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While the details of the Trump administration’s economic policies are still to be determined, the President-elect’s comments on the campaign trail indicate he is ready to shake up the status quo. Recent interviews and early cabinet selections have given us a preview of his plans. In particular, the new administration seems eager to simplify complex regulations and to advance initiatives to bring jobs and capital back from overseas.
As the specifics of those policies take shape, entrepreneurs and venture capitalists should pay close attention, as they can benefit from understanding the dynamics at work. Here are some of the promised changes to watch for:
1. Lower corporate taxes
Trump has made clear he intends to lower the corporate income tax rate from 35 percent to 15 percent. With general consensus among both parties that the U.S. tax code is desperately in need of an update, this cut might be among the more realistic of Trump’s goals.
For most early-stage growth companies, tax rates are less of a concern given typically high cash burn rates and carry-forward positions on their balance sheets. Still, startups stand to be the benefactors of a wave of investment from larger companies if lower corporate tax rates pass. Look at the corporate ecosystem as a whole, with low tax rates facilitating a strong economic investment cycle that lifts up newer, smaller companies as well.
2. Low-cost opportunities for cash repatriation
Currently, companies holding cash overseas pay a 35 percent repatriation tax rate when they move earnings back into the US. To avoid that high cost, many companies simply reinvest the money abroad instead of bringing it back. As a candidate, Trump suggested a “tax holiday” to allow that cash to flow back into the country at a much lower rate, possibly around 10 percent.
Business leaders have reacted with enthusiasm. Apple CEO Tim Cook said his company is ready to move some of its $200 billion in…