Election years always bring uncertainty, especially for businesses. Not knowing which political party will be in power for the next four years can make it hard to make big financial or strategic decisions. But this isn’t the time to simply sit on your hands. Rather, it’s an opportunity to get proactive and understand the ramifications of legislative policy on your company, regardless of which party wins the November election. Here are some of the areas to pay the most attention to when it comes to the strategic and financial path of your business.
Taxes and Tariffs May Change
One of the biggest political footballs in the 2024 election is the issue of taxes and tariffs. If the Democrats maintain control of the White House, the tax cuts implemented by the Tax Cuts and Jobs Act of 2017 may elapse in 2025. This legislation cut both personal and corporate tax rates, meaning your small business, whether a sole proprietorship, a C-corporation or any form of business structure will likely face higher taxes, according to the Tax Policy Center. The top corporate tax rate, for example, was cut from 35% to 21%.
Although not guaranteed, those tax cuts may remain in place if Republicans win in November. However, according to CNBC, tariffs may rise dramatically. Donald Trump has said repeatedly that he will raise tariffs on foreign goods, particularly those from China, by a significant amount, so this may hit some small businesses hard.
Consumer Spending May Decrease as the Election Approaches
It’s a natural tendency for consumers to keep an eye on their finances until a winner and a political course of action is set. Further down the line, policies that an administration implements could lead to job cuts and a recession, or they may stimulate the economy and boost wages. The Winds May Shift – One Way or the Other
In an uncertain environment, it’s best not to take too many big risks. If you position yourself for a win by one political party, shifting your business plans to cash in on anticipated legislation, you might get whipsawed if the other claims the White House. Even if your business isn’t directly affected by potential legislation, factors like market volatility, fluctuating interest rates, or even an economic recession could very well have an effect on how your business operates. For this reason, it can be a prudent course of action to have a safety net of working capital and not make any big bets in terms of the direction of your business until the dust has settled in November.
The Bottom Line
In an election year, there’s never any real certainty about how the economic and legislative landscape will look over the coming four years. But if you take this chance to be proactive, you can defend yourself against any adverse changes while still being able to take advantage of new opportunities. This is a great time to speak with your trusted advisors regarding which strategies your business should employ to successfully navigate these murky waters. The Funding Specialists at Flexibility Capital can be a useful ally in this scenario.
