Assessing Trump’s Policy ProposalsAssessing Trump’s Policy Proposals

A new presidential administration will, by definition, bring about changes. As the Trump administration takes hold, wealth advisors are smart to remain aware of several key policy proposals that could impact their clients.

Advisors to small and family business owners should stay informed about potential changes and their implications, from tax policy to regulatory shifts. While some proposals may offer significant benefits, others could present new challenges.

Looking ahead, advisors should consider working closely with their clients to:

1. Assess potential impacts on their specific business models and industries.

2. Develop strategies to capitalize on potential opportunities, such as tax savings or regulatory relief.

3. Prepare contingency plans for potential challenges, particularly in areas like trade and labor.

4. Stay informed about legislative developments, and be prepared to adapt quickly as policies evolve.

Here are possible changes and related impacts on family businesses in notable policy areas.

Tax Policy 

The most significant potential change to tax policy depends on the fate of the Tax Cuts and Jobs Act of 2017 (TCJA). Many of its key tax provisions are set to expire on Dec. 31, 2025. Possible paths forward include making these tax cut provisions permanent, extending them (in whole or in part) or allowing them to expire, in which case we’ll revert to pre-2017 tax laws. 

Business entities. Here are the business entity  provisions to stay aware of:

• Corporate tax rate. The TCJA reduced the corporate tax rate from 28% to 21%. Unlike many other TCJA provisions, this tax cut is permanent. During the campaign, President Trump proposed further lowering the corporate tax rate from 21% to 15% for businesses that manufacture domestically. This could provide substantial savings for family-owned manufacturing companies, potentially freeing up capital for reinvestment or expansion. However, companies that outsource or conduct operations offshore wouldn’t qualify.

• Qualified business income deduction (Internal Revenue Code Section 199A deduction). The corporate tax rate cut mentioned above only applies to corporations and doesn’t benefit businesses organized as pass-through entities, such as partnerships or limited liability companies. To bring parity, the TCJA introduced a new section in the IRC, Section 199A, which allows a deduction of up to 20% of qualified business income for eligible business-owner taxpayers. Interestingly, this deduction wasn’t made permanent like the corporate tax rate cut and is subject to the sunset at the end of this year. If it sunsets, income earned from business endeavors will have varying tax rates depending on the business’ organizational form. 

Individual provisions. Here are the individual tax provisions to be aware of. If the expiring individual tax provisions of the TCJA are extended or made permanent, it would mostly bring tax planning benefits to family business owners for their individual tax situations:

• Ordinary income tax rates. Extending today’s lower rates means the top rate on ordinary income would stay at 37%, versus reverting to 39.6%. 

• Capital gains taxes. While long-term capital gains tax rates remain the same at 20%, the TCJA altered the income bracket for which the top rate began to apply. If the provisions are allowed to expire, the 20% capital gains rate will start to apply at a lower income threshold, thus increasing the overall tax burden for high income earners. This could create a slightly higher overall tax burden for business owners who are selling their businesses.

• Standard deduction. The TCJA nearly doubled the standard deduction for those who don’t itemize. In 2025, it rises to $15,000 for individuals and $30,000 if you’re married filing jointly. If this provision expires, this amount would be cut approximately in half in 2026. 

• State and local tax (SALT) deductions. The TCJA capped SALT deductions against federal taxable income at $10,000 per individual and per couple. These provisions are set to revert to pre-TCJA rules in 2026, when there would be no such cap on the deductible amount. This would be welcome news for those living in high property and income tax states as taxpayers would benefit from the full deduction, resulting in an overall lower income tax bill. There was some indication during the Trump campaign that the administration may be open to allowing this to occur. However, be aware that the alternative minimum tax (AMT) exemption is also scheduled to be reduced unless extended, potentially lowering the actual tax benefit for many taxpayers because those subject to the AMT can’t claim a SALT deduction. 

Estate and gift tax. Currently, the federal estate and gift tax exemption amount is at the historical high of $13.99 million per individual or $27.98 million per married couple. Without further Congressional action, this would be cut approximately in half at the end of 2025. For many business owners, whose business interest is their most significant and highly appreciating asset, gifting a portion of their business interest out of their estate and into a trust could make for wise tax planning and ease succession planning, allowing for smoother transitions among generations. Using trust structures can be particularly helpful, allowing businesses to specify how and when assets are distributed while protecting the assets from creditors.

For those who may be concerned about potential “clawback” if the exemption is reduced, the Internal Revenue Service has clarified that gifts made under current law won’t trigger a clawback. This means that if one were to fully use the exemption now, there would be no associated tax liability or negative estate or gift tax impact due to a change in law.

It’s important to note that while Republicans generally favor tax cuts and there’s Republican control in both the White House and both chambers of Congress, that doesn’t mean the tax cuts provisions of the TCJA will automatically be extended. First, the Republican majority is slim in both the House (by two votes) and the Senate (by three votes), so a few dissenting votes may make a difference. Second, any extension of tax cuts will impact the budget and the new administration’s ability to raise funds for many of its promised programs and initiatives.

Advisors should remain mindful of the implications in case the above-mentioned tax provisions are allowed to sunset. 

Regulatory Environment 

The Trump administration is already seeking to advance its deregulatory agenda, which could have mixed implications for family businesses. Many regulation-cutting plans are taking shape, and on Jan. 20, 2025 President Trump signed an executive order establishing the Department of Government Efficiency, as a unit within the Executive Office of the President. Primary impact for family businesses include:

Labor. There are indications that the administration may seek to reimpose the threshold for overtime pay eligibility that was in effect during the first Trump term. This could prohibit funding to enforce the Department of Labor’s Fair Labor Standards Act (FLSA) Overtime Rule, ensuring more workers are eligible for overtime pay. The result would likely be reduced labor costs for some family businesses, although it may also impact employee compensation structures and morale. In addition, Trump campaigned to exempt tips from income taxes. This could help business owners who employ workers relying on tips, such as those in the hospitality industry, by simplifying their payroll process because business owners will no longer have to track and report employees’ tip income. It could also help with employee retention by making tipped positions more attractive.  

The environment. The new administration has prepared executive orders aimed at rolling back a range of environmental regulations, including those supporting sustainable and alternative energy, electronic vehicles, workplace oversight and diversity measures. While this might reduce compliance costs for some businesses, it could also create challenges for those investing in sustainable practices. Many of these proposals also benefit larger corporations, which could create a more challenging competitive environment for small and medium-sized businesses.

Trade and Tariffs

Trump and his team have expansive plans for trade policies, aggressive tariffs on imported goods and border restrictions that could have significant ramifications for family businesses involved in international trade. At the time of publication, Trump had reinstated a 25% tariff on all steel imports and increased aluminum import tariffs from 10% to 25%—regardless of importing country. He also imposed a 10% tariff on all imports from China. Businesses dependent on imports will likely see increased costs and disruptions in their supply chains. To adapt, companies may need to seek alternative domestic suppliers. Although tariffs aim to strengthen American manufacturing, the shift could pose considerable difficulties for businesses tied to global supply chains. 

United States-Mexico-Canada Agreement (USMCA) renegotiation. Trump campaigned on renegotiating the USMCA, a step that would impact North American trade relations and has significant economic considerations at stake. In a move that could be interpreted to violate the USMCA, in early February, he issued executive orders imposing 25% tariffs on all imports from Canada and Mexico (with the exception of Canadian energy resources, which have a 10% tariff). The tariffs, initially set to take effect Feb. 4 have been suspended for 30 days,  pending negotiations.  

Family businesses with North American supply chains should assess their exposure to new trade measures closely, judging the potential to alter import or labor practices as necessary.

Small Business Support

There’s good news and potentially unwelcome news on this front. The good news is on the side of depreciation deduction. The administration may seek to reinstate immediate expensing for research and development (R&D) costs. Currently, the requirement to amortize R&D expenditures may hamper cash flow for many start-ups or small businesses. This could be a boost for businesses with high R&D expenditures and/or in sectors with a heavy focus on research and innovation. In addition, Trump has indicated his support for extending the 100% bonus depreciation for qualifying property under the TCJA, which allows businesses to deduct the full cost of eligible assets rather than depreciating them over time. Although extending this provision would benefit businesses of all sizes, it will provide greater benefit to small businesses, where readily available liquidity and capital are critical. 

On the potentially unwelcome side, there’s discussion about eliminating Small Business Association direct lending and disaster loan programs. This could make accessing capital more difficult for some family businesses, particularly during economic downturns or disaster recovery. Traditional financing resources, such as banks and private insurance, may not be an option for many small businesses. Also, the qualified business income deduction is scheduled to sunset this year. Small businesses tend to be organized as pass-through entities, and if this provision is allowed to expire, small business owners are likely to be impacted. 

Immigration Policy

Finally, the administration has been most vocal on implementing changes that significantly tighten immigration policy. Stricter immigration policies may lead to labor shortages in sectors such as agriculture, construction and hospitality.

Beyond the workforce implications, family business owners will likely face more thorough enforcement of immigration laws. This includes increased workplace audits and stricter penalties for employing undocumented workers. Businesses in affected industries should prepare for potential labor shortages and increased wage pressure as they adapt to the new environment.

Family businesses with employees who are H-1B holders (“specialty occupations” that require a higher level of education, specialized knowledge and advanced skill to perform complex duties) should also assess their workforce, as fewer visas may be available in the near future. 

Stay Nimble and Proactive

Most of the above proposals are just that: proposals that will take time to vet and become law. To help put your clients’ businesses in the most competitive position, it’s important to remain aware of changes, monitor the progression of policies and be proactive regarding the right solutions for each situation. 

— This article is for general information only, does not reflect the opinions of Wilmington Trust and its affiliates and is not intended as an offer or solicitation for the sale of any tax, estate planning or financial product or service or other professional advice. Wilmington Trust is a registered service mark.