Beyond Politics, Trump's Handling Of Tax, Health Care Reform Looms Large For Small Businesses (Forbes)

Claudia Mirza, co-founder and chief executive officer of Akorbi, from right, Ivanka Trump, daughter of U.S. President Donald Trump, Jessica Johnson, president of Johnson Security Bureau Inc., President Trump and Dyan Gibbens, founder and chief executive officer of Trumbull Unmanned, listen during a meeting with women small business owners in the Roosevelt Room of the White House on March 27, 2017 in Washington, D.C. (Photo by Andrew Harrer-Pool/Getty Images)

Claudia Mirza, co-founder and chief executive officer of Akorbi, from right, Ivanka Trump, daughter of U.S. President Donald Trump, Jessica Johnson, president of Johnson Security Bureau Inc., President Trump and Dyan Gibbens, founder and chief executive officer of Trumbull Unmanned, listen during a meeting with women small business owners in the Roosevelt Room of the White House on March 27, 2017 in Washington, D.C. (Photo by Andrew Harrer-Pool/Getty Images)

GUEST POST WRITTEN BY

Toby Scammell

Mr. Scammell is founder of Womply, a Software-as-a-Service company serving small and medium-sized businesses.

With controversy being the only constant in the early presidency of Donald Trump, it’s easy to get distracted by politics and lose sight of what matters most for the economy right now. In particular, Americans preoccupied with 24-7 political analysis should pay more attention to how the country’s 28 million small business owners are responding to Trump’s presidency because he has an outsized impact on their confidence, and their confidence has an outsized impact on the economy and jobs.

Small business owners strongly preferred Trump over his Democratic rival Hillary Clinton as their choice for president, but they weren’t overly impressed with either candidate. Still, the local business community initially responded to Trump’s election with a spike in confidence before whiffs on the Obamacare repeal and tax reform started eroding local merchants’ optimism.

This highly elastic response, and its potential to ripple through the broader economy, is precisely why a magnified focus on Trump’s political turmoil without sufficient discussion of real economic issues is concerning. My company recently polled thousands of small business owners in all 50 states to see what’s driving their optimism or anxiety, and how theirsentiment translates into actions like hiring or expansion. We also looked for correlations between the policy environment and its potential impact on America’s economic engine on Main Street.

According to our data, Trump’s election is the No. 3 reason for confidence among optimistic owners and the No. 1 reason for concern among pessimists. This matters because optimists are 3.5 times more likely to hire and give raises to employees, while pessimists are 6.5 times more likely to reduce staff and employee pay. In short, Trump’s ability to build and maintain small business confidence could have enormous economic consequences, with room for wide swings in either direction.

Beyond the political gallows, Trump faces the ripple effects of how small business owners react to key policy issues that affect local commerce. Specifically, American merchants will evaluate their new president — and adjust their confidence levels — based on how he prioritizes and approaches tax reform, Obamacare repeal and immigration.

Taxes

Local merchants are fundamentally pragmatic, and making enough money is one of their most pressing worries, according to our study. The average small business pays $1 out of every $5 it earns in effective tax rate, with higher rates for partnerships and S corporations. It should come as no surprise, then, that tax reform is the policy change small businesses want most of all. In fact, for all the fuss about health care reform, local merchants are twice as likely to say they want tax reform compared to a new national health law, according to our data.

Trump’s tax plan would reduce the corporate tax rate to 15 percent, which would obviously make life and business easier for businesses everywhere. Small businesses are watching anxiously to see where tax reform goes and will no doubt make some early judgments about their new president based on his ability to cut a deal that makes sense to them. No room for additional hiccups here — leadership priority No. 1.

Health Care

While tax reform is pretty straightforward, health care is a complex issue, even for Main Street’s practical bunch. We asked what impact repeal of the Affordable Care Act (Obamacare) would have on small businesses. Here’s what we heard:

  • 16% very positive
  • 9% somewhat positive
  • 29% no impact
  • 5% somewhat negative
  • 10% very negative
  • 23% depends on what replaced it
  • 8% don’t know

The majority of business owners either don’t expect much impact from health care reform or aren’t going to be impressed by change for change’s sake, which should give the president pause as he and congress rush to repeal and replace.

Trump can score significant leadership points — and ratchet up Main Street confidence — by taking the necessary time to articulate a clear, compelling health care vision that resonates with the 52% of small business owners who are ambivalent about national health care or eager to evaluate the details of the replacement plan.

Immigration

Trump has spoken early and often about his vision for a more provincial U.S., promising a wall along the U.S.-Mexico border, deportation of undocumented immigrants, and changes to the H-1B visa program that admits some 85,000 working immigrants each year. Immigration policy plays well political circles but it’s a low priority for small business owners.

Our data revealed that only 2% of small business owners want immigration policy changed as their top priority, ranking below taxes, regulations like inspections and licenses, health insurance, and minimum wage. In fact, small business owners are six times more likely to say they want no policies changed than to say immigration.

Good leaders know how to pick battles and prioritize the issues that drive real results. For Trump, immigration might be better suited for the back burner, especially given what’s at stake for small business confidence with tax and health care reform.

Trump’s influence on small business sentiment is a unique opportunity and challenge for our new commander-in-chief. If he provides focus and results that drive sustained optimism on Main Street, the effects will ripple through the economic and political arenas. If he can’t, he could set off an economic freeze along the front lines of U.S. commerce. Either way, local businesses will have a considerable say in determining the leadership legacy of our 45th president.