305. How the Election Results Might Affect Product-Based Business Owners

With the 2024 election mostly behind us (not all races have been called at the time of this recording) and Trump as our president-elect, I wanted to chat through some of the policies he’s been floating that could uniquely affect you as a product-based business owner and a self-employed person. 

Specifically around health insurance, tariffs, and taxes. 

While we won’t know exactly what he’ll do until he takes office, it certainly doesn’t hurt to be prepared, right? 

In this post, I’m just scratching the surface of what you need to watch out for. If you want to dig deeper into these details check out this document where I provide more information. I’ll be updating this document if and when there is new information to share.

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Health Insurance

While the Trump campaign and his surrogates have put out conflicting information about his plans for the Affordable Care Act, during his previous administration he made multiple attempts to repeal it. 

As a quick reminder, the Affordable Care Act is what created the health insurance marketplace for you to buy health insurance and provides subsidies based on your income. The ACA also protects pre-existing conditions and requires plans to cover essential health benefits such as preventative and maternity care. Those protections and benefits apply not just to the plans one buys through the marketplace, but also to plans provided by employers. 

There are other things the ACA does, but that’s the general gist of it. 

And to clear up any potential confusion Obama Care and the Affordable Care Act are the same thing. 

Trump’s attempts to get rid of the program were unsuccessful during his first term due to the makeup of Congress, though this time around he might not get the same opposition.  

There was also a court case that made it to the Supreme Court in an attempt to repeal the act deeming it unconstitutional. The court rejected that case, refusing to hear it based on standing. Standing just means that the people who brought the case weren’t the right people to bring it.

Learning from the rejection based on no standing, it’s possible someone else attempts to bring the case, so it might come back around in the future.

As a side note. There is one more conservative judge on the court than when the case was initially put in front of them and it’s a pretty good bet that Trump will appoint 2, if not 3 additional Supreme Court justices in his next term. 

Again, we won’t know for sure what will happen. He could try and repeal the whole thing altogether. He could cut subsidies or reduce regulations to make it easier on the insurance companies, potentially increasing premiums, lowering care, or both. Or he could do nothing. None of us have a crystal ball so we’ll have to wait and see. 

As a self-employed person married to a self-employed person, who doesn’t have an employer-sponsored option available I wanted to be prepared for all the potential scenarios and wanted you to be too. 

Oh, and if you are on an employer-sponsored plan through a partner, know that the protection of pre-existing conditions, preventative and maternity care, and covering children up to 26 years old could still end up going away. 

Next up, let’s talk about Tariffs. 

Tariffs

While I imagine most product-based business owners already know how tariffs work, I have seen a lot of confusion about them online so let’s just lay that out real quick.

Tariffs are a tax on the US company that imports the finished goods or raw materials from the country that has a tariff on it. 

If you import items from China, you as the importer has to pay that tariff. If you buy goods from someone who imports from China, the person you buy those goods from has to pay that tariff. 

In either case, the person who has to pay the tariff is going to increase their price to offset that additional cost, ultimately increasing prices and inflation. 

The ultimate goal of Tariffs is to protect at-home manufacturing industries like EV cars, but Trump has mostly been talking about blanket tariffs which would include things we don’t manufacture here or don’t have the raw materials to manufacture here. 

The hope is that companies would bring back manufacturing to the US, but it most cases it would be years before we could spin up manufacturing at home and when we finally did, prices likely remain high because US labor is much more expensive. 

I don’t want to get too in the weeds here about this. On that Google Doc, I included a lot more information about Tariffs, how they’re enacted, when they’ve been used before, and the results of them. I definitely recommend you read up on that so you can keep up with whatever changes they make. 

In the meantime, we’re already seeing companies react to the anticipation of tariffs. 

Steve Madden for example is moving some of its production out of China and to countries like Cambodia, Vietnam, Mexico, and Brazil. 

Car manufacturers like Nissan have announced some pretty big layoffs as well, though I’m not sure that’s directly related to the potential tariffs, or what. 

There have been other anecdotal stories of companies not giving holiday bonuses so they can stock up on inventory.

Just like with health insurance, we don’t really know what is going to happen. What we do know is that at the end of the day, Tariffs raise prices, and are a lot harder to remove than they are to add because the countries typically apply retaliatory tariffs and then essentially start a trade war that requires everyone to come to the negotiating table. 

So, as a product-based business owner, there are a few things you’ll want to think about, plan for, and keep in mind. 

• If anything you sell comes from China, whether you import direct or buy from someone who does. Whether it’s finished goods or raw materials. Those costs will increase if the additional tariffs are put in place. 
• Even if what you sell is all 100% sourced and manufactured here in the US and you’re not subject to cost increases, your customers will face price increases on the majority of what they buy. They are going to feel the pinch financially, potentially leading to lower consumer spending. 

Last on the list for today is taxes. 

Taxes

The 2017 Tax Cuts & Jobs Act which was put in place during Trump’s first term as President is the same tax plan we are under right now. Whether or not you benefited highly from that tax plan is entirely dependent on how much money you made. 

While there were tax cuts across the board, the majority of the relief was at the top-end of the income bracket. Even with the 20% deduction in qualified business income for small businesses, if you’re only profiting 50k for the year that only amounts to amount $1500 in savings. I have a full chart on that Google Doc that outlines the expected savings for different income levels if you want to check it out. 

With the individual tax breaks expiring next year, and their desire to cut corporate taxes even further, we’ll likely see a new tax plan next year. Considering the Republicans are typically in favor of supply-side (aka trickle-down) economics it’s unlikely you’ll see much tax relief until you’re at a higher income level. 

How to Lower Your Tax Burden

What you do have control over is how you classify your LLC for tax purposes, potentially limiting your tax burden. 

Before we get into the details, let me say, I am not a tax professional so please speak to someone qualified before you make any decisions about your business. 

So, LLC’s are what’s known as a pass-through entity. Instead of your business paying taxes directly as a C-corp does, the profit from your business flows down to you and is taxed as income on your personal tax return. 

On your personal tax return, as a self-employed person you pay FICA, which is your standard federal income tax, and you pay a self-employment tax which covers your payroll taxes, Social Security, and Medicare. 

When you work for someone else as a W2 employee, they pay half of your payroll taxes. If you were to hire W2 employees, you as the employer would pay half of their payroll taxes. That’s why employees are more expensive than just the salary that you pay them. As a self-employed person, you are paying 100% of that payroll tax. 

The control you have is over how much of your profit is eligible for payroll taxes. 

There are two different ways you can classify your LLC for tax purposes

• Sole proprietorship
• S-Corp

In a sole proprietorship, 100% of the profit your business makes is subject to both income tax and payroll taxes. 

In an S-corporation, you pay yourself a reasonable salary which is also subject to both income and payroll taxes. The rest of the profits you want to remove from the business are paid to you in a distribution. This is subject to income taxes but NOT payroll taxes. 

Now, because taxing your business as an S-corp also requires additional fees for payroll processing, different paperwork, etc. It usually only makes sense IF your profits are more than what a reasonable salary would be for your position. 

If you’re only profiting $50k/year, probably not worth it. If you’re profiting $100k or more, likely worth it. 

The other thing you’ll want to keep in mind, especially if you’re going to go in the S-corp route is the Social Security payment you receive when you retire is based on your earnings. The distributions, do not count toward those earnings because you’re not paying payroll tax (aka Social Security & Medicare) on that distribution. 

So, if you pay yourself a reasonable salary of $50k a year, and you take a distribution of 50k a year – your social security calculation will be based on the $50k a year. 

That’s not necessarily a bad thing, just something that you have to plan for. Which you should be doing anyway. 

First off, rarely is social security enough to live on, and second, there’s no guarantee it will exist when you retire. What we pay into social security now, is to pay the people who are currently collecting it. It’s not like they sock it away in a bank account for us. It’s faced financial challenges for years, and while most of the powers that be vow to protect it, there are also those who would love to get rid of it, privatize it, raise the retirement age, cut the benefits, etc.

No matter what happens, it’s definitely in your best interest to have retirement investments and think of Social Security as a bonus. 

Again, I am not a tax professional, this isn’t advice. This is educational information so you know what to talk to your tax professional or CPA about. 

Immigration

The last thing I want to touch on is immigration. While we don’t know how mass the mass deportation effort is going to be, we do know that undocumented immigrants make up about 45% of all farm workers. 

While this won’t directly affect you unless you’re in the food business, it could cause supply chain disruptions and increase food prices. This will continue to tighten the wallets of consumers potentially leading to decreased discretionary spending. 

How This Will Effect The Holiday Season

So friends. What does all of this mean going into the holiday season? At the end of the day, whether they’re celebrating or practicing retail therapy – most people are still going to spend. As we discussed in episode 291. Will the Election Affect Holiday Retail Sales? history tells us that holiday spending typically rebounds after election day. 

Whatever you do, don’t be shy about marketing your business this holiday season. If people want to check out, they will – but don’t make those decisions for them.