Donald Trump, soon-to-be 45th POTUS, has had some beefs with the tech world, although planned policies might offer some benefits. Will your industry be affected?
President-elect Donald Trump, with his protectionist views and portrayal as a tech outsider, was generally not seen as a boon to the tech sector during the campaigning phase. This impression was certainly fuelled by high-profile spats with tech luminaries such as Jeff Bezos. This article objectively explores Trump’s policies and views, and seeks to determine how they may affect the Tech sector on the whole.
Trump calls for a reduction in the tax rate for corporations. This, ceteris paribus, essentially results in a lower tax expense and stronger earnings for (tech) companies. Additionally, Trump plans to impose a 10 per cent repatriation tax. U.S tech corporations are (in)famous for parking their foreign earnings overseas to avoid paying the higher U.S tax rate, and this lowered 10 per cent repatriation rate would incentivise companies such as Apple to port the cash back to the U.S.
While the government gets more cash (taxes collected) for nation-building, the American tech landscape would also be flush with more cash for investment and R&D activities. On the flipside, of course, American cash would be drawn away from the rest of the world.
Trump also plans to modify the current carried interest tax treatment — which subjects carried interest to the capital gains tax rate instead of the higher investment income tax rate. Under Trump’s proposition, carried interest will be treated as ordinary income; the top tax rate for investment income is 39.6 per cent, versus the top tax rate for capital gains at 23.8 per cent.
There are thus those that suggest that private equity and venture capital funds would, as a result, be less incentivised to take high risk in investing in (tech) start-ups, since their returns would be taxed at a higher rate — slowing venture activity in tech in general.
Trump has made clear that Americans would get priority to open jobs. This appears like a drag on the exchange of foreign talent across borders for tech companies. However, it would be difficult to imagine a top robotics professor from China, for example, being denied work at Google because of a Trump policy. Rather, those affected most would perhaps be the middle-to-junior level tech employees; U.S. tech corporations that once hired overseas (because of cheaper labour) may be incentivised (or forced) to hire domestically (with higher labour costs).
This can be seen as a bane for non-U.S. tech employees and for U.S tech companies from the perspective that they would face higher operating expenses. Assuming, however, that there is no significant change in output quality between American workers and their foreign counterparts, this is not unequivocally bad for tech development.
Trump’s protectionist stance aims to brings manufacturing back to America. Given the higher wages of American workers, this can be interpreted as higher operating expenses and cost of goods sold for tech companies. However, contained within his trade rhetoric is the goal of enforcing the protection of American trade secrets and preventing their abuse; with patents and intellectual property regulations being highly pivotal in the tech industry.
A successful enforcement of trade secret regulations for American tech companies would allow them to recover ‘lost’ sales – revenue that they should have gotten in the first place as owners of a misappropriated proprietary technology.
Trump’s development plans revolve heavily around infrastructure, and this may seem to deviate from tech. It should be noted, however, that creating the ‘best’ type of infrastructure would accordingly necessitate incorporating the ‘best’ technology. This is applicable to everything from state-of-the-art bridges and roads to ports and harbours. Nothing suggests that Trump would resist technological advances should they — and they intuitively would — serve to enhance infrastructure. Infrastructure technology may not be sexy technology, but is still very much technology.
On a more abstract level, few would argue that technology and innovation are cogs of progress and advancement. While the path of advancement is not a smooth one (which path is?), world leaders would unlikely be, by any natural means, inclined to slow the long-term growth that comes with technology.
Additionally, the very definition of innovation suggests that it is fluid and dynamic, and that it will continue to — as if it has a life of its own — surge forward to solve the next inefficiency.
Image Credit: doddis / 123RF Stock Photo
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