Whether you own a small business or are thinking of starting a business, you know that governmental policies affect everything from regulations you must comply with to taxes or healthcare for employees. When Donald Trump takes over the Oval Office in January 2017, how will American small businesses be affected?
Small Business Taxes Under Trump: What to Expect
In his campaign, Donald Trump pledged to create a more business-friendly tax environment by reducing corporate tax liability to 15% across the board. At present, small businesses are taxed at anywhere from 15 percent to 35 percent, and sole proprietors and corporate shareholders are taxed at up to 40 percent of their income.
Altering tax law can be time-consuming, so this change would not take effect immediately. If Trump sticks with the flat 15 percent promise he made when campaigning, business owners will see an immediate tax reduction and resulting increase in personal or business profit.
Wages Under Trump: What to Expect
Many expect the federal minimum wage to increase from its current rate of $7.25 per hour, which would affect small business owners. States have shown widespread support for wage hikes; four states passed minimum wage increases this November.
Business for a Fair Minimum Wage supports a federal minimum wage of $12 by 2020, and has the support of over 1,000 corporations and business owners. Yet, given Trump’s history of refusing to pay the workers who built his hotels and casinos, there is little hard evidence to suggest that he will support a $12 minimum wage as President. In direct contrast, Hillary Clinton backed a federal minimum wage of $12 and supported state and city initiatives to establish a $15 per hour minimum wage.
Small Business Lending Under Trump: What to Expect
Since the election, mortgage interest rates have risen by 0.5 percent, a big jump. This is a sign that investors believe inflation will come, as the GOP-led Congress approved new spending in 2017. Whenever inflation occurs, interest rates for all types of loans usually rise.
The Small Business Administration provides government loans to businesses; however, these loans cannot be used to either start or expand a business. Small Business Administration can be used for real estate, disaster recovery, and short-term funds. Small business owners who think they may need a business loan would be advised to secure one as soon as possible to avoid higher interest rates.
Unemployment Under Trump: What to Expect
Trump has promised to create 25 million jobs by cutting business taxes so low that employers will be inspired to create new jobs, an update of the “trickle down economics” favored by President Reagan. Republicans and Democrats disagree on whether this tactic actually reduces unemployment.
If unemployment does decrease under Trump, small businesses may have to increase benefits or wages to recruit the most desirable candidates.
Immigration Under Trump: What to Expect
Donald Trump has vowed to take a hard line in immigration and build a wall on the U.S.-Mexico border. Depending on your industry, his anti-immigration stance may positively or negatively affect your small business.
Family farms rely on immigrants for labor and will face devastating losses as a result of Trump’s policies. Studies show that farmers would need to pay between $14 and $18 per hour to replace immigrant labor with domestic labor, and that food prices would rise by up to 3 percent to offset farm losses. Restaurants would similarly be adversely affected by stricter immigration policies.
In general, many small businesses would stand to benefit from immigration reforms; however, deportation (which Trump has Promised) will sting businesses. Studies predict that agriculture will experience a 9 percent drop in production, and that construction and hospitality will decrease by 8 percent. The majority of illegal immigrants work in these industries.
Overall, the landscape for those owning or starting a business is mixed. Certain factors (including taxes and a looser regulatory environment) may be favorable to businesses, while rising interest rates, immigration and deportation policies, and a higher minimum wage will cut into profits.
These are just predictions over what might affect small businesses in the U.S., and only time will tell what will happen under a President Trump regime. Still, it’s never too early to prepare your business based on Trump’s Twitter record and recorded statements.