Entrepreneur
Donald Trump will be the country’s 47th president in January. He comes with a lot of baggage, and there are many reasons why people didn’t vote for him. This column is not about that.
This is about business. When you consider a second Trump administration purely based on how he would impact businesses in this country, it’s pretty clear that it will be good. My business, in particular, will see positive effects.
I’m realistic. I understand that President Trump is not going to create new customers or innovate new products for me. He’s not going to solve the severe labor shortages that make it difficult for me to find and retain good talent. A second Trump administration can’t magically wave a wand and fix future inflation or drive down interest rates. He’s not going to manage my business, collect my receivables or pay my bills. However, the Trump administration will impact my business in three significant ways.
Related: 10 Significant Ways A Second Donald Trump Administration Could Impact Your Taxes
1. Taxes
For starters, my tax bill will not be going up. It may actually come down.
The biggest deduction that will likely not go away is the Qualified Business Income Tax deduction for pass-through entities like S-corporations and partnerships. My company is an S-corporation. This year, I get a 20% deduction on my business’s income before it passes through to my individual return. This deduction, which was enacted by the first Trump administration in 2017, is set to retire at the end of 2025.
Many small business owners have also enjoyed a $29,200 standard deduction on their jointly filed individual tax returns. However, that deduction will be cut in half after 2025.
Significant deductions that allowed us to depreciate the first-year cost of purchasing capital equipment were reduced and faced further limitations this year. Many of my clients who once deducted research and development expenses in their first year have been forced to amortize those payments over longer periods because of expiring rules.
Tax rates in 2025 compared to 2017 would have increased. Capital gains rates would have gone up. Earners making more than $400,000 annually would’ve likely had new taxes imposed.
Overall, taxes would have gone up for small business owners like me had Kamala Harris been elected. Now, thanks to Trump’s intent to extend or make permanent the 2017 Tax Cuts and Job Act with GOP majorities likely in both the House and Senate, they won’t.
2. Workplace regulations
Under the Biden administration, many government agencies have been encouraged to issue new regulations, ranging from helping unions organize more easily to banning non-compete agreements. However, three regulations have had a particular impact on my company.
Thanks to new worker classification rules finalized earlier this year, it’s now more challenging for me to use independent contractors. My business relies on freelancers to do development and training for our clients. We invoice for their services. Our contractors get paid well and enjoy their flexibility. But now, I may be forced to reclassify these independent workers as employees because the services they perform for my business are “integral” under the new definitions. Doing so means I have to pay employer taxes, offer more worker protections and potentially open up my benefit plans — like health insurance — for them. My contractors have never asked for this, but now I may be forced to do it anyway.
For my employees, overtime pay is going up. Starting in January 2025, new rules from the Department of Labor will make workers making less than $58,656 per year eligible for overtime pay, up from $35,568 at the beginning of this year. This means that my salaried workers who meet other requirements will be entitled to overtime pay if they work more than 40 hours per week. My company’s flexible PTO plan mitigated the obligation to pay overtime in any given week because an employee may decide to work fewer hours some other time. But this rule will challenge that strategy and likely increase my compensation costs.
Finally, the Equal Employment Opportunity Commission issued new rules earlier this year that make employers like me liable for the behavior of our employees both in and out of the office and when they’re participating in online calls. For example, if colleagues bully an LGBTQ+ employee at a non-company event at a bar on a Saturday night, they may feel that their work environment is hostile, and unless I don’t know about it, I’m responsible. Another worker on a Zoom call with a vendor may be uncomfortable about a book on a bookshelf behind them. Again, I’m responsible as the employer for creating a non-hostile environment. To address these concerns, I must pay labor attorneys, trainers and a tech company to set up a reporting system.
What do all three of these regulations have in common? They’re not law. They’re interpretations of the law by government agencies. There are lawsuits challenging these rules. The Biden administration is responding to these suits. A Trump administration will not, which means the rules will either be reversed or not enforced. President Trump will likely not fill the EEOC leadership positions as they expire over the next four years, leaving that agency toothless and giving me — and many small businesses — some relief.
Related: The 2024 Election Will Determine How AI Impacts Your Business. Here’s What Entrepreneurs Must Do to Prepare.
3. Business environment
True story: A friend who works in the finance department of a large, publicly held company confided to me this week that his company had two budgets prepared based on the election outcome. If Harris had won, the budget would have been “defensive.” Trump’s budget is “expansion.” To me, that says it all.
If a president impacts the economy, it’s more intangible than tangible. When rhetoric from the highest government offices is accusatory, offensive or disapproving against business, most businesses circle the wagons. When those same political leaders pass rules and regulations targeting companies, those companies have to pay for those regulations, which takes away funding for their growth. And when leaders point their fingers at “big corporations” and the “wealthy,” they risk those entities pulling back on investing, hiring and spending.
But the opposite is true when there’s a pro-business president in office. The recent stock market rise is evidence of that. So is the “expansion” budget at my friend’s company. The reason is obvious: People ride bikes when it’s sunny; they stay inside when it’s raining. Businesses — and the millions of employees who work for them — take more risks and enjoy more rewards when they know they don’t have to worry about the government interfering with their operations. You can’t quantify this benefit. But you know it’s there. This is why small business confidence was higher during the first Trump administration than during the Biden administration.
My company sells sales and marketing software. It’s a discretionary investment — one that my clients make when they feel confident enough in the future to invest in technology that will help their firms grow. Given the more favorable business climate, I expect many will start opening their pocketbooks to make this investment.
Of course, there will be challenges under the Trump administration. And there’s still a lot of uncertainty. Many economists have warned about the negative impact of the tariffs he plans to oppose. Others are very concerned with the deficits his policies may create. Some industries — particularly ones that rely on government contracts or chip-making, as well as environmental, educational and government service initiatives, will likely suffer. Others will benefit. There will be winners and losers under this administration. But for my business in particular? It’s a win.
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