Market Perspective

What Businesses Can Expect From a Biden Presidency

January 25, 2021
The C2FO Team

President Joe Biden brings a new agenda to taxation, labor, sustainability and other issues. What changes can we expect in the coming years? 

Wednesday, Jan. 20 marked the inauguration of a new president, one who’ll have a different approach from his predecessor to a range of issues affecting businesses in the United States. 

Perhaps an equally important date was Jan. 5, when Democrats defeated Republican incumbents in two hotly contested Georgia runoff elections. Those victories give the Democrats a voting majority in the US Senate, when Vice President Kamala Harris is included as a tie-breaker. 

Democratic control over both houses in the 117th Congress will be crucial over the next two years as President Joe Biden promotes a policy agenda quite different from that of former President Donald Trump. Over the next few months, the 46th president plans to focus on four key areas: stopping the pandemic, improving the economy, addressing racial equality and justice, and climate change.

However, the slim majorities Democrats hold (a one-vote majority in the Senate, and an 11-vote edge in the House) will make passing new legislation difficult. Complicating matters is the split between far-left progressives and moderates among Democrats themselves, said Ashli Palmer, a partner for Washington, D.C.-based government relations firm Peck Madigan Jones and the former director of floor operations for House Majority Whip James E. Clyburn (D-S.C.).

“It’s hard to keep everyone on one page,” she said. “When I was floor director, we would pass all these bills, but I would lose 18 to 20 (Democratic) members. They can’t afford to do that right now.” 

Given the Congressional complexities, what can we expect from a Biden Administration on issues that affect businesses and the economy? 

Below is a checklist of the president’s stated stances on different issues, followed by insights on which of those policies are likely to become law in the next few years: 

Economic relief for small businesses 

What the president promised: 

One of Biden’s campaign promises is in the works right now: a $1.9 trillion stimulus package that could include $1,400 checks for most Americans. The plan also includes $350 billion in funding for state and local governments, rolling out a nationwide vaccination program, increasing the federal minimum wage to $15 an hour and more support for hard-hit communities and businesses.

During his presidential campaign, Biden also proposed several initiatives aimed at helping underfunded and underrepresented women- and minority-owned businesses. These included: 

  • Supporting True Small Business Fund, a $60 billion loan facility for small lenders and community-based lenders.
  • A proposed $50 billion in public-private venture capital for minority-owned businesses.
  • Business loans totaling $100 billion for communities of color. 

What’s likely to happen:

Biden’s stimulus plan is ambitious, but parts of it are achievable in the current political climate. Experts agree that some form of additional stimulus within the next few weeks is crucial to keeping the economic recovery on track as businesses and individuals continue to struggle in the wake of COVID-19.  

If Republicans and Democrats in Congress can’t agree on the specifics of a new relief package, Democrats could choose to pass legislation under the budget reconciliation process, which only requires 51 Senate votes to pass, said Kristen Harper, a consultant for Peck Madigan Jones who specializes in international trade and financial services. The disadvantage of that approach is that the bill must only contain items that have a direct impact on the federal budget. Some of the more aggressive elements of Biden’s $1.9 trillion package would be left out. 

“There’s going to be an interesting dynamic that plays out the next couple of weeks if they can’t get Republicans on board,” Harper said. “Things like a $15 minimum wage increase or paid family medical leave — those may not be germane to a budget reconciliation package.”

In the approaching months, Palmer expects the Biden Administration and the 117th Congress to place more emphasis on helping minority- and women-owned businesses gain access to funding relief, either through an extension of the Paycheck Protection Program (PPP), which will be closed to applicants after March 31, or another initiative.

“I would imagine (Democrats) were not pleased with the reports that minority-owned businesses were last in line to receive PPP funds,” Palmer said. “I think they would push for more guarantees. …I would not be surprised if they came up with another entity because there’s been so much negativity around PPP and how it was run.”  

Taxes

What the president promised:

Biden has pledged to raise taxes on businesses and the wealthy, while providing lower-income Americans with a marginal tax break. As a candidate, he proposed the following: 

  • Raise the corporate income tax rate from 21% to 28%.
  • Remove the capital gains inheritance loophole and the 20% deduction on pass-through income.
  • Cap the value of all tax deductions at 28%.
  • Double the Global Intangible Low-Taxed Income to 21%.
  • Implement a minimum 15% tax on reported corporate profits.
  • Sanction foreign tax havens to “tighten up” compliance.
  • A pledge to not raise taxes on those making less than $400,000 a year.

What’s likely to happen:

Any Biden tax plan is going to require bipartisan support in Congress. And with the US economy still recovering from the COVID-19 pandemic, raising taxes in 2021 seems unlikely, especially among moderate Democrats from traditionally conservative states.

“Someone like (Democrat) Sen. Joe Manchin of West Virginia isn’t going to be inclined to vote for that,” Harper said. “Maybe something like increasing the child tax credit or the child and care credit is possible.” 

If businesses continue to struggle with liquidity in 2021, they may receive another break on payroll taxes. As part of the 2020 CARES Act, Congress delayed collection of 2020 payroll taxes, requiring employers to repay half of the amount by Dec. 31, 2021 and the remaining half by the end of 2022. If the liquidity crisis for businesses continues, Congress may authorize a similar delay to 2021 payroll rates and consider expansion of other CARES Act provisions like the Employee Retention Tax Credit and the Work Opportunity Tax Credit. 

Looking beyond 2021, experts like Evercore strategist Ernie Tedeschi predict that any tax reforms from a Biden administration will be more moderate than what the president promised on the campaign trail. Raising the corporate tax rate to 25% and higher capital gains taxes for inherited assets are possibilities during the next two years, Tedeschi said. But more sweeping agenda items, like taxing long-term capital gains as ordinary income for wealthy individuals, are unlikely to happen anytime soon.  

Infrastructure

What the president promised: 

In 2017, President Trump proposed spending nearly $2 trillion in public and private money to fix the nation’s aging infrastructure. The plan, however, never got rolling. 

Last summer, Biden unveiled his own $2 trillion proposal to create jobs while upgrading roads, bridges, waterways and other infrastructure. The new president is expected to share a more detailed infrastructure plan when he speaks to a joint session of Congress in February. 

With one party in control of the presidency and Congress, can a meaningful infrastructure bill finally get passed? 

What’s likely to happen:

Shortly after Congress confirmed Biden’s presidential win on Jan. 6, infrastructure and clean energy stock prices got a lift. That reflects market optimism that a federal plan to invest in roads, bridges, airports, digital infrastructure and clean energy will finally come to fruition. 

Clean transportation advocates are particularly excited. Biden has promised to create 500,000 electric vehicle charging stations nationwide and zero-emissions public transit for most cities. A voting majority in the Senate makes the passage of some form of an infrastructure bill more likely.

“This has been a key pillar of Joe Biden’s plan for economic revival,” Jay Jacobs, senior vice president and head of research and strategy at Global X Exchange Traded Funds, told CNBC. “Now he has the tools to do that with Democrats owning the executive branch and the legislative branch.”

Environment and sustainability

What the president promised:

Trump sought to undo several Obama-era environmental initiatives and regulations during the past four years. Now, Biden will try to restore many of them. That includes an executive order during his first week in office to rejoin the Paris Climate Accord, which Trump withdrew from in 2017. 

Biden’s other stated goals have included achieving 100% net-zero emissions by 2050, carbon-free domestic energy production by 2035, and providing tax credits for electric vehicles.

What’s likely to happen:

Biden’s approach to the environment and sustainability will obviously be a sea change from Trump’s policies. Most Americans agree that more should be done to address climate change, according to a recent study. But how much of the president’s climate agenda is realistic? 

With a number of Republicans in Congress expressing support for reducing greenhouse gas emissions, there may be room for compromise on energy and climate legislation. These could include development of advanced energy technologies, more funding for research & development at the Department of Energy, and agriculture-related climate solutions like phasing out the use of hydrofluorocarbons.

Bolstering American manufacturing and investments with clean energy jobs will be a big part of Biden’s plan to address climate change, which he is expected to unveil in February. While making the US “climate-neutral” within 30 years is a big promise, smaller steps to address climate change should be attainable for Biden and this Congress.

“Climate is going to be a nexus for everything that Biden does,” Harper said. “There will be things he can do on an executive basis, but others will require legislation. One thing that’s very likely to move is a bill requiring climate risk disclosures for public companies with the Securities & Exchange Commission.” 

Labor

What the president promised: 

Like his energy policy, Biden’s plans for the labor force represent a reversal from the last administration.

While Trump put more money in the pockets of businesses and individuals through tax cuts, Biden wants to increase pay and protections. That includes raising the federal minimum wage to $15 per hour. Other plans include: 

  • Enforcing labor laws by increasing employment agency investigators, codifying Obama-era National Labor Relations Board (NLRB) rules, and issuing a federal debarment for employers who engage in union-busting.
  • Expand worker protections in the “gig economy.”
  • Expand union membership through a federal guarantee for public sector employees to collectively bargain and ban state “right to work” laws.
  • Penalize corporations and hold executives personally liable if they interfere with union organizing efforts.

What’s likely to happen: 

The Democrats’ narrow majority in the Senate means that some pieces of workplace legislation passed by the House in the last Congress (and killed by a Republication-led Senate) may have a better shot now at becoming law. That includes the Protecting the Right to Organize (PRO) Act, which would impose monetary penalties for companies that commit unfair labor practices. Other initiatives proposed by Biden, like a bill outlining steps companies must take to protect employees from COVID-19, may also gain support in Congress. 

Biden has already signed an executive order that will eventually require contractors for federal agencies to pay their employees a $15 minimum wage. But making a minimum wage increase part of economic stimulus legislation will likely have to wait.

“You’ve already seen Republicans say this is a non-starter, providing a $15 wage increase at a time when these small businesses can’t stay afloat,” Harper said.

The bottom line

While one-party control over the executive and legislative branches may seem to be a rare opportunity, this is not a political climate where aspirational Democratic policies like a Green New Deal or Medicare for All can pass muster. 

Over the next two years, expect greater cooperation between the new president and Congress on some legislative items, particularly ones that can win over a few votes from moderate Republicans in the House and Senate. 

Also, expect President Biden to emulate the past three administrations in using executive orders to enact policy changes that Congress won’t act on. On his first day in office, for example, Biden signed 17 executive orders, memorandums and proclamations, including the decision to rejoin the Paris Climate Accord, launching a “100 Days Masking Challenge” in federal buildings and reversing the Muslim travel ban. Trump, by comparison, issued 26 executive orders in his first 100 days. 

“He’s going to have to push a lot of executive orders early on just to fix a lot of the things that (the new administration) finds harmful,” Palmer said. 

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