WHAT DOES THE NEW ADMINISTRATION MEAN FOR SMALL BUSINESS
SMALL BUSINESSES LOOK TO DONALD TRUMP FOR CHANGE
On November 8th, 2016. Donald J. Trump was elected 45th President of the United States in a sweeping and what some claim to be, a shocking victory over Hillary Clinton, former Secretary of State. In what opponents have considered to be a major defeat, Trump took along with his victory a total of 30 states in the Electoral College on December 19th. Though the president elect has no prior public service, he is widely-revered as a successful businessman and negotiator. Trump’s ideals are something that has business owners across multiple industries enthusiastic about his success in defeating Clinton, who is often considered an extension of the outgoing and routinely disparaged Obama Administration. Armed with the slogan, “Make America Great Again”, Donald Trump has already taken strides to “drain the swamp” and replace Obama’s cabinet with some atypical selections. One of the first positions that Trump sought to fill following his victorious win was that of the Small Business Administrator.
Late last year, president-elect Donald Trump tapped one of his largest campaign contributors Linda McMahon, former WWE CEO to lead the Small Business Administration. The selection is indicative of Trump’s movement to venture beyond the traditional status quo. Linda McMahon along with her husband Vincent McMahon have amassed an estimated $1.16 billion through their entertainment empire (Vinton, 2016). What does McMahon’s nomination mean for small businesses across the United States?
According to Donald Trump, McMahon has a “tremendous background and is widely recognized as one of the country’s top female executives” (Trump, 2016). The president-elect went on to state, “Linda is going to be a phenomenal leader and champion for small businesses and unleash America’s entrepreneurial spirit all across the country” (Trump, 2016). Though detailed plans of how the spirit will be unleashed have yet to be articulated with concrete strategies, the president-elect made several pledges to improve the economic climate for small businesses, and business owners are holding him to those promises. McMahon seems up to the challenge and supporters are confident that she will deliver, but first let’s review some of the issues affecting small businesses in America and what specifically the president-elect plans to address in his historical movement.
What Should a Small Business Expect Under a Trump Administration?
Under a Donald Trump Administration, the president-elect has vowed to address the concerns of small business. Among the many challenges that businesses must contend with, the focus of Trump’s campaign and subsequent appointment include:
- Federal Tax Reform
- Deregulation of Business
- Repealing the Affordable Care Act (also referred to as Obamacare)
Federal Tax Reform
Trump has promised to eliminate special interest loopholes in an effort to make business tax rates competitive. For businesses of all sizes, he has promised to reduce the business tax rate from 35% o 15% while also eliminating a corporate minimum tax.
Taxes are simply a part of doing business in the United States and for small businesses, the cost is great. Small business owners are faced with both individual and corporate income taxes, which means they are taxed twice. Additional tax requirements include unemployment compensation, excise taxes, and more (SBA.GOV). Depending on how a business is structured, also determines what taxes are involved on both the corporate and individual level. One thing is for certain and that is that the cost of taxes steadily increases for businesses as they grow making it tough to be competitive.
Deregulation of Business
In regards to deregulation of business, Trump has promised to “eliminate our most intrusive regulations”, “decrease the size of our already bloated government through agency review”, and “cancel immediately all illegal and overreaching executive orders” Trump, 2016). Trump’s economic vision suggests, that he intends to revitalize the economy in America by reviewing regulations that “inhibit hiring” such as the EPA’s Clean Power Plan, the EPA’s Waters of the US rule, and the DOI’s coal mining moratorium (Trump, 2016).
Overtime pay is another area in which Trump and his cabinet are expected to make major overhauls, likely impacting small businessowners and their employees alike. In May 2016, the Obama Administration announced the Department of Labor’s final rule on overtime which extended overtime pay for over 4 million workers automatically within the first year. Organizations under the rule, would have been required to pay exempt employees working 40 plus hours per week time-and-a-half if their annual wages were less than $47,476 (Maroney, 2016). The intent of the rule change was to ensure that employees were being compensated fairly for their work. The final rule was supposed to go into effect on December 1ST of 2016, however it was placed on hold by a federal judge in Texas just 10 days prior. In October, 2016, 21 states filed for a preliminary injunction to place a halt on the rule citing the DOL overstepped its authority. Opponents to the rule have indicated that the regulation would reduce morale while impacting the workplace in a negative manner decidedly small businesses and non-profit organizations (Nagele-Piazza, 2016).
A Trump Administration promises favorable results for not only small businesses in sectors such as retail and hospitality, pharmaceuticals, and banking, but the defense industry as well. Trump has set his sights on strengthening the U.S. military, modernization, building new ships aircrafts, and weapons. Considering his esprit de corps with regards to growing the global military, the defense industry will likely reveal new opportunities for government contractors of all sizes to gain increased revenue while creating new job opportunities. Rosenberg suggests that there is a positive outlook for firms conducting business with the government as they entertain the possibility of receiving contract awards set-aside for small businesses under the new administration (Rosenberg, 2016). While some challenges are evident as in the case of Trump’s suggested regulation on foreign trade and the sources of funding for defense spending, the industry is optimistic.
The Patient Protection and Affordable Care Act
Along with concerns regarding federal tax requirements and business regulations, the Affordable Care Act is another issue affecting not only small business owners but individuals as well. As part of his plan to deregulate the stronghold of government on business, Trump has promised to repeal the Affordable Care Act, coined as “Obamacare”.
The Affordable Care Act has impacted small businesses and their employees. Small businesses usually purchase group health insurance coverage and as a result must contend with a regulatory environment and increasing renewal costs. According to the NCPA, the burden of compliance falls on businesses as “nearly two-thirds of Americans with health coverage have employer-sponsored health insurance” (Herrick, 2014). Businesses with more than 50 employees are required to comply with the healthcare regulations and cover 60% of the cost for minimum individual coverage or risk facing penalties. Rising costs of premiums have moved employers to pass the costs down to employees and increasing the costs to cover dependents (Herrick, 2014). Some of the management responses to the Affordable Care Act include downsizing the number of employees in an organization and reducing employee hours to cover the cost of the program.
Though there is some apprehension among small business owners in different parts of the country about how the president-elect’s policies will impact their companies, others anticipate that conditions for small businesses will improve. Since Trump’s victory, small business owners have been described as “optimistic” and “enthusiastic” according to the National Federation of Independent Business Owners who found that confidence in business was on the rise following the election (NIFB.COM). Reports suggest that consumer confidence rose and sales increased by modest margins in some industries indicating an increased comfort with spending following the election, which is a plus for businesses. With just a few days remaining until president-elect Donald J. Trump is sworn in to office on January 20, 2017 the anticipation for a stronger economy is undoubtedly high. Since the Republican Party has retained its position in Congress, Trump is likely to see his visions for small businesses advance.
Maroney, J. (2016). White-Collar Overtime Rule Delayed: What Business Owners Need to Know. Forbes. 5 DEC 2016. http://www.forbes.com/sites/groupthink/2016/12/05/white-collar-overtime-rule-delayed-what-business-owners-need-to-know/#777c8a4444ad
Nagele-Piazza, L. (2016). Federal Judge Halts Overtime Rule. SHRM. 22 NOV 2016 https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/judge-blocks-flsa-overtime-rule.aspx
Rosenberg, J.M. (2016). Donald Trump Makes Small Businesses Upbeat about 2017. Denver Post. 28 DEC 2016. Denverpost.com
SBA (2009). Effective Federal Income Tax Rates Faced by Small Businesses. SBA. APR 2009. https://www.sba.gov/sites/default/files/rs343tot.pdf
Trump, D. (2016). President Elect Donald J. Trump Intends to Nominate Linda McMahon to Serve as the Administrator of the Small Business Administration. Donald J. Trump Facebook Page. https://www.facebook.com/DonaldTrump/posts/10158245462455725:0
Vinton, K. (2016). Meet Linda McMahon, Wife of WWE Billionaire and Trump’s Pick for Small Business Administrator. Forbes. 7 DEC 2016. http://www.forbes.com/sites/katevinton/2016/12/07/linda-mcmahon-wife-of-wwe-billionaire-vincent-mcmahon-is-trumps-pick-to-head-his-small-business-administration/#91b48954f32d
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