Small Business Owners Respond to Tax Plan Changes

 

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In December 2017, sweeping tax plan changes were signed into law by President Trump. In our newest survey, we asked 500 small business owners for their thoughts on the tax plan changes now that the bill has been signed into law for a little over three months.

We found that 64 percent of small business owners fully understand the impact of the tax plan changes and, more often than not, they are reporting increased financial and economic confidence as a result of the new plan.

The Tax Cuts and Jobs Act of 2017 is bringing changes to both individual and business tax returns. From the consumer perspective, the tax plan changes are relatively easy to understand. Thanks to the changes, the majority of American consumers have seen their paychecks rise. In February, we found that the average American's monthly paycheck increased by $130.76 when the withholding tables changed.

The impact of the tax plan changes get a little more complex for small business owners. ​Understanding the changes to pass-through entities, "qualified" vs. "unqualified" business income, Section 179, the alternative minimum tax, and C-corp tax rates is a lot to wrap your head around.

In our eight-question survey, we worked to gauge small business owner comprehension, confidence, and sentiment towards the tax plan changes.

 


 

Survey Results

1. Do you believe that you fully understand the impact of the tax plan changes (Tax Cuts and Jobs Act) on your small business tax situation?

a. 63.60% of respondents answered "Yes"

b. 36.40% of respondents answered "No"

2. Do you believe that the tax plan changes (Tax Cuts and Jobs Act) will leave your small business better or worse off financially?

a. 34.40% of respondents answered "Better off financially"

b. 23.80% of respondents answered "Worse off financially"

c. 41.80% of respondents answered "Unchanged"

3. Do you believe that you fully understand the impact of the tax plan changes (Tax Cuts and Jobs Act) on your personal financial situation?

a. 66.60% of respondents answered "Yes"

b. 33.40% of respondents answered "No"

4. Do you believe that the tax plan changes (Tax Cuts and Jobs Act) will leave your personal financial situation better or worse off financially?

a. 36.20% of respondents answered "Better off financially"

b. 27.20% of respondents answered "Worse off financially"

c. 36.60% of respondents answered "Unchanged"

5. Which of the following best describes your small business' financial confidence as a result of the tax plan changes?

a. 39.60% of respondents answered "I am more confident in our financial future"

b. 26.00% of respondents answered "I am less confident in our financial future"

c. 34.40% of respondents answered "Confidence has not changed as a result of the tax plan changes"

6. Do you believe the Tax Cuts and Jobs Act tax plan changes will strengthen the economy?

a. 48.60% of respondents answered "Yes"

b. 22.80% of respondents answered "No"

c. 28.60% of respondents answered "Unsure"

7. Do the tax plan changes directly impact your sentiment about President Trump?

a. 32.80% of respondents answered "Yes, my sentiment has become more positive as a result of the tax plan changes."

b. 49.80% of respondents answered "No, my sentiment has not changed as a result of the tax plan changes."

c. 17.40% of respondents answered "Yes, my sentiment has become more negative as a result of the tax plan changes."

8. Which of the following best describes your feeling about the tax plan changes?

a. 27.00% of respondents answered "Very happy about the changes"

b. 21.60% of respondents answered "Somewhat happy about the changes"

c. 30.20% of respondents answered "Indifferent"

d. 13.00% of respondents answered "Somewhat unhappy"

e. 8.20% of respondents answered "Very unhappy"

 


 

Insights & Graphics

Majority of Small Business Owners Understand Changes

​The Tax Cuts and Jobs Act has a two-sided impact for many small business owners. The Tax Cuts and Jobs Acts is changing the personal and business tax situation for many pass-through entities and their owners. In Questions 1 and 3, we asked about the changes to their businesses' tax situation and their own personal financial tax situation.

We found that respondents mostly understood the changes to their small business tax situation and the subsequent impact, if any, to their personal financial situation. However, over a third of small business owners still do not understand the impact of the tax plan changes.

As time goes on, failure to understand the changes could negatively affect the long-term economic growth. For example, the tax plan changes may be positive or negative, but it may be hard to tell until small business owners understand the new normal.

Financial Optimism as a Result of the Changes

The Tax Cuts and Jobs Acts appears to be creating financial optimism among small business owners. In Questions 2 and 4, we asked small business owners if the tax plan changes will leave themselves and their businesses better or worse off financially.

We found that 34.40 percent of small business owners believe that their small businesses will be better off financially while 23.80 percent believe that their small businesses will be worse off. Failure to understand the changes in large part led to 41.80 percent of small business owners who are unsure how they will be left financially.

Furthermore, 36.20 percent of small business owners believe that their personal financial situations will be better as a result of the changes while 27.20 percent believe the opposite.

Increasing Confidence in Business Performance & Overall Economy

In Questions 5 and 6, we asked small business owners to tell us about their financial confidence in their businesses and in the economy.

We found that the plurality of small business owners, 39.60 percent, are more confident in their financial future. Again, failure to understand the changes in large part may have led to 34.40 percent of small business owners to have unchanged financial confidence. 

The Tax Cuts and Jobs Act has been touted as a driver of economic growth. While the long-term economic impact is yet to be seen, we found that 48.60 percent of small business owners believe that the tax plan changes will strengthen the economy, compared to the 22.80 percent of respondents who believe the opposite.​

A generally strong economy has helped small business owners over the past couple of years. Market economists are working to define the next few years of economic growth. A complicated mix of higher interest rates on products like small business loans, tax plan changes, tariffs, and regulation is certainly making it difficult to predict economic growth.

Sentiment Toward President Trump

In Question 7, we asked small business owners to tell us if their sentiment toward President Trump is different as a result of the tax plan changes. These tax plan changes were signed into law by President Trump and are often associated directly with the Trump administration.

We found that 32.80 percent of small business owners report that their sentiment toward President Trump has become more positive as a result of the tax plan changes. Additionally, we found that 17.40 percent of respondents' sentiment has become more negative while 49.80 percent remains unchanged.

 


 

Methodology

This poll was commissioned by LendEDU and conducted online by polling company Pollfish. In total, 500 American small business owners ages 18 and up were polled. We screened for consumers who reported owning a small business. We allowed the respondents to self-identify the definition of a small business. LendEDU did not verify the size or revenues of the small businesses. The poll was conducted from March 10, 2018 to March 25, 2018. LendEDU was not compensated by a third party for running this survey.

 

The Tax Cuts and Jobs Act of 2017 represents the most significant changes in tax law in over 30 years! Don’t pay more in taxes than you’re required.  Give us a call today at 636-394-5524 and let us help guide you through the complexities of these new rules.