Donald Trump’s election-day victory initially cast the stock market into a tailspin. In the days since, it’s bounced—even roared—back. Why the yo-yo?
Markets don’t like uncertainty. It wasn’t prepared for a Trump victory—who was? But once it became accustomed to the idea and familiarized itself with what a Trump presidency can mean (to bank stocks, especially) it seems to have adjusted.
It’s not so clear for small-business owners, unfortunately. But there are several utterances from Trump’s campaign speeches that serve as tea leaves, that offer some clues as to what the next four years may mean for small-business owners, like mobile-entertainment companies.
According to CNBC, small-business owners were largely supportive of Trump during the campaign—as of the first week in October, 58.7-percent said of that demographic said would vote for him. It’s generally acknowledged, at least anecdotally, that the small-business community was looking for a change, someone they view as empathetic to its concerns. (Although President Obama’s quote often has been presented out of context—he was discussing his opponent’s proposed tax policy—some small-business owners were rankled when he said at a 2012 campaign stop: “Look—if you’ve been successful you didn’t get there on your own.”)
What we do know is this: Trump has said he will reduce taxes across all income levels, and compress the tax code to three brackets from its current seven. Under this plan, top earners will see a reduction in their tax rate to 33-percent, down from the current top individual rate of 39.6 percent. (The Bush-era tax rate for highest earners was 35 percent.) A married couple making $90,000 would see their 25-percent rate remain the same.
Not all small-business owners are enthused about the personal tax cuts, however. In a recent Huffington Post article, members of the Main Street Alliance—a national organization of small-business owners—said the following:
“The vast majority of small-business owners don’t support a tax system that augments their piece of the pie by cheating their fellow citizens out of theirs,” said David Borris, the owner of Hell’s Kitchen Catering in Chicago. “When we contribute our fair share of taxes, those dollars get reinvested in our local communities, which support tens of millions of small businesses nationally.”
Deborah Field, the owner of Paperjam Press in Portland, Ore., concurred. “To level the playing field for Main Street businesses, our tax code must no longer skew in favor of large corporations and their shareholders,” she said. “Without holding multinational corporations accountable to pay what they owe and first providing relief to low and middle-income earners we shouldn’t begin to consider tax cuts for the rich.”
Amanda Ballantyne, national director of the Main Street Alliance, says, “Mr. Trump’s tax breaks would deprive the government of badly needed funds for investments in infrastructure, transportation, education, and social services. The resulting budget cuts hinder the types of investments that drive local economies and put small businesses in a better position to succeed.”
Ballantyne went on to say: “The kind of tax policy that small businesses need is one that supports their customer base and their communities.”
Aside from personal tax rates, Trump has said much about what he’ll do for corporate and small-business taxes. In a word: cut. First, he said he’ll decrease corporate taxes to 15-percent—they’re currently at 35-percent.
For small-business owners, many of whom are S-Corps or other pass-through entities like LLCs, their tax rate would also max out at 15-percent.
That means the majority of business income that gets passed through to its owners would be subject to a 15-percent tax rate when they reported it on their individual tax returns. At a speech in Detroit in August, Trump said, “Under my plan, no American company will pay more than 15-percent of their business income in taxes. Small businesses will benefit the most from this plan.”
The National Federation of Independent Business, a conservative lobbying group, approved. “Mr. Trump’s plan would eliminate the disparity between the way large corporations and small businesses are treated under the code and all businesses would be taxed at a substantially lower rate,” the N.F.I.B.’s president, Juanita Duggan, said in a statement.
For businesses, specifically, Trump has proposed closing the H-1B visa program — the federal program that allows for as many as 65,000 skilled immigrants to work in the U.S. each year. This impacts larger companies like Facebook and Google, who regularly hire foreign skilled workers. Trump has said that he would require companies to hire American workers first.
What will the future yield? Trump is an oddity in that he’s made claims on both sides of many issues. But there’s little doubt that personal tax cuts will be a major part of his program.
DJ-business owners of America, stay tuned…
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