5 Ways to Profit From the New Republican Controlled Congress
(This post originally appeared on Inc.)
First of all, everybody calm down.
Sure, last night’s elections saw the Republicans taking back full control of Congress for the first time in eight years. But we’ve all seen this before–a shift of power in Washington–and we all know, as experienced businesspeople, that nothing is ever as good or as bad as it seems.
So if you’re a Republican, enjoy the victory. If you’re a Democrat, don’t get too upset. And if you’re a businessperson, particularly a smart businessperson, put aside your emotions and focus more on how you can make money over the next few years, now that there’s been a change in congressional control.
Here are a few ways to do that:
1. You can invest with more confidence.
The NFIB’s Small Business Confidence Index not only dropped last month, but it’s been hovering well below its prerecession highs since, well, the recession. That’s because many small businesses, while feeling better than before the recession, are still very uncertain and remain disinclined to take risks. Here’s the good news: A Republican controlled Congress means it’s OK to invest with some confidence over the next two years. It’s not just the votes, it’s the process. Or lack of it. Republicans now have command over the major committees and the flow of legislation on Capitol Hill. They will determine the agenda and that agenda will be pro business. A pro-business environment is a good investing environment. But don’t get too excited–no significant legislation will occur during the next two years because the president still wields much power and the Republicans are still far, far short of having the votes they need in both chambers to override a presidential veto. But a pro-business environment in Washington is good. And gridlock means it’s easier to predict the future. So if you’re running a business you can take a few more risks this year, make a few more investments, spend a little cash.
2. Keep your “Obamacare” plans intact.
Some think that a Republican held Congress will mean the end of the Affordable Care Act (ACA), and this couldn’t be further from the truth. The Republicans can send a bill to the White House every week repealing the law but, as mentioned above, they still fall well short of the votes needed to override a presidential veto. And the president will veto. This is his signature legislation, and he has shown no willingness to consider a full repeal. Some adjustments to the law will probably happen, particularly getting rid of the unpopular medical device tax. (Good for you if you’re in that industry.) But to really profit you have to still consider the ACA in the future and continue making your plans for 2015 and 2016, especially if you have more than 50 full-time-equivalent employees. Set up and expand your health savings accounts. Make sure your plans are affordable for your lower income people. Take a hard look at the high deductible bronze plans. In other words, don’t be fooled; Obamacare is not going away.
3. Buy capital equipment.
One of the biggest impacts that Washington has had on my clients over the past few years was the expiration of the Section 179 accelerated depreciation deduction at the end of 2013. This year, for the first time in a long time, tens of thousands of companies (if not more) can no longer take advantage of the full $500,000 deduction to write off equipment purchases in their first year (it was reduced to $25,000 this year). Look for this to change. I don’t expect there to be sweeping tax reform during the next two years–it’s just too big an issue to address in the run up to a presidential election. But some tax tweaks will happen, namely the reinstatement of the Section 179 deduction and possibly the research and development tax credit too. So go ahead and start buying capital equipment in 2015–you’ll soon see the benefit.
4. Bid for certain government contracts.
You would think that a Republican controlled Congress will mean more sequestration and plenty of budget battles, right? Yes and no. You’ll certainly hear a lot about this over the next two years, how deficits are still too large, how our rising national debt continues to be a crippling problem that won’t go away, how pensions and health care costs need to be better controlled. And these are legitimate problems–however, they’re not going to be solved before 2016. The Republicans will not force another government shutdown, and although deficits under the Obama administration have been enormous, the Republicans themselveshave a history of being spenders just like the Democrats. Sadly, and alarmingly, spending will very likely continue as each party positions itself for the presidential contest. If anything, look for Congress to appropriate more funds to the military and infrastructure and less to social services. Look for more pork projects in 2015 and 2016 as both parties hope to win favor from the public. This will mean more contracts for military and other government contractors, both large and small, which means opportunities for your business.
5. Sell your business, or parts of your business.
BizBuySell, an online marketplace for buyers and sellers of companies, reported an 18 percent increase in the number of businesses sold this quarter over last year, and also found that the number of businesses sold in 2014 is expected to be the highest number since it began tracking this data in 2007. There are many reasons why companies are selling, including our aging population and low interest and inflation rates. But another factor is taxes. Capital gains taxes increased to 20 percent in 2013, which is a big chunk to take out of any profit from the sale of your livelihood. With a Republican controlled Congress there is little likelihood of significant tax reform (where more increases in this rate have been discussed) and therefore zero likelihood that we’ll see any further increase in this rate for the next two to three years. So if you’re looking to cash-in during this time, now is a great opportunity to unload your business, or parts of your business, without fear of an increasing tax bite.
A Republican controlled Congress will be good for my business and yours, but it won’t be earth shattering. Even so, there will be ways to profit from this change over the next few years. And smart business people are already making their plans.