This being Small Business Week, entrepreneurs, workers, and consumers have plenty to celebrate and plenty to be concerned about. While inflation remains stubbornly high and tariffs threaten economic growth, businesses continue to hire workers and offer opportunities for advancement. Small businesses and franchises lie at the heart of the American economy.

According to the Bureau of Labor Statistics, small businesses account for the majority – 55% – of the net number of new jobs created. Franchisees, or small businesses that hold rights to use much larger companies’ brands, have been fueling this prosperity but are largely misunderstood by pundits and politicians. It’s long past time that policymakers recognized the importance of franchisees in keeping America charging forward.

Many of the most successful companies in America (McDonald’s, United Parcel Service, Starbucks) have decided that micromanaging every one of their stores simply isn’t worth the price tag. These large corporations have been willing to cede control of everyday operations to local owners.

While some things (e.g., logos and menus) must stay the same between franchise locations, local owners have the flexibility of setting workers’ compensation policies and organizing and executing standard operating procedures. Franchisees are given the freedom and responsibility to experiment with things like digitization and incentivizing outstanding work, and don’t have to constantly answer to corporate for everything. And, the rewards can be substantial. On average, franchisees retain roughly 94% of their business revenue (with the rest going to the franchisor).

These significant revenue gains accrue to some of the smallest businesses operating in the economy. Data from market research firm and consultancy FRANdata shows that more than 80% of franchisees are the owners and operators of just one location. Yet, these small locations generate considerable employment growth. These franchises are also an integral part of their respective communities.

Thanks to the incentive structure created by the franchise model, franchise-related employment gains far outpace job gains in more conventionally organized businesses. But these gains should not be taken for granted. One analysis by the American Action Forum found that federal tampering with the franchise model (e.g., replacement with a more top-down structure) would lead to 1.7 million fewer jobs across the private sector. Even a handful of tax changes can have significant ramifications for franchisors and franchisees across industries.

For example, the 2017 Tax Cuts and Jobs Act (TCJA) leveled the playing field for franchisees by lowering the top rate on ordinary income of individuals (e.g., franchisee owners) from 39.6% to 37% and allowing owners of sole proprietorships, S corporations or partnerships to deduct up to 20% of the income earned by the business off their taxable income. Enshrined in Section 199A of the Internal Revenue Code, this deduction ensured that franchisees were getting a substantial tax cut on par with larger companies – who also got a significant tax cut.

Yet, these provisions are in jeopardy because of the impending expiration of the TCJA. Unless lawmakers act by the end of the year, franchisees’ taxes will increase significantly, hampering job growth and ensuring lower wages for workers and higher prices for consumers. The consequences of this tax hike are unfortunately lost on policymakers with a less-than-charitable view of franchisees. Members of Congress such as Rep. Bobby Scott, D-Va., will stop at nothing to impose sweeping liability on companies with franchises, and many lawmakers baselessly claim that the TCJA was little more than a giveaway to the very wealthy. 

But, it’s easy for lawmakers to villainize what they don’t fully understand. To some policymakers and pundits, franchises are oppressive fiefdoms that punish workers for demanding a fair shake. To the actual workers and franchise owners running the show, these jobs change lives and are a lifeline to more opportunities in the future.

This Small Business Week, lawmakers must act to protect franchisees against runaway liability and ever-rising taxes. 

David Williams is the president of the Taxpayers Protection Alliance.