What Does the New President Mean for Business in 2021?
What a Biden Administration Means for Business in the U.S. - Former Vice President Joe Biden will be the next president of the United States, and change in the White House comes with changes to the business plans of companies large and small.
Business strategists have been gaming out a potential Biden presidency for months now, planning for what could change.
Although President-elect Joe Biden ran on a platform of higher corporate tax rates and expanded healthcare, Biden could be better for business than the alternative, according to a recent Wall Street Journal piece from Greg Ip. Biden moving into the role of the president could ultimately mean little change with a split congress. Business leaders say one of the most important issues at hand for businesses is the global coronavirus pandemic, and it’s unclear what’s to come between hypothetical stimulus efforts and potential lockdowns and mandates. It’s a severe balancing act, and no matter what happens, it’ll have huge implications.
Tax Changes
In regard to longer-term domestic policy, “I think most businesses are expecting that there will be some change to tax rates, some change to overall regulatory structure,” said Clayton Allen, a senior vice president at Height Capital Markets.
He has been unequivocal on this, saying that raising taxes will be a “day one” priority, effectively undoing Trump’s Tax Cuts and Jobs Act of 2017—if Congress agrees. The TCJA cut the top corporate tax rate from 35% to 21%; Biden would raise it to 28%. He has also said, “We’re going to double the tax on foreign profits so we don’t encourage people to leave and build abroad.” At the same time, he would offer tax incentives to companies that bring overseas operations to the U.S. and make certain green investments, among other things.
What about small business
Small business challenges are nothing new, but the pandemic and economic collapse have shone a spotlight on two seemingly intractable issues plaguing our nation’s entrepreneurs and small business owners.
First, capital is far too concentrated—both geographically and demographically. Look no further than who gets venture capital dollars. Just four metro areas (Silicon Valley, Boston, New York, and Los Angeles) get a whopping 80% of venture dollars.5It is also unfairly concentrated among certain people. In 2016, just 15% of all businesses receiving venture capital were women-owned, 8% were Hispanic-owned, and 3% were Black-owned.6The onset of the COVID-19 economic disaster has made the capital problem even worse. While capital has remained available for large businesses, small businesses have not been helped as much by low interest rates and federal COVID relief. For example, it is well documented how minority-owned small businesses had widespread difficulties accessing the Paycheck Protection Program. Hispanic and Black-owned businesses are less likely to work with the established banks that were administering the program and distributing the initial tranche of PPP funding. As a result, these businesses didn’t get as much help as needed.
Second, there is not an adequate safety net for small businesses. Sixty percent of small businesses have less than two months of operations costs in reserve.8If you are a gig worker or start your own business, traditional unemployment insurance and other support programs are either off limits or hard to access. And while programs like the Paycheck Protection Program supposedly build a safety net for small businesses, lack of a permanent program means small businesses are subject to the whims of Congress, or federal inaction.
The big picture for business owners and entrepreneurs
A larger question—how Biden will affect the U.S. economy overall—remains hard to answer. No President alone can significantly change fiscal policy; that’s mostly up to Congress. Monetary policy is almost entirely out of the President’s hands. A study from Moody’s Analytics concluded that a President Biden would produce far more jobs and income than a continuation of Trump, while research from Stanford University’s Hoover Institution found the opposite. Research from Princeton University says there’s little evidence that Presidents influence the economy’s performance one way or the other. Either way, there has never been a better time to start a new business than today.
