When the Tax Cuts and Jobs Act — better known, generally, as “the tax bill” — was signed into law on December 22, 2017, there was a broad spectrum of reaction.
Many people were worried. Even more were angry. A small percentage were pleased — and most of all, it seemed, the public was somewhat confused.
How exactly would this impact day-to-day life — and for businesses, operations, and practices? Would we pay more? Less? Just how much will this change the way we do things?
And one place where that confusion is especially widespread, it seems, is within the small to midsize business (SMB) community.
HubSpot Research surveyed 1,046 SMB owners and VP-level leaders in the U.S. to learn more about their impressions of the tax bill — how prepared they are for it, how well they understand its impact, and who they think has the most to gain or lose from it.
Our findings are below.
About the Tax Cuts and Jobs Act
According to the official, Congress.gov summary of the tax bill, it “amends the Internal Revenue Code (IRC) to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.”
According to an analysis from the Tax Policy Center, however, “higher income households receive larger average tax cuts as a percentage of after-tax income, with the largest cuts as a share of income going to taxpayers in the 95th to 99th percentiles of the income distribution.”
In other words, the highest-income households (and businesses) are expected to receive the highest reductions.
This information, understandably, could be disconcerting to SMBs. If the highest-income or largest businesses stand to benefit the most from the bill, how does that impact the smaller ones?
However, this post is not intended to be a deep-dive into the implications of the tax bill for SMBs — rather, it’s an examination of the overall reactions, sentiments, and expectations experienced by SMBs. We will be monitoring any additional modifications as the bill actually goes into effect for the fiscal year 2018.
How Prepared Are SMBs for the Tax Bill? The Questions We Asked
- How well do you understand the tax bill’s potential financial impact on your business?
- Do you think the tax bill’s financial impact will benefit or harm your business?
- Do you think the tax bill will benefit or harm your employees?
- What kind of businesses do you think will benefit the most from the tax bill?
- Do you account for legislation or regulations when it comes to your business’s financial planning, budgets, and hiring goals?
- Does the passage of the tax bill change any of your business plans for the near future?
- Do you think your business will be prepared for the changes the tax bill will implement once they go into effect?
1. How well do you understand the tax bill’s potential financial impact on your business?
Our research found that 88.5% of SMB leaders don’t know the full impact of the tax bill. That comprises a fairly even split between those who have some idea of its financial impact, and those who simply don’t know what the impact will be.
2. Do you think the tax bill’s financial impact will benefit or harm your business?
The highest number of respondents indicated that they don’t know whether the bill will financially benefit or harm your business, but that group amounted to less than half of the audience surveyed — about 30%.
Meanwhile, there was a somewhat even split between those who believe the bill’s financial impact will benefit their businesses (18.6%) and those who believe it will harm them (19.4%).
3. Do you think the tax bill will benefit or harm your employees?
Again, we found that several respondents simply aren’t aware of how the tax bill will benefit or harm their businesses — about 34%.
Overall, however, a greater number of respondents generally believe that the tax bill will negatively affect their employees (32.2%) than those who believe it could benefit them (22.6%).
4. What kind of businesses do you think will benefit the most from the tax bill?
Our research somewhat overwhelming found that the majority of respondents view the tax bill as a boon for large businesses, with over half (63.7%) responding that they believe this sector will reap the greatest reward.
5. Do you account for legislation or regulations when it comes to your business’s financial planning, budgets, and hiring goals?
Typically, our research found, SMB leaders don’t factor legislation or regulation into their business planning, with just about half responding as such.
While some respondents occasionally account for it (36.5%), an even smaller number indicate that they always do (12.6%).
6. Does the passage of the tax bill change any of your business plans for the near future?
The lack of certainty around the tax bill’s impact, it seems, is largely resulting in inaction among SMB leaders, with 66.6% indicating that they will not change any business plans as a result.
Just under a quarter say they’ll reign in spending and hiring efforts, while roughly 10% actually plan to increase their expenditures.
7. Do you think your business will be prepared for the changes the tax bill will implement once they go into effect?
Finally, most SMB leaders (51.3%) believe that they, at least on some level, will be prepared for any changes to their tax and benefits liabilities resulting from the tax bill when it takes effect.
And despite being unclear on its full impact, less than a quarter (23.4%) believe that they won’t be prepared.
We’ll be monitoring the situation as it unfolds, and watching the tax bill’s impact on all businesses as it takes effect.
As always, I’m open to your take on the matter — feel free to reach out to me with your thoughts and questions on Twitter.
The post The Tax Bill Has Passed. Do You Know How It Will Impact Your Business? appeared first on Wicked Baron's Emporium.