With Donald Trump now leading the United States, there are a lot of questions in the air about the future of small businesses and what’s to come.
Karen Kerrigan, President & CEO of the Small Business & Entrepreneurship Council (SBE), held a live Q&A to answer questions about how small businesses will be affected by the new Trump Administration. Kerrigan has advocated and pushed for entrepreneurship and global small business growth for more than twenty-five years, and frequently testifies before U.S. Congress on key issues affecting entrepreneurs and the economy.
Tax Cuts for Corporations?
President Trump mentioned cutting taxes for corporations, but it wasn’t exactly clear if he would also provide tax relief for small business owners.
“President Trump campaigned on dropping the corporate and business tax rate, along with things like eliminating the alternative minimum tax, having full expensing for all small businesses, and eliminating the death tax,” said Kerrigan. She went on to explain that President Trump will be providing tax relief for both business types as part of a fundamental tax reform in order to simplify the overall process.
Kerrigan referenced an article covering tax reform by SBE council advisory board member and author, Barbara Weltman, which covers key points that will affect small businesses, such as rate cuts, border adjustability, expensing, research and development, and net operating losses. In terms of the GOP pan, Kerrigan explained, ”the business tax rate will be ten percentage points higher, the individual business tax rate will be twenty-five percentage points, (the) corporate rate will be twenty percentage points (higher)… eliminate the death tax, (and) eliminating the alternative minimum tax.” One important point she mentioned that’s very controversial in the business community (especially retailers and those who import goods) is the border adjustability tax. The reason for border adjustability is to counter the border adjustments that U.S. trading partners have built in to their valued added tax. Kerrigan warned that business owners will likely see a lot of increases on that side. The bottom line is that all business types should expect to see lower rates for small businesses and corporations, the elimination of a lot of taxes, full expensing, and a simplified system.
Kerrigan believes a package will be put together and available with a GOP approach in the next 100 days (late spring) through the budget reconciliation process. The fundamental tax reform hasn’t been done in nearly 40 years, so it’s definitely a top priority for the new administration. Kerrigan made note of the fact that there have been questions about whether or not this will be retroactive or forward-looking, and her guess is that it will be forward looking instead of retroactive and they are going to be dealing with numbers and how tax cuts affect the budget.
What is the process to identify which regulations to axe? Is this a guillotine approach or a more subjective approach to regulatory reform?
A guillotine approach is a systematic, speedy, and low-cost method of reviewing a large number of regulations to determine if they are still relevant and applicable to today’s economy. Governments are tasked with reviewing and updating regulations and formalities, many of which have built up over decades that are no longer current and fail to help the economy grow and protect the citizens of the United States. The guillotine approach was created as a solution to that problem.
Kerrigan explained that the process is sort of all of the above, but not really a guillotine approach. There is a multifaceted approach to regulatory reform. One is the broad type of regulatory reform approach that they’re taking right now, which essentially makes institutional changes to how you do regulations.
In terms of regulations and what the Trump administration is doing with the executive order is taking a deeper look at some regulations that the Obama administration passed during the end of his tenure. “For example, one regulation they are looking at is the blacklisting rule. Currently those that are accused of an act to get them blacklisted, are blacklisted up until their actual review, which isn’t fair to them,” said Karrigan. She concluded that the bigger piece of this is to move forward in a way that’s more modern, that makes sense, that takes small business input into account, and to hear from all sides (such as public comments) so the whole process is very thought out.
What is the status on the repeal and replace action on the Affordable Care Act?
The president put out an executive order urging the department of Human and Health Services (HHS) or the government to come up with ways to relieve the burden of ObamaCare on people and businesses. The Trump administration is really moving fast on making changes to ObamaCare using the budget reconciliation process to start voting. For example, they may start voting on repealing the individual mandate, repealing the employer mandate, or repealing other things they think are driving up the cost of coverage, etc.
They are looking at offering more affordable and competitive choices, such as new products entering the market compared to existing products already available on the market. There is some certainty in the market right now, but there is some concern for those that bought products on ObamaCare exchanges and they will probably let them keep them based on the dates if they want to keep them, but the problem with some of these exchanges is that in five states, they don’t offer the coverage, and in some of the counties there are only one or two choices in coverage. They want to introduce more competition to make it more affordable.
Kerrigan concluded that there is a new way to come up with great solutions in the marketplace where there are problems. It’s currently overregulated at the state and national level, but the Trump administration believes there’s a new way to afford health insurance and provide necessary products and services. It’s very important for entrepreneurs and the public to provide feedback during this process.
If you missed the live Q&A, visit https://huzza.io/sbecouncil/live-stream/as-the-expert-small-business-insider-live-january-26-2017-edition.