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Post U.S. Elections: Five areas Israeli entrepreneurs need to consider

It appears that attempts will be made to simplify the U.S. tax code, which could include: reductions in the numbers of individual tax brackets; the lowering of rates across all brackets; increases in standard deductions; and lowering of the corporate tax rate from to 15%
Donald Trump and Family. (Eric Cortellessa/Times of Israel)
Donald Trump and Family. (Eric Cortellessa/Times of Israel)

The United States has just completed its election for President and members of the U.S. Congress.  With this election, one can anticipate changes in U.S. policy which can impact how Israeli entrepreneurs will approach the U.S. market in the future.

The election of Donald J. Trump as President with the continuation of the Republican Party having majority in both houses of the U.S. Congress, will bring about policy changes that have the potential of impacting business in the U.S.  For Israeli companies considering expanding the U.S. market here are five policy areas to pay attention to in the future –

  1. Immigration– Immigration was a significant issue during the campaign for President.  Particularly was the issue of illegal immigration.  In 2017 and beyond, it is anticipate the U.S. will develop new policies which move towards immigration reform.  Will a new immigration plan have exceptions for high-skilled immigrants? Will there be greater restrictions on temporary and work visas? Will that new plan have any provisions for immigrants who invest in this U.S. and can help grow the economy?  What impact could new immigration legislation have the importing of innovation that have helped to stimulate the U.S. economy?  What effect could it have on investment from international sources into U.S. entrepreneurs?  These are all questions that have implications for Israeli start-ups looking to expand to the U.S. and warrant Israeli entrepreneur’s attention.  What direction immigration reform takes, could provide additional barriers to entry for international businesses in the U.S. It will increase the importance for Israelis startups to work with reliable and creditable partners in the U.S.
  2. Taxes – It appears that attempts will be made to simplify the U.S. tax code.  This could include: reductions in the numbers of individual tax brackets; the lowering of rates across all brackets; increases in standard deductions; lowering of the corporate tax rate from to 15%; and a 10% rate on repatriation of foreign profits with the goal of bringing corporate “headquarters” back to the U.S.   For the Israeli entrepreneur, will these taxes breaks and simplification of the tax code allow for individuals and corporations to invest more money on innovation or with entrepreneurs?  Will tax breaks continue for investors?  And what, if anything, will happen to the capital gains tax, which has spurred on individual investment.  The theory remains that a lower capital gains tax promotes investment.  Will there be tax advantages for Israeli companies to have U.S. Subsidiaries?
  3.  The Affordable Care Act – The repeal of the Affordable Care Act had been at the forefront of the campaign, if it is repealed, what replaces it?  Donald Trump, during the campaign, called for a more free market system?  How will this impact businesses and their employees?  Further, for those in biomedical innovations, will that add money to health system or restrict even more? As, this could encourage or discourage the adoption of new innovations and new products.  If fewer people have access to health insurance, will that mean less revenue for the healthcare organizations and thus a further tightening of their budgets and what effect will that have on the adoption of new products?  Would new legislation include wellness and remote digital healthcare? If yes, this could open up opportunities for innovation?  This could be very beneficial for Israeli startups in this space, particular those with leading U.S. partners
  4.  Trade – The trade issue reverberated and may have been a catalyst for the election results.  If there are changes to U.S. trade policy, will it restrict high quality innovation from entering the U.S.?     One area that would be clear, is the preference will be given to U.S. companies, so establishing in the U.S. may become critical and further, new policies may strongly encourage manufacturing to be in the U.S.  This could lead to incentives for companies to establish in the U.S.
  5.  Regulation – The new administration has made a point, during the campaign, of urging the streamlining of federal regulations on business.  This could open up opportunities for innovations and it also makes bringing innovation to the market simpler and less costly, pending on what areas the regulation reform is targeted.  It will be important to track these changes and to understand how they impact, if at all, your business.  Your partners in the U.S. can assist greatly in the navigation of this area.

Being a month removed from the election leaves us with many questions that during the next months and years will begin to be answered.  As entrepreneurs and innovators it is incumbent to stay on top of these issues and to understand how change affects your business.  Additionally, to stay agile will be an important quality to have as you work to understand and adapt to change.

A change in admirations brings uncertain and opportunity- two words that true entrepreneurs thrive on.

What will be increasingly important, is to have U.S. partners who have experience and understanding of the U.S. market and the changing nature of that market.  Strong partners will deliver strong results.  We are entering a period of unknown in the U.S. and it will be months and years before everything shakes out.  This is a time to stay vigilant and to keep your eye on the changing policies in the U.S. as they could impact your business opportunity – both positive and negative

About the Author
Tom Sudow is the Director of the Burton D. Morgan Center for Entrepreneurial Studies at Ashland University and an Advisor to eHealth Ventures Israel and to SCI (a Chinese investment group investing in Israel. He has worked with Israeli startups for 20 years and has lecture numerous times in Israel. He is also Director of Business Development for Cleveland Clinic Innovations (the 2nd ranked Hospital in the United States).
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