2025 Policy Outlook: Implications for the private capital ecosystem
2025 Policy Outlook: Implications for the private capital ecosystem
Author:
The Carta Policy Team
Published date:
January 24, 2025
Here’s what to expect from Congress and the new administration in 2025 and how the policy agenda will impact the innovation ecosystem—private equity, venture capital, and the startups and small businesses they support.
I. Governing dynamics
Congress
Republican control in the House and Senate will allow President Trump to more easily implement his agenda and advance his cabinet picks and other key hires. Regulators will also face less scrutiny from a sympathetic Congress.
Even with unified control, legislating will not be easy. Slim margins and intra-party dynamics will require bipartisan support to advance most policy initiatives. The exception: tax reform. Unified control unlocks the reconciliation process, which only requires a simple majority vote for tax and spending bills.
- House dynamics: Republicans maintained control of the House with a slim majority of 220-215. Narrow margins mean every member is empowered and has negotiating power, making unifying a diverse conference challenging.
- Senate dynamics: Republicans have a 53-47 majority in the Senate and new leadership as Majority Leader John Thune succeeds longtime leader Sen. Mitch McConnell.
Administration
Much of the administration’s policy agenda will be driven through executive orders and rulemaking initiatives. On his first day in office, Trump paused implementation of all rules that have not taken effect and froze federal hiring.
Musk will head the Department of Government Efficiency (DOGE), focusing on developing efficiencies and reducing red tape across federal bureaucracy.
Judicial Branch
The Supreme Court has weakened agency authority, revoking the long-standing Chevron doctrine, which granted deference to agency interpretation of rules within their jurisdiction. This will accelerate the trend where stakeholders challenge administrative rules.
II. Tax reform
Tax policy will be a key focus in Congress in 2025 as key elements of the Tax Cuts and Jobs Act are set to expire.
Process and dynamics: Speaker Johnson has set a target date of April to pass tax reform as part of a more comprehensive bill that would also include energy and immigration priorities.
Provisions to watch: Innovation economy
Potential changes affecting startups, growth-stage companies, and investors in the innovation ecosystem include:
- Carried interest: Currently taxed at long-term capital gains rate; it is in a decent position but needs ongoing engagement by fund managers.
- Qualified small business stock (QSBS): Aims to drive capital and talent to startups and growth-stage companies.
- R&D expensing: This provision incentivizes innovation by allowing companies to recoup costs.
III. Capital markets
Congressional efforts
Capital markets policy is driven by the House Financial Services Committee and Senate Banking Committee. Capital formation is a key focus for both committees, with efforts likely aimed at expanding access to private markets.
SEC
Under new leadership, the SEC is expected to prioritize reducing regulatory burdens and fostering capital markets innovation. This includes enabling retail investors to participate in private markets and developing a regulatory framework for digital assets.
IV. Crypto, AI, and tech policy
Crypto and digital assets
A regulatory framework for digital assets and stablecoins is a key priority, with bipartisan support in Congress expected to drive initiatives.
Artificial intelligence
The administration is likely to prioritize innovation, economic dominance, and competition with global adversaries. Federal and state levels are expected to see further developments in AI legislation.
Antitrust and competition
Federal antitrust agencies will likely scale back the aggressive enforcement seen in the past while still addressing concerns regarding Big Tech.
China
Policymakers will focus on bolstering U.S. competition and protecting against threats posed by China.
Engagement with Congress and the new administration will be key to ensuring that policies incentivize investment in startups and growth-stage businesses.