INSIGHTS AND RESOURCES
Policy snapshot: Consumer products
INSIGHT ARTICLE |
Authored by RSM US LLP
Joe Biden is the projected winner of the presidential election. Control of the Senate will not be decided until the runoff elections for Georgia’s two seats in January. The outcome could mean a 50/50 split or divided government. What does this mean for the middle market? RSM is looking at the policy implications and key issues for various industries. This is one in our series of industry-focused outlooks for a Biden administration.
According to Joe Biden’s plan:
The immediate actions of the Biden administration will most likely be focused on efforts to combat the COVID-19 pandemic. A new stimulus package will likely be pursued as one of the administration’s first efforts. If the previously proposed Heroes Act is any indication, this stimulus package could be much larger than the CARES Act passed earlier in the pandemic. Another round of stimulus checks and enhanced unemployment could give a boost to consumer spending in the short term. In addition, the new administration will be focused on fiscal expansion and tax policy. Government stimulus will be imperative to help already-struggling retail, restaurant and food service companies maintain cash flow and adapt to new business models and consumer preferences.
Tax reform will be on the agenda as Biden plans to raise the capital gains tax rate, the personal and corporate income tax rate, potentially introduce minimum taxes on corporations, provide for additional taxes on foreign profits and reduce the lifetime estate tax exemption. The Biden administration is also in favor of raising the minimum wage to $15 an hour. Many states have already instituted a minimum wage above the federal amount. Retailers, restaurants, manufacturers and distributors who hire entry-level employees in the consumer products ecosystem are already feeling the expense pressure. Finally, look for the Biden administration to focus on regulatory policies that improve the environment and sustainability. Consumers continue to purchase goods from companies who have environmental, social and corporate governance strategies, so addressing these preferences is key.
What a closely divided Senate means for the consumer products industry:
With a closely divided Senate, President-elect Biden may not get the tax increases he outlined during his campaign. Increasing taxes while Americans are struggling during a pandemic will be difficult to justify. However, Biden has a history of meeting in the middle; and in order to have the funding for stimulus as well as additional federal spending for other health and environmental programs, he is going to have to increase tax revenue. This could mean that corporations will still see a tax increase; however, again, with a mixed government, this may not occur.
What room for growth or evolution exists in the consumer products industry?
Before the pandemic, trade policy, specifically tariffs, was a major concern among retailers, growers, manufacturers and distributors of all manners of consumer products. Steep tariffs already increased companies’ costs, causing prices to increase for consumers. Pandemic-impacted supply chain disruptions further exacerbated companies’ challenges as they looked for additional sources. Biden has commented that he would repeal tariffs. He aims for a more tempered international approach, collaborating with allies to protect against unfair practices while maintaining a focus on bringing jobs to Americans. Middle market companies should model how changes in tariffs, as well as tax policy, will affect their bottom line.
Another area of both opportunity and challenge for the industry is e-commerce, which has grown exponentially since the onset of the pandemic. Many consumer products companies began or increased sales via Facebook and Amazon. The Biden administration will need to quickly acquaint themselves with the Organization for Economic Cooperation and Development’s plan to negotiate a global digital tax on selected gross revenue of large digital companies that is set to be decided by June 2021. If the majority of countries do not come to an agreement by that point, many European countries have stated they will move ahead with their own digital tax. Either way a digital tax is likely to end up costing consumers.
Additionally, businesses have had to maneuver quickly to not only accept and deliver orders, but also capture consumer data to understand preferences and gain loyalty. Current regulations may not be sufficient for ensuring that consumers have control of how their personal data is used. The Biden administration could help advance federal regulations protecting privacy.
Questions that frame the path forward:
- If coronavirus surges continue into 2021 and an economic pullback is warranted, what should organizations do to prepare? How might the administration help businesses weather this next wave?
- How effective are companies’ current entity structures under new tax policies?
- Have business owners addressed ownership in light of possible estate and gift tax changes?
- Do middle market consumer products organizations have a robust e-commerce strategy in place that addresses customer preferences and business growth needs?
- How have businesses addressed growing cybersecurity issues?
- How do middle market companies continue to develop their safety, environmental and sustainability programs?
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Seth Bacon, Peter Cadigan, Karen Galivan, Christopher Shaker and originally appeared on 2020-11-24.
2020 RSM US LLP. All rights reserved.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.