OPINION:
A Fortune reporter interviewed five CEOs in Davos last week about President Trump’s first year and came away with a unanimous response: He is very pro-business.
“It feels like he wants us to win,” said one.
Ask anyone running a business, and the sentiment is the same: The Trump administration is very pro-business. The president is a dealmaker, a negotiator, a property developer.
“I think Trump has been the most pro-business president we’ve ever had,” Pershing Square Capital Management CEO Bill Ackman told CNBC last year. “His presidency has been uniquely good for business.”
In just one year, the administration has done much to deserve this credit. Mr. Trump has attracted trillions of dollars of new investments in the U.S., overseen the reversal of hundreds of regulations, rolled back prohibitive environmental rules that restricted energy and other industries, and signed into law a major tax bill that reduces rates for big and small companies alike.
His tariff increases are understood by many (including many of my clients) as a necessary step to level the playing field so American businesses can compete more effectively globally.
So far, so good. Inflation has held steady. Interest rates are coming down, thanks in part to the pressure Mr. Trump has applied to the Federal Reserve. The economy grew at more than 4% in the last quarter. Productivity is up. Unemployment is holding. Consumer spending is still strong. Small-business optimism has increased.
There’s a downside to this pro-business approach, and I’m seeing it with many of my clients. As the federal government has pulled back from regulating labor, commerce and industry, states have jumped in.
The federal minimum wage stays stuck at $7.25 per hour, but that hasn’t stopped 30 states from raising their minimum wages well above that, in some cases to $20 an hour. Businesses with employees in higher-wage states are earning more, creating friction.
The Trump administration overturned the Biden administration’s rules raising overtime pay, but five states still have overtime rules that exceed the federal amounts, with more under consideration. There’s no chance the Trump administration will endorse federal legislation that mandates employers to pay for sick or family leave time, but 24 states now (or soon will) require employers to pay for family and medical leave, and 15 states have sick time mandates.
More than a dozen states also require (or soon will require) their employers to be transparent about worker pay in public and internal job postings, whereas the federal government doesn’t. The U.S. Equal Employment Opportunity Commission abolished the Biden administration’s rules on preventing worker harassment, though many states still have such rules.
Although many states still enforce diversity, equity and inclusion requirements for contracts, the EEOC chair recently warned that “corporate America faces a DEI reckoning this year.” All this can make a business owner’s head spin.
Yet it gets more complicated.
In California, employers must now keep more information in personnel files, reimburse for more out-of-pocket expenses and provide mandated training. Illinois has more requirements regarding nursing mothers, a new artificial intelligence law, a “blood and organ donation” leave mandate and more. Minnesota’s break and meal times for employees have been extended. Nevada has more air quality safety requirements.
Pennsylvania requires more background screening and less hair discrimination (yes, you read that right). Washington state mandates employers to provide leave for victims of hate crimes, safety standards for “isolated” employees and more child labor protections.
Numerous other regulations are being proposed and debated in statehouses across the country. Cities, including Chicago, New York and Los Angeles, have their own rules that exceed even what their states require. Trust me, as hungry as the states and cities are for revenue, they are pursuing these avenues aggressively.
You can be the judge of whether these are good or bad for society. That’s exactly what the federal government is doing: letting states be the judge of what’s best for their local populations. It’s reasonable. Why should an employer in Alabama pay the same minimum wage as their counterpart in California? Maybe Texans don’t think it’s necessary to have special laws protecting “isolated” employees. That’s up to them.
The problem with this approach is that it creates more complexity for businesses, particularly small ones. I recently visited a client in Texas, a trucking company with drivers operating across the country. Which state laws apply to these drivers? I have another client in Pennsylvania with remote workers in a handful of states. Which state laws apply to them? No one running a business has a clue, so they are forced to lean heavily on their payroll companies or hire labor attorneys or human resources experts to sort it out. Translation: more costs.
Having a less regulatory, pro-business, laissez-faire federal government has its benefits, but regardless of whatever rules come out of Washington, states can always enact their own. It’s one of the frustrating facts about running a business in this great country.
• Gene Marks, CPA, runs The Marks Group PC, a financial and technology consulting firm near Philadelphia.
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