Coronavirus fears hit the markets
Six ways a Biden presidency would impact small business
Former Vice President Joe Biden remains the Democratic frontrunner for his party's presidential nomination. And as he reminded many of us in last night's debate, he is considered by many to be the best candidate among the current field to beat President Trump. A lot can happen between now and then, but here are six things that small business owners should expect it Biden becomes president.
- Health care costs will remain stable, and even grow at a slower rate.
Under President Trump, health care costs have risen nationally between 6 percent and 8 percent, a reasonable amount yet still three to four times the rate of inflation. Unlike Trump, Biden is a strong supporter of the Affordable Care Act - with some tweaks - as well as a public option of health insurance for those who can't afford it.
Although Biden's plan for funding is still murky, his approach to addressing the country's health care challenges is not nearly as radical as those of some of the other leading Democratic candidates. What's more, his governing style suggests he would be more open than his former boss to compromise with Republicans on an ObamaCare 2.0.
The result? For starters, it would jeopardize many of Trump's initiatives, such as association health plans and the relaxing of rules around health care reimbursement accounts. A Biden presidency may also bring back other ObamaCare rules, like the individual mandate. However imperfect, Biden's initiatives would likely avoid significant fluctuations in small companies' health care costs and could also provide a potentially more affordable option for their employees if they choose to go off the company health plan, which would also save money.
- Small businesses may pay more in taxes.
Biden has big spending plans in mind not only for health care but also for his environmental and infrastructure initiatives. Those programs will need to be paid for, and that's going to come through higher taxes - both on corporations and wealthy individuals. An opponent of Trump's 2017 tax reform package, Biden has been careful to stay away from the tax benefits affecting small businesses, most particularly the deduction for pass-through companies. But pretty much everything else is on the table, including increasing the corporate tax from 21 percent to 28 percent and imposing higher ordinary and capital gains taxes for wealthier individuals.
The result? If you file a C-corporation tax return, your rates will go up. If you are in the highest earning tax brackets, your rates will go up. If you enjoy capital gains on your investments or you're planning on selling your business, both you and the buyer may find these transactions less tax-advantageous under a Biden administration compared to the current one.
- Employment costs will continue to rise.
In today's low-unemployment economy, many small employers are challenged not only to find good people but to compensate them fairly in an atmosphere of increased competition from their larger competitors. Unfortunately, small business costs could dramatically increase under a Biden administration. The candidate supports a $15 per hour national minimum wage (an increase that would put upward pressure on all wages), mandated paid time off, more union negotiating power and elimination of non-compete agreements for workers and a reboot of how companies treat and classify independent contractors compared to employees, ala recent legislation enacted in California.
The result? Labor and employment law is probably the area that will have the biggest, negative impact on small businesses under a Biden administration. Although he hasn't specified if all of his proposals would apply to smaller organizations, many likely would, which would mean a higher cost of wages and paid time off for small businesses.
Perhaps most concerning would be changes in the independent contractor versus employee classifications, a move that could affect hundreds of thousands of small businesses that rely heavily on outside contractors for significant portions of their work.
- Not much will change on tech, China and Wall Street.
Biden believes "we should take a hard look at" the anti-competitive activities of Big Tech firms like Facebook and Google. He called for "new rules" and "new processes" on China. He is "linked" to the Dodd-Frank Act, which imposed further regulations on Wall Street and the banking industry. But for the most part, the candidate hasn't proposed doing anything significantly different than what the Trump administration is doing, even less so in some cases.
The result? A status quo. Biden doesn't appear to be out to break up the Big Tech giants, which means that, although these companies could face more regulations, small businesses will continue to use (or be abused by) them. He's unlikely to instigate another trade war with China, opting instead to carry forward with whatever deal Trump does. He has a long relationship with the financial services and credit card industries and would probably not shake things up there.
- Small businesses may benefit from more spending on defense and infrastructure.
Biden has been on record as supporting increased funding for the military and investing billions in the country's transportation and utility systems. If he wins and gets the funding, small businesses who are players or have customers in the defense, utility or construction industries may very well enjoy a Biden presidency.
- Finally, small businesses will feel Biden's love for entrepreneurs.
Biden does not have any small business experience himself. But, a seasoned politician, he knows the value of saying the right things to this potential block of 30 million voters. As such, he supports the dropping of onerous licensing regulations for certain occupations like hairdressers and immigration reform for "dreamers." He also wants to make investments in education to provide more skills and continue the funding of local and regional organizations that support entrepreneurs and small businesses.
The bottom line for small business is that a Biden presidency would be somewhat more expensive and uncertain than four more years of Trump. But it would be not nearly as expensive or uncertain as the presidencies of some of the other major Democratic candidates.
So would this additional expense and uncertainty be worth replacing the current pro-business but very erratic president? That's a question that will be on the minds of many small business owners in the coming months.
Gene Marks is founder of The Marks Group, a small-business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.