On Sunday November 8th, the Associated Press announced to the American people the calling of the 2020 Presidential Election. Joe Biden and Kamala Harris would become the next President-elect and Vice President-elect of the United States. In this post, we’ll take a look at some of the changes that small businesses can expect from a Biden-Harris administration, including a second stimulus package (or a third). Many agree that the landscape will look vastly different than the Trump-Pence administration. It could be similar to the positions that the Obama-Biden administration rolled out.
Experts disagree: did the Obama administration do enough to promote small businesses and entrepreneurship? The official White House archives include his top achievements for entrepreneurs. However, some may recall President Obama’s “You didn’t build that” line. Pragmatically, Obama was able to provide small businesses with healthcare clarity through the Affordable Care Act (aka Obamacare). Trump came into office with the explicit goal of rolling back Obamacare. He did so partially by getting rid of the individual mandate. Trump’s term was also rounded off with the COVID-19 pandemic. It led to significant amounts of stimulus, PPP loans, and emergency actions intended to prop up businesses nationwide. Ultimately he has dealt with a second stimulus package badly needed by small businesses.
Biden’s COVID & Stimulus Outlook
What’s in store for small businesses when it comes to a Joe Biden administration? Based on campaign plans and speeches, we have an idea of what the President-elect wants to accomplish. The primary goal of the Biden administration seems to be: get COVID-19 under control and a stimulus package underway. When it comes to the business landscape, here are 8 things to look out for during a Biden administration.
1. New Tax Plan
If there’s one thing that Republicans and Democrats fundamentally disagree on, it’s the role of taxes. Joe Biden rolled out his tax plan early on in his candidacy for President. Based on what he’s communicated, we can expect to see income tax rates increase for both individuals and corporations. The Biden administration would like to see the top individual federal income tax rate rise from 37% to 39.6%. They’d also like to see the corporate tax rate rise from 21% to 28%. For the Biden administration, $400k in income seems to be the magic number for deeming someone a high income earner. This is because Biden will phase out 199a deductions (for those earning in excess of $400k). We’ll likely also see some sort of impact to the 1031 like-kind exchange for tax paying real estate investors (who earn in excess of $400k).
2. Tighter COVID-19 Restrictions
With the U.S. entering its third wave of COVID-19 cases, slamming especially the Midwest, we can expect to see a Biden administration issuing stronger mask-wearing mandates and restrictions on gatherings and indoor events. Small businesses in retail and hospitality will further suffer. The administration will need to pass a further round of stimulus support. A vaccine dispersed among the public in early Q2 of 2021 will hopefully allow for a strong, albeit late, rebound in these industries. There may be heavy debates about whether employers may require that employees receive the vaccination.
3. Stabilization of Health Insurance
Further, the Biden campaign has been touting the “Public Option.” I.e. health insurance that is made available to everyone, even if they have access to health coverage through their employer. Biden has also considered lowering the age that individuals become eligible for Medicare (down to 60 from 65). This would provide insurance access to younger retirees. It would also contribute to individuals leaving the workforce at an earlier age. It may contribute to greater innovation and upward mobility for younger workers.
4. Shifts in Compensation
Also, expect to see Biden’s new tax plan enacted. This will mean more FICA tax for individuals who earn more than $400k. This is commonly referred to as the “doughnut hole” and it will provide for a gap between the existing wage base and $400k in earnings. We can expect to see more laws like the ones enacted in San Francisco and Portland, OR. These require executives to be compensated in line with their median worker salary (or suffer a penalty otherwise). We also expect to see more interest in increasing the Federal minimum wage to $15 per hour. States like Florida have adopted a gradual increase up to 2026 to ease the increase in labor cost for employers.
5. Focus on Workplace Ethics
We may additionally wind up seeing more requirements and incentives around workplace ethics. This includes new rules and regs around diminishing workplace harassment and discrimination. The Biden administration has maintained that they are committed to the Equity Act and equal workplace rights and protections for individuals who identify as LGBTQ+. Expect also to see new training at the Federal government level. Employers may end up being required to provide training on harassment and discrimination in the workplace.
6. Small Business Job Creation & Stimulus Package
Given the impact that the COVID-19 pandemic had on jobs and employment in the US, job creation will be front and center for the Biden administration. Whether or not the Trump administration passes a second stimulus package before January, the Biden administration will have to manage its implementation (or passing) and effects.
Also, the U.S. Census Bureau announced in 2020 a record number of new business formations (i.e. applications for FEIN). This is probably a result of a growing gig economy and the Trump administration’s friendliness to businesses. In a post-COVID rebound, we expect to see many of these new businesses thriving and hiring.
7. Expansion on Pro-Immigration
Additionally, we’ll probably see a host of changes to Trump-era decisions with respect to immigration. The biggest will be a pro-immigration strategy. It’ll also include rescinding USCIS memos that slow the operational rate of visa adjudication, focusing on a massive backlog, and shifting focus away from the wall at the border with Mexico. The liberalization and rollback of restrictions related to visas will impact some industries like software development and research institutes. The Migration Policy Institute, a non-partisan think-tank dedicated to monitoring U.S. immigration policy, has cataloged every change that the Trump administration had made to US immigration policy (a whopping 126 pages). When it comes to a Biden administration, we expect to see more visa opportunities (e.g. caps lifted), new visa categories created, and general restrictions rolled back.
8. Greater Compliance Enforcement
We imagine seeing stepped-up enforcement of all types of laws and regulations that affect corporations. That includes things like wage and hour laws, tax and benefit plan enforcement, and contractor classification. It would make sense for companies to keep an eye on the EEOC agendas. We expect that the government will incentivize U.S.-based companies to keep jobs in the U.S. We’re unsure what penalties and incentives for doing so or not doing so would look like.
There’s much anticipation that once Joe Biden and Kamala Harris are sworn in on January 20th, there will be a lot of changes – at both the policy level and the legal/enforcement level.
Americans will see a return of government focus on renewable energy, bio/nanotechnology, and drones and robotics. Big tech will most likely remain in the crosshairs of regulators and policymakers. Taxes will rise and a second stimulus package will appear to bridge the gap before common vaccination and re-openings.
Small businesses should expect to encounter those changes, and the expectations a remote workforce will bring into a return to normalcy. Business owners should plan now to determine how they can take advantage of those changes or alternatively protect themselves from possible adverse effects.
Some of the questions you should ask yourself as a business owner are:
- Are plans with the bank in place to apply immediately for stimulus help when new legislation is passed?
- How will participation in an employee benefits’ plan be affected by a likely return of Obama-era marketplace coverage and healthcare price stabilization?
- How will business budgeting be affected by an increase in corporate taxes?
- In a low interest rate environment, what capital investments make sense now and how can these offset higher taxes?
- As unemployment rates begin to decline, what advantages and incentives will attract and retain the best talent?
- Are workplace ethics policies and employee handbooks in place that are compatible with best practices and remote work situations, and reflect the trends in employment law?
At Suitless, these questions are our daily bread. We’d love to help you make sure you are compliant and ahead of the curve. Shoot us an email to set up a time to speak with our expert team about your questions: firstname.lastname@example.org.