First 100 Days
Now that President Trump is in office, it’s time for his administration to address what it can do to help small- to mid-sized business owners grow their operations and workers to find new and better employment opportunities. The core of the new president’s voter base was made up of people within these groups and it’s time to pay-off the promises he made to them.
If Trump makes good on what he campaigned on, his administration will likely push for expanding the business- and worker-friendly tax incentives and making it easier to take advantage of them. While it will take time to complete broad-based tax reform, here are four ideas that would be relatively easy to move through Congress, maybe even within the first one hundred days of the new administration.
1. Lower business tax rates.
While it’s more likely that lowering taxes for businesses will be part of a broader tax restructuring initiative that could take years to complete, it would be a dramatic statement if the new administration and Congress took on this issue immediately. A small incremental business tax reduction now could do a lot to jump-start business and hiring activity here in Tennessee and throughout the United States.
2. Significant tax credits to encourage business owners to offer employee stock ownership and revenue sharing programs.
Studies show that one of the best ways to drive improved worker performance and engagement is to offer employees a meaningful stake in the companies they work for. People work harder and are more productive if they know it will pay off for them in the long term. This type of incentive can come in the form of owning a piece of the company they work for or sharing in its profits.
Some companies, especially larger ones in the financial and professional services industries, have offered these incentives for decades. However, these programs have not expanded broadly into fields like contracting, because there’s been limited governmental support and the tax rules related to them are among the most complex in the federal tax code. They’re far too complicated for the typical small- to mid-sized contracting business to navigate and leverage effectively.
If President Trump wants to provide meaningful incentives to businesses and their employees, taking on this issue could be a good place to start. It aligns closely with his pro-business, low-tax stance and it would be relatively easy to isolate outside the broader tax overhaul project.
Would you like to get started today? If you’re interested in improving employee performance by offing them company ownership or profit-sharing opportunities, an experienced tax expert can help. We’ll work with you to set up an effective employee profit-sharing program now and help you make adjustments to it as tax rules change.
3. Research and development tax incentive expansion.
One of the top ways for companies to grow, allowing them to hire new employees and provide more opportunities for current ones, is by doing research and developing new products and services. It can help contractors stand out — and rapidly advance their position — within their marketplace.
While the concepts of “research” and “product and service development” may seem daunting, they actually represent a broader array of activities than most contractors are aware of. Many things, including developing certain types of software, creating new construction products and tools and coming up with novel ways of doing contracting work can qualify.
Similar to the tax incentives for employee company ownership and revenue sharing discussed in the previous section, the current credit for research and development isn’t as robust as it could be and it’s complicated to navigate the rules associated with it. The maximum benefit a company can today claim against payroll taxes is $250,000 (significant, but not big enough to cover many contracting-related research and development projects) and the tests required to prove the validity of a tax claim by a contracting firm are extensive.
Check out our overview of how research and development tax credits can be used by contractors.
This is another area where simplifying the tax rules and raising the limits to meet global standards could help drive business growth and hiring in the United States.
Did you know: The research and development tax credit can be claimed for the current year or retroactively? Despite the regulatory complexity, doing so can really pay off for contractors. An experienced tax advisor can help your firm take full advantage of it and keep you updated on changes.
4. Higher education opportunities.
Most people agree that education provides the best path for people to get ahead. It gives owners of companies the knowledge they need to take their businesses to the next level and workers the skills required to advance their careers.
However, today’s education tax credits are a hodge-podge targeted to people with children in private schools, new college students, and adults interested in continuing their educations. They must be balanced against educational grant opportunities, which are often based on income levels. As most people are aware, income levels are affected by taking advantage of tax credits, which makes finding the right balance and mix very complex.
One of the most popular things the Trump administration could do right away is address the educational incentive mess. After all, voters throughout the presidential election process — including those who supported Sanders, Clinton, and Trump —expressed interest in reducing the cost of higher education. Finding a way to do this could be a way to bring together an electorate that finds it hard to agree on almost anything.
Without a doubt, tax regulations are likely to change faster and more dramatically than they have in decades. Feel free to contact us anytime you have questions about your current or future tax situation.