In the past few weeks, you’ve likely been inundated with pre-recorded phone calls, unsolicited opinions on Facebook, and a mailbox full of political flyers. With the presidential election looming, what effect will our decision have on taxes? Every candidate always makes campaign promises related to taxes, whether it’s closing loopholes, lowering tax rates, or completely overhauling the tax system. While it’s hard to say whether a candidate will be able to successfully follow through with these promises, we can, at the very least, attempt to compare the positions that they’ve taken during this campaign cycle. Let us briefly review the candidates’ tax plans.
Individual Income Taxes
- The top tax rate would be 43.3% and would apply to families making over $5 million. She has also proposed a plan that would ensure that all families making over $1 million would be subject to a minimum tax rate of 30%. With the exception of the deduction for charitable contributions, Clinton’s plan would cap the tax savings from itemized deductions to 28% of the value of those deductions.
- The top tax rate would be 33%. For married couples filing jointly, the brackets would be: 12% for income up to $75,000 ($37,500 for single individuals), 25% for income between $75,000 and $225,000 ($37,500 to $112,500 for single individuals), and 33% for income in excess of $225,000 ($112,500 for single individuals). His plan eliminates the head of household filing status. His plan also raises the standard deduction to $30,000 for married couples ($15,000 for individuals), but eliminates personal exemptions.
- Under Johnson’s plan, no federal income taxes would be imposed. His “FairTax” proposal would institute a national sales tax of 28%.
- Stein has said that she would overhaul the tax code. Although she has not discussed specific brackets or rates, her plan would raise taxes for the “wealthy” while reducing the taxes paid by the lower- and middle-classes. Stein has stated that the “rich” should pay taxes of at least 55-60%, but it is unclear what AGI would fall into this category.
- The current lifetime exemption of $5.45 million per person would be reduced to $3.5 million under Clinton’s plan. The excess value of the estate would be taxed at a rate of between 45% and 65% (up from the current maximum rate of 40%).
- Trump’s plan would eliminate the estate tax completely.
- Johnson’s plan would eliminate the estate tax as well.
- Stein refers to estate taxes as an “aristocracy tax,” and her plan would increase rates paid on estates.
- Clinton’s plan focuses on reducing tax-avoidance schemes. Her plan would create an “exit tax” that would be levied on US companies with un-repatriated foreign earnings that leave the US. In addition, her plan would discourage corporate inversions.
- Trump’s plan would reduce corporate tax rates to 15% and would eliminate the corporate alternative minimum tax. His plan would eliminate the domestic production activities deduction (DPAD) and all credits except for the research and development credit.
- As part of Johnson’s “FairTax” plan he would eliminate corporate taxes (as well as eliminating the IRS).
- Stein’s plan would close loopholes and would require large corporations to pay their “fair share” of taxes. She has not released specific plans related to tax rates or tax breaks.
Regardless of which candidate is victorious on Tuesday, it’s unlikely that we’ll see all of the proposed tax changes enacted as promoted. The relationship between Congress and the next president will have a strong impact on what legislation is passed.