are facing higher costs due to the broader agenda: tariffs, the war on Iran, cuts to healthcare and other programs. Under the administration's broad imposition of tariffs on products coming in from virtually every country, the typical household is paying about $1,700 more in tariffs over the course of the first year of the administration. All Americans are facing these higher costs, but small businesses in particular are hit hard. I recently released an analysis with some colleagues at the Center for American Progress that found that your typical small business importer, there are about 236,000 of them, saw their tariff costs triple, with an average monthly increase of $25,000 a month due to these tariffs. Overall, these small business importers paid $306,000 more in tariffs from March of 2025 to February of 2026 compared to the previous year. Another major area of heightened costs for Americans and small businesses is on healthcare. Healthcare premiums doubled on average amongst the 20 million Americans, the more than 20 million Americans with subsidized marketplace coverage due to the expiration of their Affordable Care Act enhanced premium tax credits. About half of those affected individuals are either small business owners, self-employed individuals, or employees at businesses with fewer than 25 employees. Small businesses are also facing huge spikes in gas and diesel costs due to the war in Iran. Gas prices are up 40 percent, diesel prices are up more than 50 percent, and we've seen FedEx, UPS, Amazon, and the U.S. Postal Service all announce higher fuel surcharges or other shipping costs citing the spike in fuel costs. In the past week, we've seen indicators of consumer and business inflation come in hot, with year-over-year increases in the Consumer Price Index of 3.3 percent and in the producer price index of 4 percent. And then on the other side of the ledger, the tax benefits of the One Big Beautiful Bill Act have flowed to a smaller, wealthier subset of businesses, and the tax cuts themselves, the refunds that people are receiving, have failed to live up to the expectations that were set by this White House. As noted, the One Big Beautiful Bill Act made permanent the qualified business income deduction, and since its creation in 2017, this deduction has primarily benefited wealthier business owners. Half of the benefit of the 199A deduction to date has gone to millionaires, and two-thirds have gone to people earning more than $500,000 a year. So when reviewed in the full context, I believe the story of the One Big Beautiful Bill Act is that the benefits it offers in the form of reduced taxes are mostly enjoyed by wealthier Americans and businesses. The relatively fewer benefits it's offered to everyone else are right now being outweighed by higher costs due to tariffs, due to cuts, and due to the impact of the war in Iran. This is not a legacy to celebrate today. Thank you for the opportunity to speak today, and I look forward to the discussion and any questions.

Gentleman yields back. We will now move to the member questions under the five-minute rule that we discussed earlier. I recognize myself for five minutes. Ms. Renfro Borbolla, the working families tax cuts were designed to ease the financial burden on families and small businesses, helping them invest in their employees, expand operations, and plan for the future. So my question would be, could you explain how the estate tax provisions affect your long-term business planning, and specifically, do these provisions make it easier to ensure the continuity of your business? Ms. Borbolla, could you explain how the estate tax provisions affect your long-term business planning, and specifically, do these provisions make it easier to ensure the continuity of your business?

So I would love to see, as I call it, the death tax go away and capital gains go away. We want to, you know, I paid taxes, my grandmother paid taxes, our company paid taxes. And then Grandma passes away, we have to pay taxes on the taxes that we've already paid. And a lot of companies have to sell the farm, have to sell the company or a portion of the company to be able to pay those taxes. And that's horrible that generational companies and farms are having to be sold to pay taxes on taxes that they've already been paid.

All right, thank you. And Mr. Watson, congressional Republicans ensured that the working families tax cuts includes provisions to improve small business's cash flow and access to incentives. My question is, can you walk us through how these provisions reduce barriers for small businesses trying to invest and trying to grow?

For sure. So the 2025 reconciliation law provided for permanence for 100 percent bonus depreciation for short-lived assets so they can immediately and fully deduct the cost of those investments. And that's particularly important for small businesses just because they often don't have the cash flow or the margins necessary to wait to take those deductions in future years. Large firms, big corporations have the liquidity on hand to go ahead and wait there, but for small businesses, it can make a very big difference. That's especially true for domestic R&D expensing, which is something else that was made permanent in the law. And one thing that was also important was that permanence part because it sets aside that uncertainty, folks aren't to worry about changes in the underlying law or uncertainty about what will happen in Congress, which was a game changer for folks. And we find that that's the biggest bang for the buck, meaning benefits to economic growth for the revenue that you lose comes from expensing for R&D and for those investments.

Okay, thank you. Ms. Tapani, as you know, the Working Families Tax Cuts Act extended and made permanent the 100 percent bonus depreciation which we've all been talking about this morning, while also adding a new provision of no tax on overtime. So could you describe how these specific elements of the working families tax cuts have benefited your business and your employees?

Certainly. The only way that U.S. manufacturers can remain competitive in this global economy is to invest in equipment. We need people, we need equipment and raw materials to be successful. And if you're not constantly investing in equipment, you cannot meet the needs of your customers. I mean, I'm dealing with enormous manufacturers in the state of Minnesota and throughout the country that have ever-increasing demands and needs. So to be able to invest in that equipment is really helpful. It's also helping us close the skills gap, which I think is important. When we can't deduct the cost of that equipment right away, I might as well get out a crystal ball and try to predict what's going to happen in the future. Manufacturing has been in contraction, in and out of contraction for the past several years, and my crystal ball doesn't show me when that's going to come to an end. So being able to make a decision today to buy something and expense it is everything to my business. It's serving my community and my customers. As far as my employees go, when they have to work overtime to help us get a project done that's come in unexpectedly for a customer, they might have to leave their children in daycare for longer. They might have additional expenses. Everybody knows people are experiencing higher grocery costs and some other costs. The more of that hard-earned money that they can keep is important to them, their happiness and their ability to pay for their everyday needs, their childcare, their healthcare, whatever that might be, matters to me. So I'm thankful that they can keep more of their overtime pay.

Thank you. Gentlelady yields back. And with the time we have left, I want to say one thing about the inheritance tax. One of the things, and with your help, with your help, Ms. Renfro, we were able to take it from 11 million per couple to 30 million, or 15 to 30 million. So that helps a lot of people so we don't lose the family farm. Thank you for your help on that. I appreciate it. With that in mind, I now recognize the ranking member for five minutes of questions.

Thank you, Mr. Chairman. Mr. Negron, as the saying goes, the purpose of a system is what it does, not what it claims to do. We hear a lot of wishful thinking from our Republican colleagues about what they want the pass-through deduction to do, from increasing investment to creating jobs, but rarely do they contend with the actual outcomes. Mr. Negron, what does the pass-through deduction do?

Well, on its face, it reduces the tax burden of sole proprietors, S corps, and partnerships who are now allowed going forward to deduct 23 percent of their qualified business income, which is essentially their net profits. What we've seen is essentially the more income you have, the better benefit that you get from the deduction. Now, there are income caps in the QBI provision, about 550,000 or so married, 270 joint or individual. And what we're seeing is that these benefits are really skewed towards the wealthiest businesses. I've used some of the numbers: half go to millionaires, two-thirds going to people who earn more than 500,000, only 6 percent to businesses that earn less than 150,000. And so the 736 billion going forward for the next 10 years, it is primarily going to the wealthiest businesses.

And of the academic research that exists on the effect of the pass-through deduction, have they found a measurable increase in employment, wages, or investment?

No. As you mentioned, the definitive study on this from February of 25 in the Journal of Public Economics found no benefit to wages, to job creation, or to physical investment.

And about three-quarters of the people who claim this deduction make less than 200,000 per year, arguably the people who are most in need of tax relief. How does the size of their tax benefit compare to someone who makes millions of dollars per year?

Well, to give you one example, using just Joint Committee on Taxation analysis, businesses that earn less than 150,000 were making about $425 on average in tax benefits through the pass-through deduction, compared to hundreds of thousands in benefits that go to wealthier businesses. And that $425 can get canceled out pretty quickly when you look at tariffs, when you look at gas prices.

While Republicans were passing a $4 trillion tax cut for the rich and cutting $1.5 trillion in healthcare and food assistance for the poor, the president was enacting the largest middle-class tax hike in a generation through tariffs. How are tariffs affecting small business in particular?

Well, I would point to a couple of different things. So first is just the costs themselves. You know, what are tariffs? Tariffs are a tax. Tariffs are a tax that a consumer, a business has to pay to bring a product in from another country. They'll pay it at the port of entry. Plain and simple, it's money. But also, more red tape. You have to actually, because the tariff system is more complicated, you're having to track the products that you're bringing in more carefully, not only to make sure you're paying the right amount, but to avoid any compliance issues. And I think the third is just predictability. Right now, if you're a business, you're a toy store, your neighborhood retailer, you're trying to plan for Christmas, the picture's a little murky. You've got the 10 percent across-the-board tariffs that the President put in place following the Supreme Court decision. That should end in mid-to-late July. What's coming after that? What's next? So it's very hard to plan right now for that future, and that's just another barrier hanging over the heads of small business owners.

Thank you, Mr. Negron. Mr. Watson, when it comes to the interaction between the President's two main economic policies, how do the cost of the tariffs affect the overall impact of the one big beautiful bill?

So I think Michael got this right in that tariffs are a tax, and the risk is that that tax, which is going to be passed on to consumers and American workers, there's a risk that it's going to offset a big portion of the tax cuts that were delivered last year. Particularly when you look at the distribution of that, lower-income folks, working-class folks, larger portion of their after-tax income is going to be eaten up by those tariffs. And so that's probably one major reason that we should be reconsidering that regime.

Thank you. I yield back, Mr. Chairman.

Gentlelady yields back. I now recognize Ms. Van Duyne from the great state of Texas for five minutes.

Thank you so much, Mr. Chairman. And I want to thank all of our witnesses for joining us today. I'm especially excited to have our North Texan here, Ms. Becky Renfro Borbolla of Renfro Foods, testifying in front of the committee today. We just had your Fort Worth Chamber I just met with earlier, and they wanted me to give you a hard time, and I told them I wasn't going to do that. I asked what questions that I should ask, and they said maybe not. But this past summer, Republicans passed the Working Families Tax Cuts, and it was the most consequential tax package in generations. Today, I'm proud to celebrate the several transformative small business provisions contained in this landmark legislation, which will deliver real and lasting benefits to small business owners across the nation. This bill made permanent the 20 percent qualified business income deduction under Section 199A, providing critical long-term relief to millions of pass-through businesses. It restored 100 percent bonus depreciation and immediate expensing for business investments in qualified property, like machinery, making it much easier for small business owners, not billionaires, to invest in new technologies and stay competitive. It also reinstated full and immediate expensing for research and development, allowing again small business entrepreneurs to invest in new ideas, products, and technologies to fuel the next wave of American innovation. That being said, I think the most critical and crucial aspect of the Working Families Tax Cuts is that it made these provisions permanent. For far too long, small business owners operated under the cloud of temporary tax relief and impending expirations, and now they have certainty that they need to effectively plan for the future. They've told us over and over again that they can plan if they know what the rules are, but when the rules consistently change, they don't know how to invest. And it's actually said that the previous tax bill from 2017, because it had a date set to expire, that we might have missed out on as much as 80, I'm sorry, $800 billion of investments. So I just have a quick question. How many of you are billionaires on this panel? How about billionaires in the room? No? But you're all here to testify on the benefits of this bill, right? So it's not just like the massive billionaire companies. I think that's an important thing to note. This morning I started off, I had an 8:00 a.m. roundtable where we had eight people, eight constituents in Virginia that talked about how important this small, you know, to small businesses this Working Families Tax Cut bill is. These are not large companies. These were not massive corporations. These were small mom-and-pop shops that it really made a difference to. Ms. Borbolla, I want to ask you how beneficial is it for a company like Renfro Foods to have a solid picture of what the tax environment will look like five, 10, 15 years out?

It allows us to pay our employees more, provide benefits. We have matching 401(k). We pay 100 percent of their healthcare insurance premiums and 50 percent of their dependents. That's huge. We cannot do that if we don't know what the taxes are going to be tomorrow or in five years.

So are you investing more in upgrading and scaling up into the future growth of your business as a direct result?

Yes, we are. And one of the things we upgraded that the bonus depreciation helped us was we put in a line, a new production line that ran, took us from running 100 jars a minute to 200 jars a minute. And then the pandemic happened, and our sales doubled overnight because people were staying home and they were buying salsa, chips, pasta sauce, pasta, all the comfort foods. And allowing us to do that allowed us to stay in business and fill orders, and our employees loved it because they were getting lots of overtime, and they loved all the overtime. And in two years, out of 70 employees, we had five cases of COVID in our entire plant.

That's incredible. Ms. Tapani, what was the best part of the tax cuts bill for you?

I would start by saying that leading up to the expiration or potential expiration of many of the things that were in the 2017 tax bill, it was very stressful for small business owners because here we are in 2025, not knowing what could happen at the end of the year. So we started off, you know, in the end of 2024, the beginning of 2025, not being able to make a plan for anything because we don't know what the tax situation's going to be. In my particular business, besides the fiber optic laser welding that I mentioned, we have made an investment in fiber laser welding. Representative Stauber's not in the room right now, he came to my facility to see that. And we were able to use bonus depreciation on that equipment as well. Sometimes when you think of people's equipment on a small business, you might not realize that if I buy a laser cutting machine, we're talking about $500,000 to a million dollars of an investment for me. I'm putting my company at risk, I'm putting my family at risk, I'm putting my employees at risk when I make a decision like that. Being able to deduct immediately makes a huge difference.

Great, thank you very much. Ms. Borbolla, real quick question. Where can we buy your salsa in D.C.?

Okay, Chevy Chase Supermarket.

Thank you so much, Chairman, and thank you to the Ranking Member for hosting this hearing today. I want to thank each witness for being here, and Ms. Borbolla, I want to offer my condolences to you and your family and praying for you all with the loss of your uncle. Small businesses are struggling. They didn't know what they were doing in 2025, and now in 2026, they still don't know what they're doing. Here we are almost a year after Republicans passed the big ugly bill, and the economy is not stronger. It's on the brink of collapse. Inflation and gas prices are skyrocketing, job growth has stopped, wages are declining, and confidence in the economy is at a record low. The administration's plan to rob the working class to give money to the wealthy has raised costs and cut healthcare and nutrition assistance. Working families and young people are not feeling relief. They are falling behind. Small businesses depend on these customers to keep their lights on. When families pull back, those businesses have to shut their doors. The reality is simple. The big ugly bill is creating an economy that only produces profit for the one percent. Mr. Negron, I want to thank you for your testimony. It was a masterclass here. One because it had a lot of facts, right? A lot of facts, a lot of numbers, and honestly, I might print it and put it on the front door of my office so people understand exactly what we're dealing with here. Inflation on everyday goods is skyrocketing that you talked about, and incomes for families, the incomes families rely on to pay for these are plunging, literally. How is this combination killing the purchasing power of working families, and how does that hurt small business? I know you talked a little bit about it on your testimony, but can you elaborate a little more about that?

There you go. I yield back, thank you.

Gentlelady yields back. I now recognize Ms. McIver from the great state of New Jersey for five minutes.

Yes, first, and if my wife is watching, the fact that you called anything that I've done a masterclass, I hope she's taking that to heart. So I'd say a couple things. First, we have talked about the fact that people are paying more. So that's a $1,700 per household just for the first year due to the tariffs. There's the fact that small business importers are paying more. Those costs get spread around. But what we're also seeing is due to this war, the price of gas is up more than 40 percent, the price of diesel up more than 50 percent, the price of jet fuel is up more than 90 percent, the price of fertilizer is up more than 50 percent. And so you see that first at the pump, but then it makes its way through everything else. Grocery prices, online purchases, plane tickets, you name it. The longer this goes on, the more it will filter through the economy. And so you see these headwinds that are being imposed by these policies. And on the other side of the ledger, we just, my organization just put out a study yesterday showing that the increase in refunds under the one big beautiful bill act is coming in about $650 less on average per taxpayer than what the White House had anticipated. So instead of a $1,000 bump in refunds, we're seeing closer to $350. And so when you line those all up against each other, the cost of these policies are exceeding the benefits of those tax cuts to the vast majority of people. And I think that's the economic headwinds that we're facing.

Yes, thank you for that. You know, small business bankruptcy surged 67 percent from last year due to the worsening of the economy. And you talked about the one big, you know, beautiful bill and the administration policies. How have they helped, or how has this bill helped create this increase in, you know, small business bankruptcies, you think, in your opinion?

I mean, I would just say that the uncertainty of the tariff regime, the additional cost, those are likely contributors. I haven't seen studies that unpack that increase in bankruptcies, so I'm speculating just on the basis of what we know to be the case is that people are facing, businesses are facing higher costs due to the tariff taxes.

Yeah, thank you for that. With that, I yield back.

Gentlelady yields back. I now recognize Mr. Wied from the great state of Wisconsin for five minutes.

Thank you, Mr. Chairman. And thank you to all of our witnesses for being here today. You know, after four years of overregulation and over $1 trillion in increase in compliance costs under the Biden administration, the Working Families Tax Cuts are a major step forward towards leveling the playing field for America's small businesses. From the codification of 199A deductions and the R&D expense deductions to the creation of new opportunity zone and no taxes on tips and overtime, Republicans are committed to helping entrepreneurs start and grow their businesses. As a former small business owner, I know firsthand the importance of many of the pro-small business tax provisions that were included in the Working Families Tax Cuts. For some businesses, these deductions can be the difference between growing their small business and laying people off. We have already seen the benefits of these tax cuts as in March alone, our economy added 178,000 jobs. I look forward to our discussion today about the Working Families Tax Cuts and how this committee can improve the important part of our nation's economy, which is Main Street. Mr. Watson, one of the most common lies folks on the other side of the aisle like to tell is that the Working Families Tax Cuts only benefits the wealthy and the big, big businesses. If we look at one aspect of the Working Families Tax Cuts, which is the 199A, a report from the bipartisan Congressional Research Service found that 80 percent of the 199A claims were filled by those making less than $200,000 in a year. How important are 199A deductions for the smallest of America's small businesses?

Part of the motivation for 199A, of course, was in 2017, we reduced the headline corporate tax rate from 35 percent to 21 percent, and it was really important that we had some degree of parity between those larger corporations and smaller firms so that they didn't think about the type of business that they need to be to get the tax cut. And that 20 percent deduction helped create that parity and simplified that difference. And as you said, a lot of small businesses do claim that deduction when they have net income. Also, when you look at the weight of economic activity, a lot of, you know, big firms who hire a lot of folks, who earn a lot of income, are getting a lot of that benefit, but that's because they are contributing to the economy. So that is what we would expect under a progressive tax system.

Ms. Tapani. Manufacturing employs almost a quarter of working-age people in our district in Wisconsin's 8th Congressional District, with over 90 percent of the manufacturers are small businesses. How have the Working Families Tax Cuts allowed you to reinvest your tax savings into your manufacturing business?

I think in a number of... Sorry, I don't know how to use a microphone, apparently. You know, I've already talked about investments in equipment. I know that I've heard a number of people mention that people's wages are not increasing. At Wyoming Machine, that is not true. Ever since we came out of the COVID pandemic, people's wages have been steadily rising. April is the month in which my employees, all of them, will receive a pay change. They will be receiving it this year. They received a bonus at the end of last year, even people that were temporary employees that were working for me received a bonus even though they're not actually employees of Wyoming Machine at this point in time. So we're investing in people, we're investing in equipment. We are using some of the money that we have available to us to employ people with disabilities in our community, working with organizations like Rise who employs people that need extra assistance in the workplace. We're working with our high schools and our technical colleges to provide internships and part-time jobs for people so that they can learn the necessary skills that they need to move on. So I don't agree with this idea that we're not investing back in our business. I know a lot of small business owners, some of them are my customers, some of them are my suppliers, some are my colleagues on the Small Business Policy Council. And I have yet to hear someone who doesn't have a story about how they've invested back in their business, in their employees, and in their community.

Thank you. Ms. Borbolla, a family-owned business like yours, it takes a long-term view and must balance responsibility with sustainability for employees and the next generation of business owners. So from your perspective, how have the working families tax cuts helped you invest in employees and the long-term stability of your business?

The same as Ms. Tapani. We are, we've given a pay raise every year. We gave bonuses at the end of December. And we have generational workers. We have mom and son and grandson working for us. So we're, the management side is multi-generational, but also our employees are multi-generational. They tell their son and daughters and grandchildren, you need to go to work for the Renfros. And we want to keep them, so we pay higher wages so that they don't leave us. And we've had a few leave and find out the grass is not greener on the other side and they come back.

Thank you all very much. I yield back.

Gentleman yields back. I now recognize Ms. Simon from the great state of California for five minutes.

Thank you. Thank you, Chair Williams and Ranking Member Velázquez, for holding this hearing. And I really want to thank our panel today. And ma'am, thank you so much for talking about workers with disabilities and working with Rise. They're a fantastic organization. And it's small business owners like you who are really, really living this idea of inclusivity. As a person with disabilities and who's advocated for workers with disabilities, there are far few folks like yourself. So thank you so much. I'd like to align myself with my colleagues' concerns about the negative impacts felt by small businesses in this last year and a half. And you know, I want to actually frame my comments to focus on the systemic implications of HR 1, the indiscriminate tariffs, the cuts to Medicaid and SNAP, and increasing cost of living of many of the employees that we've talked about today. Rent is higher, groceries are higher, gas is ridiculous. Folks, not just business owners, but workers are feeling squeezed to a point of no return. A specific example point that I would like to discuss is the ACA tax credits, which expired in December of last year. So consider a story of a small family business in my district, an architectural firm founded as a first-generation small business, and it's been operating successfully for 20 years. They are a micro-business, less than 10 employees, but they weathered the storm of 2008 and weathered the storm of COVID and continued to move forward until, until because of the lapse in healthcare subsidies used to offset tax breaks for the wealthy in HR 1, their own health insurance for their lovely and amazing and hardworking employees, their premiums increased by 245 percent. 245 percent. Premiums increased from $765 a month to $1,800 a month per employee. This is an increase of more than $13,000 a year per employee for bare-bone health coverage. The increase has wiped out the discretionary income and has devastated this small business's ability to grow and to hire, much less give raises. The business recently brought in a new employee, a new mom, whose expertise they need to expand the firm, but this year they could not offer her health benefits. So I have a lot more written here, but I'm just going to go straight to my question for Mr. Negron. The Center for American Progress, and again, thank you for your testimony today, estimates that over five million small businesses get their health insurance from the exchange. Five million small businesses in this country get their health insurance from the exchange. And 4.4 million saw an average premium increase of over $1,500 per month. Now, how does this cost compare to any benefit many small, middle-class businesses get through the deduction?

So just one basis of comparison, looking at business owners with less than 150,000 in income, according to the Joint Committee on Taxation, that subset of businesses, middle-income, mom-and-pops, saw a benefit of $425 on average from the 199A deduction. 4.5 billion in total in relief for that group of businesses. On the other side of the ledger, those businesses will pay about 5.8 billion dollars more due to the expiration of the enhanced premium tax credits. It's about $540 more per business. And so you see just right there, they're out about $120 just on the basis of that loss of enhanced premium tax credits. And then just to repeat a point I had made earlier, you also have millions of employees of small businesses of less than 25 employees who benefit from this. And that means less certainty for those employers in terms of attracting top talent. Right, if you can't offer that benefit because you're too small, if the government is doing it through these policies, it makes it easier to compete for workers with bigger businesses who can usually offer better packages of benefits.

And wouldn't you agree that some of these small businesses who are no longer able to provide healthcare, that their employees are more likely to be sick, their pregnant employees are more likely to have maternal health issues, disabled employees are less likely to get not only the medication, but the supports they need to be able to not only be good workers, but good parents and good citizens?

Yes, I think a loss in coverage or more coverage costs could result in higher absenteeism at work, missing days because of being sick, being less productive at work, just being less happy. And that's not good for the business.

Well, thank you all for being here today. We really appreciate your testimony. Thank you, sir.

Gentlelady yields back. I now recognize Mr. Bresnahan from the great state of Pennsylvania for five minutes.

Thank you, Mr. Chairman, and thank you to our witnesses for being here today. The Working Families Tax Cuts Act is a strong step towards making sure our economy is built to grow and built to last. During the 2026 tax year, 45 percent of all filers have claimed at least one new tax cut. That is real relief and it means more money staying in the pockets of hardworking Americans. On top of providing much-needed relief for American families, it delivers pro-growth policies that benefit the small businesses that power our local economies. Over the past few weeks, I met with business owners across Northeastern Pennsylvania, from mom-and-pop diners in Luzerne to a drilling tool manufacturer in Jessup and everything else in between. And they all told me the same thing: predictability and stability matters. When you make key provisions permanent, like the 23 percent pass-through deduction for small businesses, restoring 100 percent expensing, and the doubling of Section 179 small business expensing to 2.5 million, businesses can finally plan ahead with confidence, knowing where the goalposts are. My first question will be for Ms. Tapani. You spoke about how important overtime pay is for your employees. What are you hearing from your workers about keeping more of that income this season and putting it back into your pockets, as well as just a little public service announcement, today is April 15th and it is tax day. I was able to finalize mine just this morning. But to that, what does that mean to your employees and their ability to retain those hard dollars?

Being able to return or retain more of what they earn in overtime pay matters to them. When an employee has to work overtime, as I've already said, they're giving up something. They're giving up time with their family, they're giving up an opportunity to attend a sports event, they might be paying more in daycare. So keeping more of that money does matter to them. I have had some employees mention that they're more likely to volunteer to do overtime when it's needed. No employer wants to have to mandate that employees work overtime in order to get a job done or fulfill our customer requirements. So their willingness to be voluntary about it is super important. I heard one of my employees tell me that his wife also works in manufacturing and she's worked a lot of overtime this year. They saved hundreds of dollars on their taxes this year because of that provision and it really mattered to them.

Thank you for that. And I'm going to pivot to Ms. Borbolla. Ms. Borbolla, did I pronounce that correctly?

Yes, you did.

Okay. Bresnahan, so I empathize. But someone who comes from a multi-generational family business, what, I know how all the uncertainty of the tax code and again, knowing how important it is where those goalposts are so you can make adequate planning for your family business. How has the added stability around the estate tax provision and the small business pass-through deduction changed the way your family is planning for the future of your company?

Well, we definitely know now because of the estate tax being increased that we will not have to sell some of the business. My uncle just passed away and so we will not have to sell some of the business to pay the estate taxes on his estate.

I guess something that we had always struggled with was we went from a first-generation family business to a third-generation family business and not knowing what the future would be for a business. It allowed us to encapsulate a lot of the unknown. And when you had different provisions set to sunset out and making those plans, how easy was it or challenging was it for you to work with your accountants and do you feel that your professional service advisors were adequately informed with leading you through that transition? And I'm sorry to hear about your uncle.

Yes, between our estate planning attorneys and our CPA, they actually both work together to help us work through making a plan for all the generations. My grandparents actually started the plan and it's followed us through all the years and actually helped us save on paying taxes.

And how many employees does Renfro Foods currently have?

We have 35 employees and 35 temporaries that work for us right now.

Well, thank you for providing family-sustaining careers for those 35 permanent employees and 35 temporary employees. And with that, Mr. Chairman, I yield the balance of my time.

Gentleman yields back, and I recognize Mr. Tran from the great state of California for five minutes.

Thank you so much, Mr. Chairman and the ranking member for holding today's hearing. You know, almost a year ago, congressional Republicans voted to cut over $1 trillion in Medicaid and Affordable Care Act spending and $200 billion in nutrition assistance through HR 1. Now the White House is proposing to cut even more. The President's fiscal year 2027 budget request, a skinny request that came out two months late, dedicates nearly 70 percent of proposed spending, $1.5 trillion, to the Pentagon, while cutting investment in health, education, housing, and small businesses by $300 billion. I sit on the House Armed Services Committee as well as this committee, so I know how important it is that we have a strong defense budget for our national security. But ensuring that Americans have a roof over their head, food on the table, and hospitals that can treat them is also a matter of national security. America thrives because of our robust private sector and our many entrepreneurs. But when the federal government stops investing in healthcare access, workforce training, community development, and potentially entrepreneurs are left struggling instead of growing, and Main Street loses customers. Small business owners cannot afford this when they're being squeezed by rising healthcare premiums, tariffs, and skyrocketing fuel prices tied to the Iran war. Mr. Negron, HR 1's pass-through deduction is the primary tax cut aimed at the wealthiest of businesses. How could it be reformed to benefit primarily those who need it the most?

Thank you. So, as has been noted a couple times here, the 10-year cost of the revised 199A is $736 billion over the next 10 years, which is a lot of money. And a couple ways in which you could improve upon this, just one example is the Mom and Pop Tax Relief Act, which is a bill, I think HR 3249, which would be sponsored by Representative Gwen Moore, among others, which would replace 199A with a bottom-up flat tax deduction of $25,000 with an income cap, $400,000 for married filing joint and $200,000 for individual returns. So that is one example of a more progressive version of this kind of tax deduction that could also reduce paperwork for people if it functions essentially as a standard deduction for your mom and pop businesses. And I imagine it was, I haven't seen a score of this, but when two-thirds of the current benefit are going to businesses with over $500,000, you would think that would save a lot of money that could go into either deficit reduction or you could be putting it to other purposes to help small businesses, help working families.

Thank you so much for sharing that. And Mr. Negron, even before the war in Iran, inflation had been trending upward for some time, particularly from places like the Producer Price Index, which you mentioned. That affects the cost of goods for businesses. What items are driving this inflation and how are businesses coping?

Yes, we've seen... sorry. So the key drivers on the last two Producer Price Indexes were elevated. We had 4 percent just announced year-over-year just released earlier this week. Last month it came in higher than expected at 3.4 percent. And the big drivers are energy costs, food costs, in terms of services, transportation and warehousing services are major drivers. And so those are just added costs that businesses are starting to face. We've now seen two months of it where it's coming in hot, and it will, those costs will ultimately make their way to consumers as businesses have to pass those along.

Let me ask you this. Because of the war of choice by this administration, oil prices have spiked, driving up gas and diesel prices. Can you discuss how those prices increases affect other goods?

Yes. So first, obviously people see it at the pump. Right? So if gas prices are up 40 percent, and so that's something that people see immediately. But diesel prices are up even more, and that's something that extends into everything. The cost of trucking a pallet of goods from one part of the country to the other, diesel affects that. And so you can start to see these costs go into your grocery, into your grocery prices. Fertilizer is up more than 50 percent. The combination of fertilizer and diesel, more costs for farmers. Another cost you could see at the grocery store. Shipping costs are going up. As I mentioned earlier, Amazon, UPS, FedEx, the Postal Service are announcing increases in shipping costs due to the fuel costs. That is something that people who are shopping at Amazon or you're shopping online at Walmart, you'll start to see that in those costs of good. And then jet fuel is up 90 percent. Travel is getting more expensive. And so some people will bite the bullet, pay more for their flights, others won't travel at all, and that means reduced business in tourism if this prolongs for months and months and months.

I appreciate your testimony. With that, Chairman, I yield back.

Gentleman yields back. Now I recognize Mr. Cisneros of the great state of California for five minutes.

Thank you, Mr. Chairman, and I'd like to thank you and the ranking member for bringing us together today. I want to thank our witnesses for being here and Ms. Renfro Borbolla, my sympathies are with your family. My family just recently lost my father-in-law, so you know, my prayers are with you all. Look, I'm in favor of providing working families with tax cuts. But unfortunately, this Republican-led Congress has not passed any such bill or no such act. What I remember, you know, is them passing the one big beautiful bill that does nothing to help the, or only serves to help the wealthy and does nothing for working-class families. Rebranding the bill doesn't change that. It doesn't change the law nor what it does. It insults the intelligence and it's a slap in the face to the working American people. I'm all in favor of the real tax cuts, as I said, for working families and the small businesses that are grinding it out on a day-to-day basis. Any success they are achieving is frankly despite this administration, not because of it. I come from a working-class family. My mother was the lunch lady, my father was a Vietnam vet who worked various jobs. I know how important a real tax break can be for those living paycheck to paycheck or small businesses trying to balance their thin margins. But the law touted by my colleagues across the aisle did not deliver the economic growth they promised. In fact, it's hurting working families because of the historic healthcare cuts that they used to pay for it. They are bearing the brunt of chaotic taxes in the form of tariffs. They are being forced to pay 21 percent more for gas. The Consumer Price Index in March spiked at 3.3 percent year-over-year. Consumer sentiment is at a record low. Small business bankruptcies are up 67 percent. But President Trump and his family have made almost $4 billion and corporate profits hit a record $4.4 trillion. So Mr. Negron, who is benefiting more from this tax law, working families or the wealthy?

Well, I think the evidence shows that the wealthy are benefiting more. And to the extent that everyone else is benefiting in the form of lower taxes, it's being outweighed by far by rising gas prices, tariffs, and cuts to healthcare and other programs.

You just answered my next question right there. So President Trump, Mr. Negron, President Trump stated this month that the U.S. government should not support childcare because we should prioritize wars instead. I hope my colleagues across the aisle don't take that as marching orders, but should the employer-provided childcare credit cut end, what kind of devastating effect would that have?

Well, what I'd say about what the President's statement is that budgets are reflections of values. And here we have a clear statement that we cannot afford things that people need, healthcare and childcare, that help businesses. We've heard in this panel today businesses who are benefiting from when their workers receive good benefits. And so it's in businesses' interest. And so if you have a President saying that we cannot invest in those things that help workers and businesses because of a war that is fundamentally a war of choice, that is a very strong statement about the current direction of the federal government, and it's one that I certainly find concerning.

Thank you very much for that. Mr. Watson, the Tax Foundation found that tariff rates have changed 50 times in the past year. Can you explain how this kind of uncertainty affects small businesses' ability to plan, hire, and invest?

For sure. There's been, yeah, a lot of changes to tariff policy, both in terms of ever-changing rates and, of course, different applications under different sections of the law on which products are going to be allowed, what exemptions are allowed over the last 12 months. And that has produced a lot of uncertainty for businesses. It's one of the top concerns that they have, particularly for businesses that are importing a lot of goods or have complicated supply chains abroad. And of course, looking forward, even with SCOTUS striking down the IEEPA-based tariffs in February, this latest Section 122 round of tariffs produces more uncertainty because there is uncertainty about what will happen if Congress steps in in July and what the regime may look like moving forward. So providing that certainty or eliminating those new tariffs would be helpful for small businesses.

Thank you for that. And Mr. Watson, policies like no tax on tips and no tax on overtime sound great to a lot of people and may deliver some benefit. But the tax code is increasingly complex. How do these provisions in HR 1 complicate the tax preparation for small businesses and their employers? I'm being told employees are having to do this on their own, they're not getting any benefit from the companies at all.

Two things on that. We did see some simplicity from keeping an expanded standard deduction, but the new deductions for tips and overtime can be complicated and more guidance from the IRS will be needed to help iron that out as folks are trying to figure out what they qualify for.

Well, thank you all for your time today and I yield back.

Gentleman yields back. I now recognize Mr. Alford from the great state of Missouri for five minutes.

Well, thank you, Mr. Chair, and thank you ranking member for holding this today. This committee really exists for one reason. That is to champion Main Street and make sure that small businesses have the tools, the resources they need to do businesses, to start businesses, to be the fabric of America. We have seen firsthand now what happens when tax policy gets right. The Tax Cuts and Jobs Act unleashed one of the strongest economies in modern history and the Working Families Tax Cuts builds on that success by making those pro-growth policies permanent. And permanence matters. Small businesses do not operate on one-year timelines. They make decisions years in advance about hiring, capital investments, and expansion. And when tax policy is uncertain, those decisions don't get made. Those investments don't get made. Working Families Tax Cuts and Jobs Act delivers that certainty and with it growth. We're already starting to see that. It strengthens Main Street by expanding Section 199A deduction for pass-through corporations, restoring 100 percent bonus depreciation and increasing Section 179 expensing so small businesses can reinvest in themselves. It supports innovation by allowing full and immediate expensing of research and development. And it puts more money in the pockets of working Americans through provisions like no tax on tips and no tax on overtime. I want to share with you a little story. Two weeks ago, a 76-year-old man named Melvin who lives in Benton County in Warsaw, Missouri, near Lake of the Ozarks, called our office. He was almost in tears. He said, Congressman, you've got to tell this story to the American people. I said, what is it? His daughter is a hairstylist, she works a lot on tips. Her husband works a lot of overtime in his job. They have not gotten a refund in years. And this year they just opened their mailbox, opened that envelope and the check was for $12,000. That's real money. Not just for Warsaw, Missouri, but anywhere in America. This bill is about more though than tax relief. It's about creating an environment where small businesses compete, plan, and succeed. Monday, the Small Business Administrator, Kelly Loeffler, came to our district and visited a good friend of mine, Franco Cupini, who owns a great Italian restaurant in Kansas City. And he told the administrator firsthand the benefits that it was having for his business and his employees who were getting large refund checks. The immediate expensing that he was able to conduct for his small business. And I'm telling you, Franco Cupini is not a millionaire, not a billionaire. I want to know, Mr. Watson, how many small businesses are classified as an S corp pass-through corporation in America?

The majority of small businesses are pass-through firms, either being an S corp or a sole proprietorship or a partnership.

How many of those... I looked it up, there's about 5 million operating as an S corp in America. This was comes from your website. How many of those have a income of greater than half a million dollars?

Not sure about the exact amount, but a large number of them do not have that level of income.

Right. I looked up in your website, it's about 3.1 percent. Yeah. We are talking about a large millions of companies, startups, mom and pops who have invested their time, their resources, their blood, sweat, and tears a lot of times into these small businesses who now have a shot at success and competing with the big guys. And yes, are some corporations benefiting from this tax policy? Yes, they are. I'll admit that. But you're also seeing some of the largest refunds we have seen in years. The average this year, the IRS just reported that it's more than 11 percent up from last year. Some are saying 24 percent by the time everyone gets filed. An average so far of a return of $3,400 in America. That is real money. And so yes, Mr. Negron, we are celebrating today. We are celebrating the hard work that this committee, the Republican conference put in, even though no Democrat voted for the one big beautiful bill, the Working Families Tax Cut. They all voted to raise taxes on America. We all voted to reduce and make permanent these deductions so that families can keep their farms. So that business owners can keep their businesses and thrive in America and contribute to the fabric of America. Thank you, Mr. Chairman, I yield back.

Gentleman yields back and now I recognize Mr. Olszewski from the great state of Maryland for five minutes.

Thank you, Chairman Williams, Ranking Member Velázquez, and to our witnesses for being here today. I'm excited to share some facts. Actually, I'm disappointed to share some facts because they're not that great. Today's conversation discussing the impacts of the one big beautiful bill, which President Trump and my Republican colleagues are now desperate to rename. But that makes sense to me because so many of my constituents are the working families this law purports to support, and they have nothing beautiful to say about this legislation. Unfortunately, their complaints are validated by the data. The big ugly bill massively increases our nation's debt by a whopping $3.4 trillion. That's $25,000 that will have to be paid back by every American household. So, what do we get in exchange? Well, the nonpartisan Congressional Budget Office determined that the combined effects of just the President's tariffs and the not-so-beautiful bill decreases net income for 99 out of 100 American households. Everyone loses except literally the top one percent. Those that make more than $700,000 annually. By 2027, the poorest American households will lose a net of $1,650 or 3.4 percent of their income. The middle 20 percent of earners will see their overall income decrease by 1,300. And the top one percent of those households will receive a net increase in income of nearly $5,000 with the ultra-wealthy doing exponentially better. I don't know anyone who would call that a good investment. There are also real-life impacts on our nation's small employers. For example, the $187 billion of SNAP cuts not only ends a critical lifeline for seniors, children, older adults, veterans, but it also harms small businesses. SNAP supports more than 200,000 jobs in independent grocery stores and another 45,000 jobs in agriculture, manufacturing, and transportation industries. It's not complicated. When consumers can no longer afford their groceries, those stores suffer. Under this bill, the rich get richer and the rest of us have fewer means to support the small businesses in our district. We might do less dry cleaning, wait more weeks between our haircuts, eat out less or perhaps not at all. Americans feel it in their pocketbooks and in their everyday lives. The one big beautiful bill is anything but beautiful. It's ugly, it's mean, and it makes the American dream even harder to realize. Mr. Negron, would you generally agree with the analysis presented here and would you agree with the sentiment that if it comes out of your pocket, it doesn't matter what you call it?

Yes.

And I know you had an engagement with Representative Tran, so I don't want to re-engage that too much, but that analysis excludes gas and the surcharges that you talked about, it excludes the fertilizer costs and the rising cost of food, the increases in mortgage rates. Isn't that yet another cost that Americans are bearing?

That's right. The analysis that's on that chart there, I have colleagues who at the center who worked on this or a similar chart and that was based solely on the cuts and the tariffs. It did not factor in the costs of the Iran war, which show that this picture looks even dimmer for working Americans.

And we know that we're also in the midst of a cost of living crisis after years of high inflation. Over a year ago, we finally had inflation trending back down in the right direction. How has inflation been under this administration and what policies would you have Congress consider to bring down the cost of living?

Yes, well we've seen inflation indicators start to, one they've kind stayed sticky around 3 percent, so above the Federal Reserve's target rate for most of the life of this administration. There are studies, one in particular from the Harvard Business School that believes that about 0.7 percent of CPI inflation is due to tariffs. And so we have had persistent inflation higher than what would have happened had the tariffs not been in place. The Iran war is threatening to accelerate it even further. And so quick list of things that you could do or that one could do is one, pull back these section 122 tariffs that the President put in place after the Supreme Court struck down his emergency tariffs. That's one example. You could restore the enhanced premium tax credits, which will help more than 20 million Americans better afford their health insurance. You could get more serious about building new homes, we can get down costs of housing by moving, there's bipartisan bill in the House, the Housing for the 21st Century Act, there's the bipartisan Road to Housing Act in the Senate. Move those bills, build more homes, that'll get housing costs down. Just three examples that come to mind.

Appreciate that. Americans are being crushed. It's time that this Congress actually do something and push back against policies that are hurting everyday working Americans. With that, I yield.

Gentleman yields back. I now recognize Mr. Meuser from the great state of Pennsylvania for five minutes.

Wow. Okay. Hey all, how are you? Thank you for your work, thanks for being entrepreneurs, thanks for driving our economy. And our role here is to try to assist that, right? I mean, that's what you would hope your government would do. Be advocates for small business, particularly on this committee, and do everything possible to remove the barriers so as you could grow your businesses, your enterprises, treat your employees well, and build products that are useful. I spent nearly 25 years doing that, helping grow a small business to a large business. How the government thinks and some members think that raising your taxes by a lot, 25 percent perhaps, is a good thing and somehow is ugly and evil and all those other things is insane. Also, let's or just highly irrational or completely illogical or just political commentary because we're told that the BBB or Working Family Tax Cut was all about billionaires. Okay, I have 795,990 people in my district, not one of them's a billionaire. Okay, I don't work for billionaires, okay, none of us do. So, so the what we're able to at least celebrate today on tax day is the fact that you're getting returns, the fact that 25 million small businesses are paying 22 percent less taxes than they would have if we would have abided by what every single Democrat in the U.S. House and the U.S. Senate voted for. As well, 26 million people are receiving no taxes on overtime. In some cases that adds up to $3,000, $4,000. We have 6 million people, elderly who are receiving Social Security that are not paying any taxes on the $6,000 deduction on Social Security. So there's all kinds of and that's a reason why our economy, even in spite of the other issues that need to be resolved, is doing extremely well. Certainly versus the rest of the world from an energy standpoint and everything else. So anyway, I'll just ask you, Mr. Watson, do you feel that the environment that you're in that it's been created over say the last 12 months, now I know the tariffs are definitely an issue. I mean, let's talk about that. The problem is though in 2019, 2020, we had 50 percent tariffs against us from our number one competitor, China. That was very, very difficult. I know from the industries that I was in, companies were being wiped out because of that. Products were coming in literally, they were selling them for what for what in my industry they were making them for. President wasn't going to live with that anymore because because how manipulative their exchange rates are and and their ability to to have slave labor basically. Okay, so they had huge tariffs on us, we had no tariffs on them, that's been reversed. India and you know what, our allies in Europe really the same thing. And and Canada. Canada had you know on our dairy farmers and and everything else had basically an embargo on dairy for American imports and we had a 3 percent or 2.5 percent tariff on them. Guess what? We rethought tariffs and we're reversing it and eventually it will be it will be equal. That's the whole idea to create that true parity. But anyway, the tax cuts, today's tax day, how has the what they refer to as the ugly bill, how has it benefited you?

So I think just speaking broadly on the tariff point real quick, I think certainly it's the case if we can get to a equilibrium where we're feeling good in terms of bilateral trade and those agreements are better on more solid footing and there's more parity there in terms of other non-tax trade barriers, that would be a win. I think the question is how long will that take and what is the uncertainty and disruption in the meantime? So hopefully we can get there, if not in this administration in the future when it comes to trade policy.

In this administration, I agree with you.

Yeah. And then on the tax cuts I think, you know, I think it is important to say that a big part of that underlying law was making permanent the 2017 cuts, which avoided a tax hike on 62 percent of Americans. And that's really going to kick in next year during the next year's tax filing season because they would have had that higher tax bill then. So I think that's another thing on top of the new cuts.

Thank you. Ms. Tapani, real quick, R&D tax credit, you mentioned expensing and bonus depreciation, your thoughts?

The R&D tax credit is incredibly important to small businesses, and I know a number of them who are using the money that they're saving through the R&D tax credit to reinvest in their businesses, to expand their facilities, and we see that time and time again.

Thank you all very much. I yield back, Mr. Chairman.

The gentleman yields back, and I now recognize Ms. Goodlander from the great state of New Hampshire for five minutes.

Thank you, Mr. Chairman, and thank you to our witnesses for being here today for this important hearing on H.R. 1, the President's so-called big beautiful bill. I must say this bill has been absolutely brutal for my home state of New Hampshire. It's been brutal for New Hampshire small businesses, and we've talked a lot about why that is so in this hearing today, but just to share with you, healthcare costs have been jacked up for every small business in my state, and that's because of the biggest cuts to healthcare in American history. We've seen our best healthcare providers literally go out of business because of these cuts. We have some of the highest energy costs in America in New Hampshire, and they've only gone up as a direct result of this bill. The invoice is extreme, and it has been absolutely brutal for the hardworking people of my state. We've talked about what was supposed to be one of the real upsides of this devastating blow to working people, which was making the Section 199A deduction permanent. And we've talked about who's benefited from this. Mr. Negron, I just want to give you an opportunity to say a bit more on that front. You know, when I look at small business people in New Hampshire, we're talking about, on average, an annual salary of $124,000, which is actually pretty good in terms of the national average. So can you just, in your written testimony, you really put a fine point on this, what we're talking about in terms of the share of who's actually benefiting from this Section 199A deduction?

Yes, happy to. So a couple things that I'd point out. So first, about half, a little under half of filers for the 199A deduction made less than $150,000 in income in the year in which they filed. They received 6 percent of the benefits of the deduction. The 10 percent of taxpayers who filed for the deduction who made more than $500,000 received two-thirds of the deduction. And so you can see that there's a major difference in who's receiving the benefits just in terms of dollars, and so that is, I think, probably captures most of the story there. 700,000 dollars received two-thirds of the deduction. And so you can see that there's a a major difference in who's receiving the benefits just in terms of dollars and so that is I think probably captures most of the story there.

And so that 6 percent who did capture the benefits, I think you mentioned that the benefits were around $429?

Yes, 425.

And you put that up against the costs of the trade war, which I want to come to in a second, and where do we end up when you do the final math on that?

Well, I think it's in the negative generally when you look at the higher costs due to tariffs, and, you know, happy also to talk about gas prices and other things, I don't know if you were going to take me there, but...

Yes, we'll go there. But first I want to talk about red tape and compliance costs because, Mr. Watson, your testimony should give each and every one of us pause. We're talking about $536 billion in compliance costs for the U.S. tax code, 7.1 billion hours spent complying with IRS tax filing and reporting requirements every year. For Section 199A, you pointed out this is a major source of complexity, which may explain why working people and small businesses aren't benefiting from it. You mention in your written testimony $20 billion in compliance costs in 2024 alone. Can you talk to us about how we can cut the red tape and simplify?

Sure, I think there's several options there. Of course, one is with 199A in particular, there are, you know, a series of restrictions and guardrails meant to, you know, in a, you know, for a good reason, try to reduce tax avoidance, reclassifying income. So there's these wage and capital limitations built into the law. But for folks, particularly who are not extremely high earners, that is a source of complexity and confusion, especially if there are entire industries that don't qualify, folks don't know that getting into business, that could be a rude awakening and surprise there. So I think there are options to simplify that, to either better target the deduction, especially to encourage more investment, which I think is something that we did see in that in the 2025 law that we could do more of to target in that and dial in that deduction more, and that could actually save a little bit of money too. More broadly, I think on tax day, it's really important that there's still a lot to be done. There was a big emphasis in my testimony on broader complexity. Folks are still feeling the pressure there. There's a lot of forms that they have to file. The IRS is going through a lot of tumultuous issues nowadays, and there's a lot of paper forms too that they're still dealing with. So digitization, taxpayer services are all going to be essential.

And the IRS has never been dealing with staffing cuts in the way they have, which has really harmed small businesses. I'm out of time, but I want to thank our witnesses again. I yield back, Mr. Chairman.

The gentlelady yields back, and I now recognize Dr. Morrison from the great state of Minnesota for five minutes.

Thank you, Chairman Williams and Ranking Member Velázquez, for holding the hearing. Thanks to our witnesses for being here today. During the past few weeks, I had the opportunity to meet with small business owners throughout my district, and what I've been hearing over and over again is that this is just a really hard time for small businesses. Last year they were hit with unexpected and unpredictable tariffs, as we've discussed this morning, which they're still being forced to pay despite the Supreme Court ruling. Earlier this year, during Operation Metro Surge, small businesses across Minnesota sustained heavy losses in sales and revenue. And now they're facing soaring energy prices and supply chain disruptions due to President Trump's war in Iran. Our small businesses are reaching a breaking point, and rebranding the so-called one big beautiful bill act isn't going to solve any of the problems this administration has created for them. Mr. Watson, I appreciated that during your testimony you highlighted that much of the economic damage caused by President Trump's tariffs fall on small business and how this results in higher costs for consumers and declining wages for workers. For nearly a year now, I have been asking this administration to exempt small businesses from these tariffs. Would you support a tariff exemption for small businesses?

I think that there's strong rationale for that, especially keeping even the de minimis exemption that's being challenged by the administration in place at minimum for businesses that have small dollar items they're going across the border, that's particularly helpful for them.

Appreciate that, thank you. And Mr. Negron, the Center for American Progress estimates that over 5 million small businesses get their health insurance from the exchange, and 4.4 million saw an average premium increase of over $1,500 because the Republican majority let the enhanced premium tax credits expire. Why was the expiration of these premium tax credits especially hard on small business owners and employees?

Well, I think there's in a couple of ways. One, many small business owners themselves receive their healthcare coverage through the exchanges, but we also know a large share of employees at small businesses, particularly under 25 employee businesses, receive their care through the exchanges. Of the 20 plus million who receive care through the exchanges overall, about half are either small business owners, self-employed individuals, or employees of these really small businesses. And so it's not just directly out of the pocketbook of the business owner, but for many it's affecting their employees and their ability to be competitive as a hiring destination because larger businesses can offer better benefits. If you're a really small business, knowing that the exchanges are out there and allows you to compete for workers in a way that you couldn't if that wasn't there or if the coverage was much more expensive.

I appreciate your explaining that. You know, I'm a physician myself, and watching the effects of this one big beautiful bill are pretty heartbreaking. We are creating a healthcare catastrophe that's going to have to be addressed. I also want to note that while some of the one big beautiful bill was offset by cutting critical food assistance and healthcare for millions of Americans, much of it was not paid for and will add over $4 trillion to our national debt over the next 10 years. Mr. Negron, how will this affect capital for small businesses and our economy overall?

Well, I think you're seeing it in a number of different ways now, and it will play out depending on the outcome of these tariffs and the outcome of the war in that higher costs across the economy could start to slow demand. We've already seen the job market slow down considerably. 2025 was the worst year for job creation since 2003 outside of a recession year. And when you look at the data, you see that Liberation Day is a clear dividing line. Job growth was more than 100,000 per month prior to April 1st, or prior to April 2nd, and since then it's been fairly anemic. And so these are trends that if they are not reversed because of changes in tariff policies or changes in the war, you could see that continue to act as a drag on the economy. We could see borrowing costs of capital remain elevated because of a lack of confidence about the federal fiscal situation, and so treasuries could remain elevated, which will result in higher borrowing costs. We're already seeing that in the mortgage market. Mortgage rates had gotten below 6 percent for a brief spell in late February and have since gone back up to just under 6.4 percent driven by this war. And so there's a lot still to be done. Decisions could be made to change course, but at the moment these different factors will slow down the economy, and really didn't need to be that way because the economy is resilient, but all of its headwinds are due to policy decisions that are being made by the administration.

It's a pretty chilling prognosis, but I agree with you, it's not too late, we could change course. The Republican majority could stand up to this President. Thank you, Mr. Chairman, I yield back.

The gentlelady yields back. I'd like to thank our witnesses today for their testimony and for appearing before us today. We are and we are praying for the Borbolla family as you go the next day or two. Without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair, which will be forwarded to the witnesses. I ask the witnesses to please respond promptly. If there is no further business, without objection, this committee is adjourned.