Trump & Clinton's Tax Policies

Revisiting Trump & Clinton's Tax Policies

We're a day away from what may turn out to be one of the most historic and important US Presidential elections of our time.

In the spirit of the moment, we thought of revisiting our June 15th post summarizing Hillary Clinton and Donald Trump's tax policies and seeing where you stand at this time based solely on these positions.

So please make sure to share your opinion with our community in the comments section below!


2016 US Elections - Revisiting Hillary Clinton's Tax Platform
Image: Jose Gil / Shutterstock.com

Clinton's Position on Taxes

Clinton's tax plan is summarized below:

  • Hillary Clinton plans to increase tax rates for the wealthiest 1% (individuals earning more than $732 thousand per year) and practically leave tax rates for the middle and lower classes untouched.

    According to an in-depth analysis of the Clinton tax plan by the Tax Policy Center, “In 2017, taxpayers in the top 1 percent of the income distribution (those with incomes above $730,000 in 2015 dollars) would see their tax burdens increase more than $78,000, a reduction in after-tax income of 5 percent,” while “taxpayers outside the top 5 percent (those earning less than $300,000 in 2015 dollars) would see little change in average after-tax income.”
     
  • Clinton would also establish an “exit tax” with the aim of penalizing American companies involved in mergers with foreign entities for the sake of tax avoidance.

    Back in January of this year, Hillary Clinton spoke against the merger of Johnson Controls with Tyco International, saying that company inversions should actually be referred to as perversions and that she will stand up to companies “willing to walk away in order to pay a lower tax instead of doing what they should to support our country to grow and be prosperous and strong in the future and it is wrong."

    Likewise, according to Tax Policy Center, Clinton will “increase the threshold for foreign ownership in an inversion transaction—before a US company can give up its US tax residence—from 20 percent to 50 percent of the combined company shares.”
     
  • Furthermore, Clinton plans to issue a wide range of tax credits to boost the economy.

    For instance, according to Tax Policy Center, Clinton plans on providing “tax credits for businesses that invest in community development and infrastructure,” and “businesses that hire apprentices or share profits with employees.”
     
  • Finally, per Tax Policy Center’s analysis, Clinton’s proposal regarding estate taxes is to lower the exclusion from $5,450,000 to $3,50,000 “with no adjustments for inflation going forward, and raising the top rate to 45 percent” from 40 percent.

Trump's Tax Platform

Here’s what Donald Trump has in mind for taxes in the US:

  • Unlike Hillary Clinton’s proposal, Donald Trump plans to “reduce the number of individual income tax brackets from the current seven brackets to three, with rates of 10, 20, and 25 percent,” cutting “the top 39.6 percent rate by 14.6 percentage points, or more than one-third.

    According to the Tax Policy Center’s study of the Trump tax plan, the Republican nominee’s “significant marginal tax rate cuts would boost incentives to work, save, and invest if interest rates do not change,” as well as “reduce some tax distortions in the allocation of capital.”
     
  • Trump also seeks to “reduce the US’s corporate tax rate to 15 percent” and “impose up to a 10 percent deemed repatriation tax on the accumulated profits of foreign subsidiaries of US companies on the effective date of the proposal, payable over 10 years.” Likewise, Trump will get rid of the corporate alternative minimum tax (AMT).
     
  • In terms of estate and gift taxes, Trump will abolish all of them.
2016 US Elections - Tax Policies

How Will Either Tax Policy Affect the US?

According to Time Magazine’s Money section, it’s all-around “good news if you’re a Clinton supporter on a budget: It’s more than likely her tax plan won’t have any effect on your contribution to federal revenue.”

On the other hand, the Republican candidate’s “proposal would lower taxes for the top 1% by more than $275,000, and by more than $1.3 million for the top 0.1% of earners,” according to statistics drawn from the aforementioned Tax Policy Center’s analysis.

One drawback of Donald Trump’s plan, however, is that it “could increase the national debt by nearly 80% of GDP by 2036, effectively undoing some or all of the positive benefits of the cuts.”

Overall, says Money in an earlier article, “most people will see cuts under a Trump administration, with the richest Americans enjoying the biggest tax breaks, while the majority of Americans would see modest cuts,” while “most Americans would probably see no change if Clinton is elected (unless they’re extremely rich).”

A series of studies by the conservative organization Tax Foundation support this notion, also implying that Donald Trump’s policies will seemingly fare better in the long run.

Tax Foundation posits that Clinton’s proposal “would impose slightly higher marginal tax rates on capital and labor income, which would result in a reduction in the size of the U.S. economy in the long run.”

In turn they write, “this would decrease the revenue that the new tax policies would ultimately collect” and “lead to lower after-tax incomes for taxpayers at all income levels, but especially for taxpayers at the top.”

On the other hand, Trump’s tax proposals, says Tax Foundation, “would both lower marginal tax rates on workers and significantly reduce the cost of capital,” boosting “the U.S. economy’s size in the long run, leading to higher incomes for taxpayers at all income levels.”

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