a second donald trump The administration will likely have a huge impact on small business owners in the area, with potential effects both positive and negative. Here’s how Trump’s proposals on tariffs, taxes, regulatory cuts and spending could affect small businesses in different industries.
Taxes
Many provisions of the Tax Cuts and Jobs Act of 2017 will expire at the end of 2025. This was a signature law during the first Trump administration and the president-elect has promised to extend or make permanent most, if not all, of its provisions.
One of the biggest stipulations that will expire is the Qualified business income tax deduction. Currently, this allows eligible owners of “pass-through” entities, such as partnerships and S corporations, to deduct up to 20% of their business income before it is “rolled over” to their individual tax returns. Business owners who run C corporations also face tax rates rising from the current 21% to 28%.
Business owners who take advantage of the $29,400 standard deduction on their jointly filed individual tax returns will see that deduction. cut in half. First-year deductions for research and development costs have already expired, and other incentives to invest in capital goods, such as machinery, furniture and technology, have also been cut. Deductions related to estate taxes and state and local taxes are also on the table.
The fate of these provisions will have a direct impact on the taxes small business owners pay, which are among their largest expenses.
Rates
In May, the Biden administration rate increase on certain products from China, including levies of up to 25% on steel, aluminum, batteries, critical minerals and ship-to-shore cranes, and up to 50% taxes on imported solar cells.
President-elect Trump has promised further increase all rates on imports from China up to 60%, in addition to imposing a 10% tariff on all other imports.
The impact of tariffs has been much debated. Supporters say raising tariffs protects prices, creates and protects jobs and provides more federal tax revenue. Opponents worry that tariffs could negatively impact competition by benefiting some industries over others, inviting retaliatory actions by those countries they target, and, probably most importantly, raising prices and fueling inflation. .
Small business owners who sell or buy products using imported materials would be hardest hit, and this applies to all industries.
Other companies that have been negatively affected by foreign competitors undercutting their prices may find increased tariffs beneficial.
Regulations
Certain industries, particularly energy, will benefit from a likely rollback of environmental regulations on drilling.
More important for small businesses is a likely slowdown, if not a reversal, of major labor policies that the Biden administration enacted this year.
For example, the Department of Labor issued new rules on worker classifications That required more employers to classify independent contractors as employees and therefore incur additional tax and benefit costs. The same department also reviewed its overtime rules so, at the end of this year, eligible workers who now earn up to $58,656 will be entitled to overtime pay (at the beginning of the year this amount was $35,568).
The Equal Employment Opportunity Commission also issued new rules hold employers more accountable for their employees’ behavior both inside and outside the office, especially if that behavior can create a hostile work environment.
Lawsuits have already been filed against these regulations and more are expected. The Trump administration is not expected to defend these regulations, so they could revert to what they were before the president. joe biden took office.
At the EEOC, commission members’ terms expire each year, and if the trend in their first term continues, the Trump administration is unlikely to fill those positions, leaving the commission virtually ineffective.
Spent
According some economistsPresident-elect Trump’s spending and tax plans could increase our already high national debt by up to $7.75 trillion. The US national debt now stands at $35.9 trillion.
Increasing the country’s national debt in that way without significant changes in federal government revenues or spending will put more pressure on the Federal Reserve to expand our money supply, resulting in inflation and higher interest rates.
Federal Reserve Chairman Jerome Powell He has said that he will not resign if Trump asks him to, and that Trump cannot fire him under the law.
Even with the recent cuts, interest rates remain historically high and inflation is above the Federal Reserve’s target.
Industry Impact and Sentiment
Since taking office, Biden has seen a significant decrease in small business sentiment and optimism, as measured by the National Federation of Independent Business for more than 50 years.
As happened during Trump’s first term, sentiment may rise to historically high levels. Small businesses employ more than half of the workers in this country and They represent 44% of US economic activity.according to the US Small Business Administration. More bullish sentiment could help increase investment and hiring.
Certain industries that dominate Philadelphia’s economy, such as health care and education, could suffer significant disruption if President-elect Trump implements policies to end the federal Department of Education, curb what he sees as leftist tendencies at universities, and rein in fixation of medical care prices.
Other major industries in the area, such as financial services, manufacturing and construction, may see the benefits of looser oversight, protective tariffs and fewer labor regulations.
But because politicians, mostly Philadelphia Democrats, opposed his candidacy, Trump will likely withhold federal support for investment in local public infrastructure or other local initiatives involving small businesses.