30-40 million voters make up the Small Business voting block, and every candidate knows this. The presidential candidates have been bringing up benefits for Small Business a lot, as well as attacking their competition on their proposed policies.
Last year, Hillary made a promise to be our “small business president”, and her promises include simplifying tax filings, having more tax credits targeted to smaller businesses and their owners, as well as making it easier for these smaller companies to get funded. She was also the first to put “small business” as a particular issue for her campaign on her website. As we all know though, campaign websites are biased, and when trying to figure out what a candidate is actually going to try and accomplish, one needs to take a look at the track record.
The National Federation for Independent Business (NFIB) represents 325,000 small businesses in all 50 states and Washington, D.C., and is dedicated to leveling the playing field with Big Business, Big Government, and Big Labor in every key area – taxes, healthcare, regulations, and more. (taken directly from the NFIB site)
What is important here is to understand that Hillary Clinton, during her time in the Senate, 75% of the time voted against policies that would help small businesses, according to the NFIB. Among these proposals were bills which would drive up the cost of affordable energy for small business, and protecting small business owners against tax hikes.
However, with news of her new Small Business goals, Jack Mozloom, NFIB media and communications director, states “We are glad that she’s focused on small business as a presidential candidate, and we’re eager to find out what she has in mind.” Citing Clinton’s NFIB voting record during her time in the Senate at an average 25 percent, Mozloom says: “It’s not the worst, but she could do better from our perspective.” Source: http://www.nfib.com/article/will-there-be-a-small-biz-advocate-in-the-white-house-in-2016-69428/
With that being said, many new ideas are being proposed by the Clinton Administration. Here is a small evaluation on the effects of Hillary Clinton’s proposed policies, as well as what the competition has said.
A CHANGE IN INFRASTRUCTURE SPENDING
Hillary Clinton has promised to overhaul infrastructure spending. Clinton recently said at a Colorado rally, “We’re going to have the biggest infrastructure investment program since World War II, and if you look, our roads, our bridges, our tunnels, our ports, our airports, our water systems, they’re all in need. They all should be repaired. So we’re going to make investments that will make America grow our economy, put people to work, and position us better to actually be competitive around the world. But there’s a lot of infrastructure that you can’t necessarily see that we want to work on.” While this will put government workers to work, one of the biggest reasons to economic hardships in Japan and Europe has been excessive government spending.
Specifically, Clinton’s infrastructure plan calls for an extra $275 billion in spending over five years. A Infrastructure bank would be created, where $25 billion of that $275 billion would go to loans and loan guarantees that could add up to an additional $225 billion. This means that this project could be a $500 billion dollar investment from the US Government. However, this is chump change compared to Trump’s plan, which will cost roughly twice as much. The point here is that excessive government spending can cripple economies, and specifically, small business, unless of course your small business depends on government spending.
WALL STREET RESTRICTIONS AND THE EFFECTS
Clinton, like many small business owners, likes the capital Wall Street provides, but also are unhappy with it’s excesses. She plans on closing the loop holes which benefit hedge funds, and wants to hold corporate executives accountable when problems occur. While people are worried that more restrictions will reduce capital, this will be better for businesses in the long run because it means that there will be a bigger demand for providing legitimate funds for more reputable businesses.
While the Affordable Care Act does allow companies to provide their employees with healthcare, it brings on higher taxes for businesses. Most small business have less than fifty employees; this excludes them from the more demanding taxations of Medicare. Being that Clinton is an advocate for the Affordable Care Act, as a small business owner, you can expect her to work in more of the same line as Obama. Of course, this also depends on who gets elected into Congress.
CERTAIN SMALL BUSINESSES WILL PAY MORE IN TAXES, BUT NOWHERE NEAR THE AMOUNT TRUMP CLAIMS
Donald Trump said on Monday, August 8th, 2016, “would tax many small businesses by almost 50 percent.” The keyword that makes this Trump statement mostly false is many. It is nowhere near many, comparatively.
When we are talking about small business, we aren’t simply referring to the mom and pop shops around the corner. According to the Small Business Administration (SBA for short), 97% of all of the businesses in the United States of America are considered small business. There are some businesses with 1,500 employees and a gross income of over $38 million that are still considered small business according to the SBA. There are also different rules from the SBA in the IRS’s guidelines for what is considered small business.
So lets break down where Trump got this figure –
Currently, the top tax bracket is 39.5% +3.8% for any possible Medicare taxes the business owner would have to pay.
This brings us to 43.3%. Clinton is proposing a 4% surcharge on higher earners, so that brings that number up to 47.4%, which is close to the 50% that Trump is claiming.
One more fact to consider is that this 4% surcharge is for companies profiting $5 million or more. So with the top tax bracket being for the most successful small businesses, and the surcharge also being for the most successful small businesses, one can consider that yes, some small businesses will be paying almost 50% in taxes. But not many, considering the bulk of small business isn’t in that tax bracket.
Lets look at just how many small businesses aren’t in that tax bracket:
According to Citizens for Tax Justice,of the 150 million tax returns filed in 2013, 34,251 of them said their income was more than $5 million. So, that’s far less than one percent. It’s around 0.00022%. Another factor to consider is that in particular industries, if you have more than 100 employees or more than $750,000 in annual revenue, you aren’t considered a small business. This brings that .00022% even lower. Also, according to the Office of Tax Analysis at the U.S. Treasury Department in 2011, an estimated .5% of small businesses reported profits exceeding $1 million.
So, if you are part of the fraction of successful small businesses that Hillary’s policy is targeting, then yes, you will pay more taxes. Keep in mind though, this fraction is far less than 1% of all of the small businesses in the United States.
Do you think that any of these possibilities will affect your business? Talk to one of our specialists today. Having proper preperation in regards to funding can help you prevent poor performance in 2017. Get more info here.