Could President Trump’s Small Business Policies Tilt The Electoral Map?

REUTERS/Joshua Roberts

Stewart Lawrence Stewart J. Lawrence is a Washington, D.C.-based public policy analyst who writes frequently on immigration and Latino affairs. He is also founder and managing director of Puentes & Associates, Inc., a bilingual survey research and communications firm.
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Donald Trump may have the best opportunity of any president in recent years to consolidate political support among America’s 27 million small business owners — giving his administration and the GOP a distinct advantage in future elections.

That conclusion comes from an analysis of voting data in recent elections and from the likely impact of Trump’s economic policies, which are shaping up to be the most small business-friendly the country has seen in some time.

It also derives from the potential impact of a new social media marketing campaign to be launched later this year by Linda McMahon, the founder of the World Wrestling Foundation who heads up Trump’s Small Business Administration.  McMahon is already traveling the country on a “listening tour” intended to raise the profile of small businesses while creating new pressure for supportive small business legislation from a heavily GOP-dominated Congress.

Small businesses, which comprise the vast majority (97%) of all US companies,  are not usually thought of as a distinct voting constituency, in part because they are scattered all across the country, and are not formally organized or mobilized to participate in electoral politics as large corporations or women’s and ethnic groups typically are.

While ably represented by trade groups like the US Chamber of Commerce or the National Federation of Independent Business, small business owners tend to be broadly conservative on economic issues.  However, they’re also socially liberal.  And historically, they’ve been critical of the way Democrats and Republicans have approached their interests, leaving many disaffected without strong partisan affiliations.

Past studies of small business voting patterns have suggested that entrepreneurial voting behavior is not determined by a political candidate’s position on issues of special concern to small businesses, such as taxes and regulations, or wage and overtime rules.

Instead, demographics are thought to play a larger role.  For example, while businesses overall tend to lean Republican, women owners lean Democratic.  The same is true of African-American and Hispanic entrepreneurs.

However, a closer look at the data suggests that demographic breakdowns for small business owners are not the same as the voting population at large.  For example, over 40% of Hispanic business owners do vote Republican, higher than the figures reported for the two most recent GOP presidential candidates.  The same disparity is true for African-American business owners.

But it’s Trump’s stance on issues like rolling back Obama-era regulations, slashing the business tax rate to 15%, and abolishing new minimum wage and overtime standards that are already giving small businesses reason to cheer the incoming regime.  With the economy poised for takeoff, small businesses need fresh incentives to make new outlays and hire more workers.

A key issue that could determine how far the small business sector moves into the Trump camp is tax reform.  A proposal is pending that would give small businesses a major tax break known as “full expensing.”  It would allow companies to immediately deduct the cost of capital investments from their tax bill, including the purchase of new equipment and facilities.  This is a huge incentive for small companies to take the risk of expanding their operations beyond what they might otherwise contemplate, especially in a slow growth economy where consumer confidence is still recovering from the Great Recession.

Supporters say full expensing will create a tipping point for small businesses to jump into the economy pro-actively, allowing more workers to be hired more rapidly.  Small businesses typically account for two-thirds of all new jobs created in the economy though some analysts say the figure is closer to just over half.

Either way, full expensing might create a real job growth spurt – good news for businesses and of course, good news for Trump politically, too.

But not everyone supports the new initiative.  In fact, other business conservatives inside the GOP – especially those representing larger corporations – see full-expensing as a threat to their larger tax cutting agenda.  These Republicans prefer to prioritize Trump’s call for a reduction in the corporate tax rate and worry that the already narrow path for tax reform cannot accommodate both provisions.

Like the complicated horse-trading on alternatives to ObamaCare, which eventually could not be managed, retaining full-expensing could prove to be a big challenge for Trump.

But it’s one that holds enormous political potential.  Big business may contribute to super-PACS and help fund elections, but they are relatively few in number.  Small businesses are potentially a larger voting constituency than veterans, Hispanics or African-Americans.   The latest polls indicate that more than 60% of small business owners are highly optimistic about Trump and his agenda.

A decisive legislative victory on full-expensing could put even more of them squarely in the Republican camp – while providing real dividends for the economy.

It’s worth noting that some of the highest rates of new business start-ups were recorded in states that are considered “in play” in national elections.  For example, Colorado, a key swing state, recorded the third highest rate of new business start-ups last year.  Nevada, another swing state, had the sixth largest rate.  And Arizona, a red state that is beginning to trend blue, had the highest rate.

The fate of full-expensing won’t be decided until later this year.  But the potential implications seem clear:  along with other measures aimed at stimulating small business, Trump’s more “populist” approach to the economy could expand the GOP’s political base in ways that past Republican – to say nothing of Democratic – candidates would hardly have imagined.