Corporate taxes have a significant impact on businesses of all sizes, especially small businesses in Maine. As the state’s small business owners prepare for the next election, understanding how upcoming tax policies could affect them is crucial.
Donald Trump’s proposed corporate tax policies for his potential second term aim to continue offering relief to small businesses, helping them grow and compete. On the other hand, Kamala Harris’s proposed corporate tax hikes may create new financial pressures, making it harder for small businesses to thrive.
Trump’s Upcoming Corporate Tax Policies: What Small Businesses Can Expect
In a potential second term, Donald Trump has indicated that he would continue his pro-business approach, with plans to further reduce the tax burden on small businesses. Here’s how his upcoming tax policies could benefit small business owners in Maine:
1. Maintaining or Reducing the Corporate Tax Rate
Trump has signaled that he aims to maintain or potentially lower the corporate tax rate for C-corporations, which currently sits at 21%. Further reducing the corporate tax rate to small businesses would see even greater potential benefits. Dropping the tax rate to 18% or lower, small business owners could see a significant reduction in their tax bills, helping them better navigate the economic challenges they face, from rising supply costs to inflation. In Maine, where small businesses are integral to the local economy, these savings could make a critical difference in how much they can invest back into their companies, expand operations, or hire more employees.
2. Enhanced Pass-Through Tax Benefits
Many small businesses in Maine operate as Subchapter S Corporations, Limited Liability Companies or Partnerships; all of which are taxed at the personal level. Trump has suggested that he would expand the 20% Qualified Business Income Deduction (QBID) he implemented during his first term in office by increasing the deduction or making it permanent. Expanding pass-through deductions would be a significant win for family-owned shops, contractors, and other small businesses across Maine. These businesses could reinvest those savings into growth opportunities, new hires, or operational improvements, giving them more room to succeed in an increasingly competitive market.
3. Tax Incentives for Job Creation and Investment
Trump has also proposed offering more targeted tax incentives for small businesses that hire new workers or invest in technology and infrastructure upgrades. For Maine’s small businesses, especially those in industries like tourism, manufacturing, construction and agriculture, these tax breaks could help fund expansion efforts or modernization projects, helping them remain competitive while supporting
local job creation.
4. Simplified Tax Filing and Compliance
One area where Trump has expressed interest is in simplifying the tax code to make it easier for small businesses to file taxes without needing extensive (and expensive) legal and accounting assistance. Simplifying the tax filing process could reduce costs and eliminate some of the complexities that currently burden small business owners, giving them more time to focus on running their operations rather than getting bogged down in significant and complicated paperwork.
Kamala Harris’s Corporate Tax Hike Platform for Small Businesses
Kamala Harris has advocated for raising the corporate tax rate from 21% to 28%, arguing that this would primarily target large corporations. However, small businesses organized as C Corporations will feel the squeeze. Here’s what to expect from Harris’s proposed corporate tax policies.
1. Increased Tax Burden
For small businesses that are structured as corporations, a corporate tax hike from 21% to 28% could significantly raise their tax bills. While Harris argues that the tax increase would primarily affect large corporations, many small businesses in Maine would be caught in the tax trap. This additional tax burden could limit the ability of small businesses to invest in growth, hire new workers, or even stay afloat in challenging economic times.
2. Increasing the Capital Gains Tax
Maine’s small businesses often operate on tight margins, and increasing the capital gains tax would shrink those margins even further. This means that any long-term investment in new facilities, equipment and strategic assets could restrict volume and purchases in the future. Businesses faced with higher borrowing rates AND an additional increase in capital gains taxes, would cause sales to drop from suppliers of these resources. This would result in higher sales prices to make the dollars with less volume…resulting in layoffs, or even business closures. For small business owners already struggling with inflation and supply chain issues, a higher tax burden could be the tipping point.
3. Slowed Job Creation by Raising the Minimum Wage
While not directly a tax policy, Harris’s support for raising the federal minimum wage will undoubtedly increase payroll costs for small businesses. In a state like Maine, many businesses have jobs where laborers are relied on to assist in the evolution and profitability of the company. By increasing labor wages, operating margins will get even thinner. This would result in layoffs or even closures, compounding the economic pressure on already strained businesses.
Why Trump’s Upcoming Tax Policies Could Support Small Business Growth
If Trump is re-elected, his tax policies could provide much-needed relief to small businesses in Maine. Here’s why his approach works for small businesses:
● Lower Taxes Mean More Investment
Keeping the corporate tax rate low allows small businesses to reinvest their profits into expanding their operations, hiring employees, and improving services. This direct financial benefit helps small businesses compete with larger companies while staying rooted in their local communities.
● Increased Deduction Opportunities
Expanding pass-through deductions
and other tax incentives could provide small business owners with additional
financial resources, allowing them to grow their businesses without the fear
of losing profits to high taxes.
● Supporting Local Job Growth
Trump’s proposed tax policies, particularly those offering incentives for hiring and investment, would encourage small businesses to expand their workforce and reinvest in their communities. In Maine, where small businesses are often the largest employers, these policies could be the key to sustaining local economies and creating new job opportunities.
What This Means for Your Business
Donald Trump’s upcoming corporate tax policies offer small businesses in Maine a path to financial relief, growth, and competitiveness. By maintaining or potentially lowering the corporate tax rate, expanding pass-through deductions, and offering targeted tax incentives, his approach aims to keep more money in the hands of small business owners. In contrast, Kamala Harris’s proposed corporate tax hike threatens to add financial pressure, limiting small business owners’ ability to invest, grow, and hire.
For Maine’s small business community, Trump’s tax policies provide the stability and flexibility needed to continue thriving in an increasingly challenging economic environment. If implemented, these policies could help small business owners protect their profits, expand their operations, and create more jobs for local communities.