How Small Businesses Might Fare From A Trump Presidency

Everyone knows Donald Trump is a different breed of Presidential candidate. His background as a businessman was his chief selling point when he first ran for office in 2016.

Trump’s tax cuts helped spur the economy his term, until Covid hit and decimated the economy. The Tax Cuts and Jobs Act (TCJA) overhauled the tax code in 2017 by changing deductions, depreciation, expensing, tax credits and other tax items that affect businesses. His goal is to boost economic growth by reducing taxes and simplifying the tax code. Among the key corporate tax provisions:

• Lowering the corporate tax rate from 35% to a flat 21%.
• Initiating a “Repatriation Tax” on overseas profits held by U.S. companies, thereby incentivizing them to bring back foreign earnings to the U.S. at reduced rates.
• Enabling businesses to fully deduct the cost of certain capital investments immediately, rather than depreciating them over time, thereby encouraging investment.
• Allowing a tax credit for employers that provide paid family and medical leave to employees.
• Making many owners of sole proprietorships, partnerships, and S corp eligible for a qualified business income (QBI) deduction. The TCJA allows eligible taxpayers to deduct up to 20% of their QBI, plus 20% of real estate investment trust (REIT) dividends,and publicly traded partnership (PTP) income.

What Could Trump Offer Small Businesses This Time Around?

1. Deregulation

Trump has long favored reducing the regulation of businesses as part of his economic policy. While in office, he cut regulatory burdens in the finance, energy, and manufacturing sectors in order to spur economic growth and encourage investment.

Trump supported dismantling parts of the Dodd-Frank Act, enacted after the 2008 financial crisis to increase oversight of financial institutions. His goal in deregulating the finance industry is to reduce compliance costs for banks, particularly smaller and regional banks that frequently engage in small business lending.

Trump’s deregulation in the energy sector opened areas for oil and gas exploration, including in offshore waters, to increase domestic energy production and reduce reliance on foreign oil. The rollbacks helped put U.S. oil and gas production ahead of Saudi Arabia and Russia. Small businesses, including those in the transportation industry and ones that deliver products, benefited from cheaper gas prices. When Trump left office in January 2021, the average cost of a gallon of gas was about $2.39. Gas prices rose dramatically during the Biden years and were a big reason inflation rose. However, fuel prices have begun to decline in recent months.

While in power, the Trump administration worked to reduce labor regulations on businesses, including easing some restrictions related to overtime pay and workplace safety.

Trump believes regulations unnecessarily burden companies, especially small- and medium-sized businesses. He claims that excessive regulations curtailed economic growth and made U.S. companies less competitive globally. Trump believes that reducing regulations will encourage innovation, job creation, and investment.

2. Tariffs

The former president has said he will impose across-the-board tariffs of 10% or 20% on imports coming into the U.S. and higher rates on all Chinese imports. He has also proposed a 100% or 200% tariff on cars made in Mexico and on products made by companies that move manufacturing from the U.S. to Mexico. Trump says that tariffs will boost American manufacturing, create jobs, and generate billions of dollars in revenue that would go away if he initiates tax cuts.

3. Tax Relief

If elected, Donald Trump will likely extend the provisions of the 2017 Tax Cuts and Jobs Act. Otherwise, these tax policies will expire. Recently, he has floated the idea of lowering the corporate tax to 15%. He also proposed the idea of “no tax on tips” for hospitality and service workers, a concept that Kamala Harris also embraced. He has also suggested eliminating taxes on overtime pay.

4. Access to Capital

Although he has not touted expanding access to capital as frequently as Kamala Harris has done on the campaign trail, SBA lending rose during the first two years of the Trump Presidency. In 2016, under Barack Obama, SBA lending totaled $31,8 billion. The figure rose in 2017 ($32.9 billion) and 2018 ($33.2 billion) but declined in 2019 ($30.2 billion). Trump initiated the Paycheck Protection Program (PPP), which kept millions of companies afloat during the pandemic.

Pros and Cons

1. Deregulation

Deregulation streamlines processes and tends to reduce costs. For instance, cutting through government red tape, speeds up small business lending and reduces costs. Setting less restrictive energy policy will help American producers and reduce fuel costs overall, which will have an impact on the bottom lines of business owners.

However, there are protections that regulations provide that can be valuable for the environment, for workers, and for businesses themselves if they were to go away.

2. Tariffs

By raising tariffs, foreign-made goods will become more expensive in comparison to things made in the U.S. In theory, this action will raise the competitiveness of American manufacturers.

But prices can go up for U.S. manufacturers, too, if they use foreign-made parts. Further, if the U.S. raises tariffs on cheap, Chinese-made goods, there could be an inflationary effect to the policy. Additionally, other countries could respond by imposing retaliatory on American made goods, which would thereby hurt their ability to sell goods abroad.

3. Tax Relief

There is a financial risk involved with cutting taxes and imposing tariffs. If American productivity does not rise because of tax cuts, it will have a negative effect on the economy by increasing the national debt. He has not stated how he would address this revenue loss. Similarly, the amount of money collected through tariffs will have to offset potential revenue shortfalls due to tax cuts or reduced revenues from taxes on U.S.-made goods if the tariffs do not yield their intended results.

Ultimately, if government revenue losses happen, the national debt will rise, resulting in inflation and stress on the economy. High levels of debt lead to increased government interest payments, which can consume a significant portion of the federal budget. Additionally, when the government borrows heavily, it can lead to higher interest rates, thereby raising the cost capital for businesses (and individuals) who want to borrow money. If the debt is financed by printing more money, it can lead to inflation in the economy.

According to many surveys, the economy is the number one issue among voters in 2024, and it’s an issue in which voters seem to prefer Donald Trump over Kamala Harris. Trump is relying on his reputation as a businessman, support for deregulation, and decreasing tax burdens in his campaign.

These are issues that are important to small business owners. While, he has outlined his overall philosophy, his website has not been as specific as Kamala Harris has been in providing details.

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