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What A Trump Presidency Means for Startups and Tech Companies

November 9, 2016

donald trump's effect on startups

Despite odds believed to be long and an avalanche of scandal, Donald J. Trump has been elected to be the 45th president of the United States of America. After one of the most closely watched elections in history, President Elect Trump delivered a speech calling on Americans to come together and heal the wounds that have been inflicted on this long, tooth-and-nail campaign. He even called on those who opposed or disagreed with him to reach out and advise him going forward.

The two candidates in this campaign offered very different plans of action in nearly every area of policy, from foreign to domestic, from health care to fiscal to educational. Both candidates promised that their plan would get the economy back on track, but Donald Trump has, from the beginning, argued that reducing regulation and taxes is the only way to accomplish this.

There are changes coming, some of them fast. On the first day of his office, President Elect Trump plans to begin the repeal process for the Affordable Care Act in congress and “begin working on an impenetrable physical wall on the southern border.”

No matter who you were supporting, the election is over (finally) and it’s time to move forward. Trump’s policies will reverse many laws put into place under the Obama administration and many of these policies will have a direct effect on companies of all kinds.

If you haven’t looked at the Trump’s position page, you should check it out before he is sworn in on January 20th. The fact that Republicans took control of both the House and the Senate means Trump’s policies will have a fast track to becoming law, so it’s safe to anticipate that most of his major plans will be underway soon after he has taken office.

Here are some of the policies that will be most important to startups, tech companies and employers of all kinds.

Healthcare

One of the main talking points that Trump has stuck to throughout this election is repealing the Affordable Care Act or Obamacare. To quote the trump website: “On day one of the Trump Administration, we will ask Congress to immediately deliver a full repeal of Obamacare.”

The Affordable Care Act requires companies with over 50 full-time employees to provide those employees with healthcare or else be faced with penalties. Companies with 49 or fewer FTEs have been offered incentives in the form of 50,000 in tax breaks to provide care for their employees. Additionally, all employers or employees who make over 200,000 per year pay an additional .9% on their Medicare Part A tax.

One of the biggest complaints about this program has been the rising cost of healthcare premiums. For any company that has fewer than 50 employees, but offers healthcare as an employee perk, these rising premiums may have put more of a strain on budget than anticipated.

The repeal of the Affordable Care Act would mean that companies would no longer be required to provide employers with healthcare, which will reduce costs for employers who opt out of providing this care. Trump plans to replace the existing healthcare model with Health Savings Accounts (HSAs), which are tax advantaged medical savings accounts that are available to citizens with a High Deductible Health Plan.

Donald Trump plans to reduce the regulations on insurance providers in many ways, and believes that a highly competitive insurance market will cause the cost of coverage to drop.

  • Allow the sale of insurance across state lines in all 50 states to create a “dynamic market,”
  • Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system.
  • Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products
  • Allow individuals to use Health Savings Accounts (HSAs). Contributions into HSAs should be tax free and should be allowed to accumulate. These accounts would become part of the estate of the individual and could be passed on to heirs without fear of any death penalty.

For startups and tech companies who want to continue to provide healthcare, hopefully these policies lead to reduced premiums and lower costs of coverage. It at least takes the pressure off of companies who have been struggling to pay the increasing cost of healthcare premiums for their employees.

Tax Cuts

Trump promised big tax cuts, and big cuts are what he’s going to deliver.

On the personal income tax side side:

“The Trump Plan will collapse the current seven tax brackets to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0. The tax brackets are similar to those in the House GOP tax blueprint.

Brackets & Rates for Married-Joint filers:

Less than $75,000: 12%

More than $75,000 but less than $225,000: 25%

More than $225,000: 33%

*Brackets for single filers are ½ of these amounts”

This is good news for individuals, but the tax cuts don’t stop there. Here are the proposed tax cuts for businesses:

“The Trump Plan will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both small and large, that want to retain the profits within the business.”

It also

“eliminates most corporate tax expenditures except for the Research and Development credit.”

A 20% tax cut is pretty significant, and business leaders across this country will enjoy this tax break once it is passed through the majority Republican House and the majority Republican Senate. Additionally, any company that incurs significant R&D costs will be relieved that it is one of the last corporate tax expenditures that will be available to companies in this country.

A tax break of this size means that companies will have more funds available for, well, anything, and can plan on a greater ability to invest in new technologies, employees and product development initiatives.

Foreign Talent

Many tech companies rely on contracted talent to meet their objectives and, over the past few years, these contractors have been sourced increasingly from other countries. These tech contractors come to the United States under a H-1B visa and these visas are won, overwhelmingly by tech giants and outsourcing companies, who then contract these H-1B workers to businesses around the country.

Trump plans to:

  • Suspend the issuance of visas to any place where adequate screening cannot occur, until proven and effective vetting mechanisms can be put into place.”
  • Protect the economic well-being of the lawful immigrants already living here by curbing uncontrolled foreign worker admissions
  • Establish new immigration controls to boost wages and to ensure that open jobs are offered to American workers first.

The blanket language of these policies could result in foreign talent sources being deemed a “place where adequate screening cannot occur,” meaning that no visas would be granted to this region until “proven and effective vetting mechanisms can be put into place.”

If your company relies on any H-1B contract labor, anticipate much more difficulty in the process of obtaining a visa. If employers are required to ensure that “job are offered to American workers first,” this may present a challenge to companies that rely on foreign talent or do a majority of their business in the global marketplace.

The Trump Presidency means that startups and tech companies will no longer face the costs of mandatory health care and will be seeing some sizable tax cuts in the coming year. Companies that rely on foreign talent may face challenges obtaining visas and the process for vetting foreign talent is likely to grow in length and detail. Hopefully, cutting regulations will encourage growth of stagnant wages and boost economic growth. It’s a good time to be a business owner, but only time will tell what the effects of this wave of deregulation will have on companies and the economy.

VP of Marketing at Digital Astronauts Ronny Cheng is one of the Co-Founder's of Digital Astronauts and has helped drive lead generation in the software industry for organizations of all sizes -- from start-ups to Fortune 500's. He helped build one of the first online software review websites, specializing in CRM, ERP, and HR software. He's a nationally published author with extensive experience working with the HR/Recruiting industries largest brands. In his spare time, you can catch him on Instagram doing his best food blogger impersonation.
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