Two Candidates – Two Different Tax Plans
Although both Donald Trump and HillaryClinton seem to agree on certain points such as making the country’s tax structure more attractive to business, ending the carried interest tax break and expanding the tax deduction for childcare, they differ on how to best accomplish these tasks. Their tax plans deviate from one another on other important issues as well. These include individual income tax brackets, capital gains tax rates and the estate tax, among other things. Clinton’s tax plan includes many of president Obama’s current tax proposals while Trump’s strategy has adopted many of the line items suggested in the tax reform agenda set forth by congressional Republicans.
The following is a comparison of some of the important differences between the Clinton and Trump tax plans, although the list is by no means exhaustive.
• Business Tax Rates
Trump’s tax plan proposes lowering business tax rates across the board with the aim of encouraging businesses to keep their headquarters at home rather than moving them to foreign soil to avoid high taxes. His tax strategy includes lowering the corporate income tax rate from 35% to 15%, assigning the same 15% tax rate to income from pass–through entities such Partnerships and LLCs and allowing companies to repatriate overseas earnings at a tax rate of 10%. While Clinton has not presented a specific proposal in the area of business taxes, she has stated that she will fund infrastructure improvements through business tax reform.
• Individual Income Tax Brackets
Trump is in favor of using the four tax brackets – 0%, 10%, 25% and 33% – suggested in the tax plan proposed by House Republicans. While Clinton has not specified tax brackets, she has made several suggestions which would result in tax increases for those taxpayers with high incomes. Her tax plan includes adding a 4% surcharge to the tax rate of anyone with an adjusted gross income in excess of $5 million. It also suggests setting a ceiling of 28% for the total amount of deductions and exemptions and requiring that any taxpayer who earns more than $1 million be subjected to a minimum tax rate of 30%.
• Estate Taxes
While Trump’s tax plan proposes eliminating estate and gift taxes altogether, Clinton is in favor of increasing them. Her proposal suggests reducing the estate tax exemption to $7 million per couple and increasing the tax rate on amounts above that limit from 40% to 45%.
• Capital Gains Taxes
Trump is in favor keeping the current long term capital gains tax rates of 0% to 20%, depending on a person’s tax bracket. Clinton’s tax plan, on the other hand, contains items that will result in an increase in capital gains taxes. She proposes extending the holding time for short term capital gains from one to two years as well as increasing the tax rates for gains on investments held for less than six years to as much as 47.4%.
• Childcare Tax Credits
Trump is proposing a tax deduction for childcare expenses that would be available to anyone who files a tax return regardless of whether they claim the standard deduction or itemize deductions. Furthermore, he is a suggesting that individuals who do not owe any taxes should be able to deduct childcare expenses from their payroll taxes. Clinton’s tax plan includes expanding the current childcare tax credit with the overall aim of capping a family’s childcare costs at 10% of their adjusted gross income.
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