Health care. Government and agencies. Workforce development.
A wide range of business topics was brought to The Northeast Pennsylvania Business Journal’s 2017 economic roundtable, “Perpetuating Greatness: The First 100 Days.”
The conference, which marked the first 100 days of the Trump administration, included panelists from a variety of professions and industries including health care, economic development, business services and more.
We recently caught up with a few of these panelists via email for a follow-up Q&A to see how business evolved during the past year. They are Jeff Box, president and CEO, NEPA Alliance; Roger Howell, president, Howell Benefit Services, and Geoffrey Mesko, partner, Drucker and Scaccetti, PC.
Here’s what they had to say:
What has been happening in your business during the last year, and what are some specific changes you saw in terms of market evolution?
Box: The best news in NEPA Alliance’s world is that our business loan programs are doing very well. We have put millions of dollars of low interest business loan funds on the street over the last year helping businesses create and retain jobs in Northeastern PA.
Mesko: Our business has experienced significant changes over the last year, especially since the Tax Cuts and Jobs Act of 2017 was signed into law late last year. Given that we’re a tax consulting and advisory firm the new law has had a huge impact on clients in our market. The new law presents both opportunities and challenges.
For example, many closely held businesses are considering changing their entity structure to take advantage of opportunities in the new tax law, they’re considering the creation of new entities in their structure to separate certain business activities, they’re considering changes to owner compensation levels, and the individual business owners are reviewing and updating their estate/wealth transfer planning in light of increased transfer tax exemption levels in the new law.
We believe that the new tax law will significantly reduce the number of individual taxpayers that will require professional assistance with tax preparation services in the light of the much increased standard deduction and the elimination of many traditional itemized deductions.
Finally, there continues to be a fast pace of market evolution in the financial consulting industry because of changes to technology that are mainly new and improved software applications that effectively handle most aspects of data input and analysis. Software technology is driving down the cost of traditional accounting services, which is causing our industry to rethink business models and service lines that generate revenue. With the advent of technology new service lines are being created for accountants, in particular cyber security and operating systems testing to ensure safety and proper functionality.
Howell: Larger carriers are going down market to under 100-employee companies to capture additional revenue. All of them are utilizing technology to sell in this market space to create efficiencies.
Has the corporate tax rate cut had any effect on your business plan? Please explain.
Box: NEPA Alliance is not directly affected by the tax changes because we are a nonprofit, but our clients in our business development programs have benefitted.
Mesko: The change in the corporate tax rate has caused many of our clients to reconsider their structure and consider adopting a corporate structure. Most clients have opted not to adopt a corporate structure because of the existing high corporate tax rate for companies operating in Pennsylvania and the existence of an additional tax on individuals paid out of a corporation. The change in the corporate tax rate has caused many new/start-up companies to elect corporate status in high-growth industries where these companies have a defined exit strategy in the short-to-medium term.
I’ll add that we’ve seen a clear uptick in the amount of foreign capital entering the U.S. for operating business reasons and the preferred structure for foreign investors has been the corporate structure. The lower corporate tax rate has made this structure even more attractive to foreign capital.
What changes and/or trends are you seeing in the labor market?
Box: We continue to hear from our clients that there is a skills gap between what employers need and their skill levels. The economic development partners are working with the WIBS and employers through the new ENGAGE! program to learn what the employers need so that we can refer them to the proper resource for assistance.
Mesko: We continue to see the need for entry level positions being diminished because of technological advances and better qualified labor forces offshore. Our firm continues to invest in entry level professionals but the industry as a whole is changing business models to accept new realities and changes in customer expectations.
Howell: Seeking talent such as professional level and skilled trade level employees is a big challenge for everyone.
In what ways is the drug epidemic effecting the labor market? And have you seen any improvement since last year in the number of candidates who pass/fail pre-employment drug testing?
Mesko: Speaking on behalf of many of our manufacturing, construction, and distribution clients, nearly all convey to us that they cannot find enough qualified people to fill available jobs. Many cite reasons such as passing initial drug tests and the general lack of the workforce having proper training.
Howell: This question is out of my area of expertise. However, most of the health insurance carriers are monitoring, restricting and regulating the dispensing of opioids.
As you look forward to the next couple of years, what kinds of changes do you anticipate making to your business plan?
Box: NEPA Alliance continues to work with our federal and state legislative delegation to ensure that key economic development programs that support our local business development efforts continue. Federal and state economic development programs help create and retain jobs in our region. Metrics prove that cuts to those programs hurt business development.
Mesko: We expect our business plan to change significantly for many of the reasons mentioned in my earlier responses. The types of services provided by financial professionals are changing significantly with new technology and new markets. Many of the traditional accounting services are being minimized by artificial intelligences and firms will need to create new lines of business. There continues to be a significant need for advisory services that require complex analytical skills, project management skills, and cognitive diversity with respect to problem solving. We expect that CPA firms will continue the trend of hiring professionals with different disciplines to bring cognitive diversity to their teams, which will continue to add significant value in resolving client challenges.
Howell: Continue to leverage technology in our own practice and selling it to carriers and other agencies.
Is there anything else you would like to add in follow-up to last year’s round table discussion and/or the Trump administration’s first one year and 100 days?
Box: In my opinion, the President still does not understand the value of federal economic and community development programs, as evidenced by his proposed budget cuts to numerous programs. Hopefully he will come to a better understanding over the next year.
Mesko: The new tax law has completely changed the tax code in many respects. It remains difficult to implement new planning strategies given the lack of formal guidance provided by the U.S. Treasury Department. We expect that certainty will remain in the near term, but many business clients will be able to take advantage of the increased incentives within the new law.
Howell: It appears that the new administration is paying greater attention to small business which is encouraging. Generally speaking, a few of the ACA initiatives have been stalled or relaxed for the time being. I’ve noticed some effort to reduce the foreign trade deficit and regulations restricting small business growth.