WASHINGTON (Reuters) - U.S. small business startup applications are surging this year with sentiment improving in the sector after a rocky post-pandemic period as inflation eases, a U.S. Treasury report showed on Tuesday.

The Treasury analysis, released as Vice President Kamala Harris' presidential campaign proposed a 10-fold increase in a tax break for startups, showed that the U.S. is averaging 430,000 new business applications per month so far in 2024. That is 50% more than the average in 2019, the last pre-COVID year of Republican nominee Donald Trump's administration.

Applications for businesses most likely to hire employees have risen to 140,000 per month, 30% more than 2019, the report shows. It added that small businesses since 2019 are now providing 70% of net new American jobs, up from 64% in the previous business 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 deduction limit is for $5,000 in startup costs, but the average cost to start a business is $40,000, the official added.

Harris has worked with U.S. Treasury Secretary Janet Yellen to provide more lending resources to small businesses in minority and under-served communities, including over $8 billion in investments in 162 community financial institutions through the COVID-era 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, there have been a record breaking 19 million new small business applications since President Biden and I took office - including in overlooked and underserved communities."

The Treasury analysis shows that several small business sentiment measures have improved in recent months as inflation has subsided. The monthly Small Business Optimism Index, based on a survey of National Federation of Independent Business member firms, has been trending downward since 2018, but this year has rebounded to its highest level since February 2022.

A similar U.S. Chamber of Commerce Small Business Index also has climbed this year, reaching a post-pandemic high in the second quarter of 2024.

Tight lending conditions for small businesses have been a headwind for the sector, but the Treasury report said that lending standards are starting to ease, another factor that is driving rising optimism in the sector.