As the 2024 U.S. election approaches, both Kamala Harris and Donald Trump have proposed policies targeting small businesses. Here’s a look at the potential pros and cons of each candidate’s plan, providing insights on how they might shape the small business landscape.
Kamala Harris’s Small Business Policies
Harris’s approach emphasizes increasing startup support and improving access for new businesses. She proposes raising the startup tax deduction from $5,000 to $50,000 and suggests deferring these deductions until the business reaches profitability, which could allow entrepreneurs to maximize tax savings and ease early-stage financial pressures. Harris has committed to directing one-third of federal contract dollars to small businesses. This plan includes expanding contract access for small businesses in rural and underserved areas, building on the Small Business Administration’s current goal of awarding 23% of prime government contracts to eligible small firms. Additionally, she aims to simplify occupational licensing requirements, which would reduce the regulatory burden on small businesses, especially in highly regulated industries.
However, Harris’s plan also includes raising the corporate tax rate to 28%, which could impact small C-corporations, potentially cutting into profit margins. Her proposal for a 28% capital gains tax on high-income earners might also affect small business owners looking to attract investment from wealthier backers or reinvest their own capital gains. Although her policies are geared toward economic stability, increased regulation, such as her proposed federal ban on price gouging in the food industry, could bring additional compliance costs for businesses dealing in regulated products.
Pros:
· Increased tax deductions for startups, allowing businesses to delay deductions until profitable.
· Simplified licensing requirements, reducing entry barriers for small businesses.
· Expanding contract access for small businesses in rural and underserved areas.
· Price stability focus could aid businesses by stabilizing costs and reducing competition pressures from large corporations.
Cons:
· Harris’s plan to raise the corporate tax rate to 28% could increase costs for some small businesses organized as C-corporations, potentially impacting profit margins.
· Higher capital gains tax on high-income earners could make it more difficult for small business owners looking to reinvest profits or attract investment from wealthier backers.
· Although her policies are targeted at reducing red tape, the federal ban on price gouging and new regulatory standards could impose compliance costs, especially for businesses dealing in regulated goods.
Donald Trump’s Small Business Policies
Trump’s plan primarily focuses on tax cuts and trade protections. His proposal to reduce the corporate tax rate from 21% to 15% would decrease taxes on small C-corporations, freeing up resources for growth. Trump also supports extending or making permanent the 2017 Qualified Business Income Deduction, which allows significant tax savings for pass-through entities like LLCs and S-corporations. Additionally, Trump’s stance on payroll tax elimination for tips could benefit industries like hospitality, helping employers by reducing payroll tax burdens while also potentially increasing employee take-home pay.
However, Trump plans to impose tariffs of 10% to 20% on imports and a more than 60% tariff on goods from China, which could raise costs for small businesses reliant on foreign suppliers. These tariffs might impact sectors such as retail and manufacturing, potentially resulting in higher prices for consumers. Additionally, the potential elimination of Social Security taxes for retirees could have long-term implications, affecting funding for programs critical to many Americans, particularly those with limited retirement savings, which may indirectly impact businesses that rely on older customers.
Pros:
· Trump’s proposal to reduce the corporate tax rate to 15% would lower the tax burden on small businesses organized as corporations, allowing them to reinvest more into growth.
· Extended Qualified Business Income Deduction provides substantial savings for pass-through entities.
· Elimination of payroll tax on tips would help reduce payroll costs in the hospitality industry.
Cons:
· Trump’s plan to impose tariffs (up to 60% on certain imports) could increase the cost of goods for businesses relying on international suppliers, affecting sectors like retail and manufacturing.
· Potential long-term budget impact of Social Security tax cuts could indirectly affect consumer spending patterns.
· Limited regulatory relief specific to small businesses.
Overall Impact and Considerations
Both candidates aim to aid small businesses but approach their support from different angles. Harris’s policies lean toward regulatory support and small business access, providing greater startup relief but potentially increasing operational costs due to higher taxes. Trump’s policies focus on tax cuts and tariffs to protect domestic industries, which might benefit established businesses more than startups. Small businesses will need to consider these potential changes carefully as they plan for 2024 and beyond.
In a climate of rising inflation and economic uncertainty, the 2024 election could substantially influence small business viability and growth depending on which policies prevail.
Sources
2. https://www.newsweek.com/how-kamala-harris-donald-trump-policies-may-impact-businesses-1953026
3. https://www.politico.com/news/2024/09/03/harris-small-business-tax-cuts-00177210
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