Impact of Tariffs, Tax Rate Changes, and Regulatory Shifts on Small Businesses in San Diego

Preovolos Lewin, ALC – Keeping San Diego Businesses Informed and Prepared

In today’s dynamic economic environment, small businesses across San Diego and beyond must remain vigilant about evolving tariffs, tax rate changes, and shifting regulatory landscapes. Recent updates from the White House and IRS could significantly affect businesses of all sizes. Below, our San Diego business attorneys break down the key changes you need to know and how they could impact your operations.

How Tariffs Are Affecting Small Businesses

Tariffs have reemerged as a major economic discussion point, with former proposals even suggesting tariffs could replace income tax entirely. In reality, the implications are much more complex.

  • Increased Costs: Tariffs typically raise the cost of imported goods, squeezing small business margins and often leading to higher consumer prices.
  • Uncertainty in Planning: The volatility of tariff policies makes it challenging for businesses to forecast costs and plan inventory.
  • Economic Impact: Analysts estimate that the cost increase from tariffs could amount to $2,000–$4,000 annually per taxpayer, disproportionately affecting middle- and lower-income households.

For small businesses, especially importers, navigating fluctuating tariffs is crucial to maintaining profitability and competitiveness.

Potential Changes to Top Income Tax Rates

Congress is actively discussing potential changes to the federal tax code, including:

  • Restoring the Top Income Tax Rate: Proposals to reinstate the 39.6% top tax rate—or increase it to 40% for those earning over $1 million—are gaining attention.
  • Impact on Pass-Through Entities: Many small businesses operate as pass-through entities (LLCs, S-corporations, sole proprietorships), where business income is reported on personal returns. Higher tax rates could directly affect these business owners.

While these tax changes are not guaranteed, small business owners must prepare for the possibility of higher tax liabilities in the near future.

Regulatory Changes: A New Era for Businesses?

On April 9, 2025, the White House issued a directive to federal agencies to review and repeal regulations deemed unlawful or excessively burdensome. This regulatory shift could have a profound impact on industries with heavy compliance requirements.

  • Regulatory Rollback Efforts: Agencies are identifying outdated or costly regulations that could be modified or eliminated.
  • IRS Public Comment Period: The IRS is accepting public feedback on which tax regulations should be revised through May 30, 2025, offering businesses a rare opportunity to voice their concerns.

For small businesses, reduced regulatory burdens could lower operating costs and simplify compliance procedures.

What San Diego Small Businesses Should Do Next

With so much change on the horizon, it’s essential for small businesses to take a proactive approach:

  • Monitor Tariff Policies: Stay informed about tariff developments and adjust pricing strategies accordingly.
  • Prepare for Tax Rate Changes: Consult a business tax attorney to evaluate potential impacts on your income and financial strategies.
  • Engage in the Regulatory Process: Take advantage of the IRS comment period to advocate for regulatory changes that benefit your industry.

Proactive planning today can help minimize disruptions tomorrow.

Contact Preovolos Lewin, ALC – Your San Diego Business Law Advocates

At Preovolos Lewin, ALC, our San Diego attorneys are committed to helping small businesses adapt to evolving economic conditions. Whether you need strategic advice on tariffs, tax planning, or regulatory compliance, we are here to help you stay one step ahead.

Contact us today to schedule a consultation and learn how we can support your business through these changes.