The past few years have not been a good time to be an American small business owner. But hope is on the horizon.
President Joe Biden likes to claim that his economic agenda is about building “from the bottom up and the middle out”—but his policies have been devastating for the small businesses that constitute the engine of the American economy.
Small businesses account for nearly half of all private-sector jobs in the United States. That share will only continue growing, as small businesses have generated almost two-thirds of all new jobs in this country since 1995.
Unfortunately, the Biden-Harris administration has imposed costly new rules and regulations that are strangling many American small businesses—to the detriment of the tens of millions of families who depend on them.
In April, for instance, the Department of Labor announced that it was unilaterally changing the terms of employment for salaried employees. In two stages, the Biden-Harris administration dramatically increased the so-called “overtime threshold,” from $35,568 to $58,656.
For small business owners, this is like raising the minimum wage for salaried employees, but without an act of Congress.
Starting January 1, any salaried employee who makes less than $58,656 must essentially be treated like an hourly employee. Their employer will have to track their hours, calculate their pay on an hourly basis, and pay them time-and-a-half for every hour they work beyond 40 hours per week.
That’s not how salaried employment is supposed to work. When a company hires a worker for a salaried position, it calculates that employee’s value based on the job they are doing, not the amount of time they spend doing it. This arrangement works well for both sides, which is why most hourly workers aspire to work for a salary.
Effectively eliminating salaried labor for a significant number of middle-income Americans will affect the way small business owners make compensation decisions, because paying someone $50,000 per year is not the same as paying them $25 per hour.
Some employers will raise salaries to avoid the administrative headache, but that will mean raising prices. Others will convert salaried employees to hourly wages, but at a reduced rate or for reduced hours.
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The Biden-Harris administration also championed the Corporate Transparency Act (CTA), an Orwellian measure designed to outsource national security and fraud prevention to the private sector.
An estimated 32 million business entities are affected by the new law, which imposes five-figure fines and potentially even jail time for entrepreneurs and investors who fail to provide detailed personal information to the Treasury Department’s Financial Crimes Enforcement Network. Naturally, this hurts small businesses more than large corporations, which can employ high-priced lobbyists and make large campaign contributions.
Although the initial reporting requirement imposed by the CTA sounds simple enough—advocates stress that the disclosure form should only take about 10 minutes to complete—the devil, as always, lies in the details. Any time a “beneficial owner” of a small business changes address, updates their driver’s license, or changes their name, the company must file a new report within 30 days. Failure to do so can result in fines of $500 per day and possible imprisonment for up to two years.
It’s difficult to run a small business under the best of circumstances. Small business owners and their families make immense sacrifices, such as working long, unpaid hours or sacrificing their own compensation to keep their business afloat during those pivotal early years.
Small business owners make these sacrifices because they believe in a dream. But every additional burden the government places on them makes those dreams that much harder to achieve, and discourages other would-be entrepreneurs from taking the risk in the first place.
Fortunately, the Donald Trump campaign is proposing policies that will benefit small businesses and their employees.
Eliminating taxes on overtime, as Trump has proposed, would create a huge incentive for increased productivity, boosting the entire economy. Businesses that struggle to find enough workers would suddenly have no problem staying fully staffed, because workers would be champing at the bit to work extra hours.
Even more importantly for small business owners who devote a substantial amount of time to untangling government red tape, Trump is looking to outdo his previous administration’s benchmark by eliminating ten outdated and unnecessary regulations for every new one added.
Couple those with an extension of the Tax Cuts and Jobs Act, and American small businesses (and their employees) can expect to be in a stronger position than ever before.
The past few years have been rough for small businesses, but the situation could soon be changing for the better in a big way.
Julio Gonzalez is the founder of Engineered Tax Services.
The views expressed in this article are the writer’s own.
