OPINION:
I think I understand why surveys from the National Federation of Independent Businesses, U.S. Chamber of Commerce and Bank of America are showing a rising level of small-business optimism. What do these small-business owners know? Based on my firm’s hundreds of clients and the thousands of business owners I have spoken with over the past six months, here’s what they know.
For starters, they know that the most significant impacts of the One Big Beautiful Bill Act will be kicking in.
Taxes
Thanks to the legislation passed midyear in 2025, businesses now have the permanent ability to deduct their costs of buying capital equipment, building manufacturing plants and doing more research and development. Their employees — particularly tipped workers, those working overtime and seniors — will be getting refunds for the tax overpayments they made in 2025 in advance of the deductions they will be taking when they file their tax returns.
Hopefully, on the advice of their accountants, they will adjust their estimated tax withholdings in 2026. All this means more money in their pockets. Workers can also now receive more benefits for dependent care and their retirement savings.
Regulations
U.S. small businesses are now enjoying a much changed — and diminished — regulatory environment. Agree with it or not, the Trump administration has been on a tear of rolling back federal regulations (more than 600 of them) since taking office. This means energy firms can get back to leveraging the country’s economic resources at lower costs to the consumer and businesses can operate without worrying about new rules around overtime, worker classifications, unions, discrimination, harassment and the like.
Less regulation means lower costs, which will lead to more worker compensation and will offset any potential inflationary increases caused by tariffs.
Interest and inflation
Watch for interest and inflation to continue falling. The prime rate is now 6.75% after reaching a high of 8.5% just two years ago. Inflation was once close to 9% and is now below 3%. Falling inflation expectations mean lower bond yields, which will translate into lower mortgage rates, which are already down to about 5% to 6%, compared with 8% recently.
As the cost of borrowing falls, expect to see a rise in home sales and construction projects, both commercial and residential. Considering that the real estate industry represents 15% to 18% of the country’s gross domestic product, it’s no surprise that this long-anticipated rebound will lift many businesses, big and small, across the country.
Consumer spending
The country’s two largest payroll companies, ADP and Paychex, have reported wage increases for both hourly and salaried workers over the past year of 3% to close to 7%, comfortably above inflation. That trend will continue. Markets are up more than 16% since last January. Household wealth is at an all-time high. Big retailers such as Walmart and Amazon are forecasting strong holiday sales and have upgraded their annual forecasts.
All this has happened in the midst of doom-and-gloom predictions from economists and media about rising inflation, falling incomes and higher tariffs. If consumers opened their wallets in the face of these warnings, imagine what will happen this year as they come to understand that those predictions were wrong.
Artificial intelligence
This will not be the year artificial intelligence takes over businesses. It will not be the year AI replaces zillions of workers and causes global unemployment. Perhaps sometime in the future. This year will be the one in which AI features and functionality in small-business accounting, customer relationship management, human resources and other software become more readily available, accurate and reliable.
Like the internet, the cloud, mobile and all the other advances in technology that my clients swore they would never accept (and ultimately did), AI will become a bigger part of their fabric. I’m already seeing small businesses subscribe to phone systems with virtual AI receptionists, set up simple agents to accept accounts payable invoices, create AI-monitored chatbots to answer simple questions on their websites and lean more into AI assistants such as ChatGPT, Gemini, Copilot, Grok and Claude to get more out of their existing staff. In 2026, AI will start to generate a return on investment for small businesses and increase their profits.
To be sure, not all small businesses will have a strong year. We live in a big country with geographical, industry-specific and management quality issues to consider. There are and will always be challenges: rising health care costs, labor shortages, supply chain demands, risky investment decisions, bad technology.
It’s possible that an AI bubble is lurking. Or a crypto collapse is in the offing. Or there’s another potential war in the Middle East. Or a major national disaster or pandemic. Maybe our 79-year-old president has a health scare. Or there’s a Madoff/Enron/Bear Stearns fraud waiting in the wings that unravels the markets. Anything is possible.
Barring those unforeseen events, the economy is poised for another strong year in 2026, and small businesses will benefit.
• Gene Marks, CPA, runs The Marks Group PC, a financial and technology consulting firm near Philadelphia.
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