October 10, 2016

As in…how is this election going to hit your pocket book?

The following summarizes each candidate’s tax policy proposals (in no particular order):

Trump’s “Pro Growth Tax Plan” includes the following:

https://www.donaldjtrump.com/policies/tax-plan/

  • Reduce the current 7 tax brackets to 3 ranging from 12% for those with taxable income less than $75,000 to 33% from those with taxable income more than $225,000 for MFJ. Rates for single taxpayers will kick-in at half of these amounts.
  • Head of Household filing status will be eliminated.
  • Capital gains rates will remain the same (20%).
  • 3.8% Net Investment Income Tax (Obamacare tax) and AMT will be repealed.
  • Standard deduction will increase to $30,000.
  • Itemized deductions capped at $200,000 MFJ ($100,000 for single filers). Note that with the increase in the standard deduction, most taxpayers will not need to itemize.
  • Above-the-line childcare and eldercare deductions (subject to phase-out for high-income taxpayers)
  • Dependent Care Savings Accounts allowing annual contributions of $2,000 per dependent
  • Estate tax repealed with provisions for capital gains over $10,000,000 held until death to be taxed.
  • Reduce the corporate rate from 35% to 15% and eliminate corporate AMT.
  • 10% tax on repatriation of corporate profits held offshore.
  • Manufacturers may elect to expense capital investment, but lose deductibility of corporate interest expense.

Clinton’s “Fair Tax System” includes the following:

https://www.hillaryclinton.com/issues/a-fair-tax-system/

  • Implement a “fair share surcharge” of 4% on taxable income over $5,000,000 per year.
  • Implement the “Buffet Rule” which ensures that those making more than $1,000,000 per year pay at least an effective tax rate of 30%.
  • Shut down what her campaign is calling the “private tax system” by closing some specific loopholes that benefit VERY high income taxpayers.
  • Implement measures to prevent taxpayers from misclassifying income as capital, such as:
    • Raising capital gains rate on short-term trading
    • Limit benefits of like-kind exchanges
    • Retain the 3.8% Net Investment Income Tax (Obamacare tax)
    • Close the “step-up in basis loophole” that allows accumulated capital gains to go untaxed when passed on to heirs (with provisions to protect small and closely-held businesses)
  • Restore estate taxes to 2009 parameters by lowering the exemption amount (currently around $11,000,000) and increasing estate tax rates as estate tax values rise.
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