How Have Small Businesses Fared Under Biden?
President Biden took office during the 2021 Covid headwind, and as a result, he has made significant legislation to address the needs and struggles of small businesses.
Many small businesses throughout the U.S. shut their doors due to low demand for products and services and uncertainty from the pandemic. Within just several weeks after the onset of COVID-19, small businesses faced dislocation, and it is estimated that 34% of these businesses were still closed by 2021.
The small businesses that suffered the most throughout the country were the food service, hospitality, and entertainment industries.
For reference, 99.9% of all businesses in the U.S. qualify as small businesses, employing 47.3% of the nation’s private workforce. The government could not ignore the significant economic impact of COVID-19 on America’s population and workforce.
Biden’s government implemented policies immediately, but how did these policies impact small businesses?
Policies Introduced by the Biden Administration
The Biden administration has put forth several economic policies aimed at primarily addressing the impact of the COVID-19 pandemic on the economy and managing other long-standing issues.
Many of these policies have had and are still significantly impacting small businesses. As small businesses employ a large proportion of the U.S. workforce, these businesses play a crucial role in driving economic growth and providing employment opportunities.
American Rescue Plan Act
One of the policies introduced was the American Rescue Plan Act of 2021, a $1.9 trillion stimulus package to provide financial support to individuals, families, and small businesses who suffered the most due to COVID-19.
This act also includes tax credits for employers who provided paid and sick leaves so they could cover their business expenses.
American Jobs Plan
Another one of the policies enacted in 2021 was the American Jobs Plan, which focused on improving human and physical infrastructure across the U.S.
This plan dictates that $1.7 trillion will be spent till 2031 to improve infrastructure. It promises more jobs, but they come at a cost.
A salient feature of this policy is that the $1.7 trillion figure will partially be funded by higher corporate taxes, raising them from 21% to 28%. The proposed tax reforms resulted in higher tax bills for small business owners, hindering their ability to invest and hire new employees.
Raise the Wage Act
The Biden administration also proposed to increase the minimum wage from $7.25 to $15/hour in the Raise the Wage act.
While the increased wages are only in effect in Washington, California, Connecticut, and Massachusetts, many states are expected to join this list by 2025. This act will help decrease poverty but also mean more labor costs for small business owners.
The administration will try to offset these increased labor costs by proposing tax credits to small businesses that pay their employees a fair wage and offer good benefits.
Small Business Administration, an organization aiming to provide credit for small business growth, was also awarded $154.2 billion in contracting. This will help expand access to credit for small businesses.
How Did Small Businesses Fare Under Trump’s Administration?
During the Trump Administration, small businesses faced the initial challenge of Covid and lockdowns, but before the pandemic, metrics indicated that small businesses were performing strongly.
The 2017 tax law and the rollback of specific regulations were seen as beneficial for small businesses. The tax law cut corporate taxes from 35% to 21%, a 40% reduction. It is, however, debatable whether it had negative or positive effects on the overall economy or created larger net profits for businesses.
Trade conflicts with China and Russia, as well as market instability, had a negative impact on some small businesses in certain sectors during Trump’s time as president. Nevertheless, the trade conflict with China has continued to be a focal point of the Biden administration and hinders business and trade relationships, mostly in the tech and agriculture sectors.
The net impact of Biden’s policies cannot be easily quantified. It is, however, a fact that many small businesses have started thriving again while many are suffering because of these new policies. As most of the policies implemented by Biden’s administration are still in effect, their result impact will likely be more visible in the coming years.
Josh is a financial expert with 15+ years on Wall Street as a senior market strategist and trader. Josh graduated from Cornell University with a business degree in Applied Economics and has held numerous U.S. and European securities and brokerage licenses including FINRA Series 3, 7, 24, & 55. In addition to running an investment and trading firm, Josh is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses himself.