By David Lawder

WASHINGTON (Reuters) – Applications to start small businesses in the United States are rising sharply this year, with sentiment in the sector improving after a difficult post-pandemic period and inflation falling, a U.S. Treasury report showed on Tuesday.

The Treasury Department analysis, released after Vice President Kamala Harris’ presidential campaign proposed a 10-fold increase in the startup tax credit, found that the U.S. is seeing an average of 430,000 new business filings per month in 2024. That’s 50% more than the average in 2019, the final year of Republican candidate Donald Trump’s administration before the COVID-19 pandemic.

Claims from companies that are most likely to hire workers rose to 140,000 per month, up 30% from 2019, the report said. It added that small businesses now account for 70% of new jobs in America since 2019, up from 64% in the previous cycle.

Harris will announce her plan for a small-business tax deduction of up to $50,000 for startups on Wednesday in New Hampshire, a campaign official said. The current limit on the deduction is $5,000 in start-up costs, but the average cost of starting a business is $40,000, the official added.

Harris worked with U.S. Treasury Secretary Janet Yellen to provide increased lending resources to small businesses in minority and underserved communities, including more than $8 billion in investments in 162 community financial institutions through the COVID Emergency Capital Investment Program.

“President Biden and I know that small businesses are the backbone of our communities,” Harris said in a statement accompanying the report. “Thanks to our Administration’s historic investments in the success and growth of small businesses, a record 19 million new small business grant applications have been submitted since President Biden and I took office — including in overlooked and underserved communities.”

Treasury analysis shows several indicators of small-business sentiment have improved in recent months as inflation has eased. The monthly small-business optimism index, based on a survey of National Federation of Independent Business member firms, has been on a downward trend since 2018 but has rebounded this year to its highest level since February 2022.

The U.S. Chamber of Commerce’s similar small business index has also risen this year and hit its highest level since the pandemic in the second quarter of 2024.

Tight lending conditions for small businesses have been a drag on the sector, but a Treasury report said lending standards are starting to ease, another factor contributing to growing optimism in the sector.

(Reporting by David Lawder; Editing by Stephen Coates)