It’s still early in the presidential campaign cycle but I thought it might be interesting to take a look at what the candidates are saying about taxes. I’m not aware of any candidate that has released a comprehensive tax plan. However, there are a lot of ideas being thrown around. These may be just trial balloons to see how the public reacts. The ideas could make it into a comprehensive plan if the reception is favorable.
The Democratic candidates all appear to agree they want upper income earners to pay more taxes.
Hillary Clinton – Would cap itemized deductions at 28 percent of the deduction amount. This is an idea President Obama has been asking for since the American Taxpayer Relief Act of 2012 (ATRA12) was signed. She has advocated using the taxes raised from the limitation to fund her plan to make college more affordable. ATRA12 made a lot of tax provisions permanent but the education-focused American Opportunity Tax Credit was only temporarily extended. Mrs. Clinton would make it permanent and expand it. She has also suggested higher tax rates on capital gains rates – from the current 23.8% rate to 39.6% percent on investments held less than six years on top-bracket filers (singles with taxable incomes over $413,200, marrieds with more than $464,850).
Bernie Sanders – Would raise taxes on the wealthiest Americans and corporations. Senator Sanders has not said how much income taxes would be increased but he supports marginal rates in excess of 50% for top earners. Revenue raised from increased taxes would be used to rebuild infrastructure, create jobs, and make public colleges and public universities tuition-free.
He has also proposed a progressive estate tax on multi-millionaires and billionaires by lowering the estate exemption to $3.5 million and raising the federal estate tax rate incrementally from 45% to 55%. Estates of billionaires would pay an additional 10% surtax, making their top rate 65%. He would also eliminate or sharply curb popular estate-tax-saving strategies, such as the use of valuation discounts when transferring interests in closely held firms to family members, grantor retained annuity trusts, etc. Additionally, he wants to reduce the annual gift tax exclusion to $10,000 from the current amount of $14,000. Senator Sanders would also raise the current 6.2% Social Security tax on earnings up to $118,500. His plan would also levy the tax on incomes over $250,000. He advocates a tax on financial transactions to help fund his plan to provide free college tuition at public universities. He’d impose an excise tax of 0.5% on the value of most stock trades and lesser levies for bond and derivative trades.
The Republican candidates are rallying around some form of flat tax.
Donald Trump – The front runner has said very little about tax policy in recent campaign speeches. He would simplify the tax code and make sure top income earners are paying some tax. Mr. Trump dismisses a flat tax because it would be unfair to the poor. In his 2011 book, Time to Get Tough, he describes a five-part tax plan that establishes 4 tax brackets from 1% to 15% of your income. The plan eliminates federal estates taxes, lowers the tax rate on capital gains and dividends, and eliminates corporate taxes altogether since shareholders are already taxed on dividend income.
Jeb Bush – Has laid out three main goals related to tax policy: to make the tax code simpler and clearer with three tax brackets of 28, 25 and 10 percent; to eliminate lobbyist-created loopholes in the tax code; to ensure the tax code does not hinder America’s international competitiveness. The top tax rate of 28% would apply to taxable income over $85,750 for single filers and $141,200 for joint filers. He wants to increase the standard deduction to $11,300 for single filers and $22,600 for joint filers. His tax proposals eliminate the Medicare surtax of 3.8% on net investment income and would subject interest income to the same lower tax rates as capital gains and dividend income. Corporate taxes would be lowered to 20%. Mr. Bush would eliminate the federal estate tax but with it, he would also eliminate the step-up basis for capital gains that benefits heirs.
Chris Christie – The Governor signed the Americans for Tax Reform’s Taxpayer Protection Pledge promising to “oppose and veto any and all efforts to increase taxes. He advocates three individual tax brackets, from 8% to 28%. In order to lower tax rates he would eliminate itemized deductions except for charitable donations and mortgage interest. Governor Christie also proposes eliminating payroll taxes for workers under 25 and over 62 years old. Corporate income-tax rates would be lowered to 25%.
Rand Paul – Advocates a flat tax of 14.5%, with a standard deduction of $15,000 per filer and personal exemption of $5,000 each. He would eliminate payroll taxes and itemized deductions except for charity donations and mortgage interest. The Senator would retain the earned income tax credit and child tax credit but eliminate the federal estate tax and lower the rate on dividends and capital gains to 14.5%. Corporate income tax would also be replaced with a 14.5% business-transfer tax on capital income and labor payments. Senator Paul has signed the Taxpayer Protection Pledge.
There are several presidential candidates not mentioned in this article simply because of space limitations. For more complete and up-to-date information on the candidates and where they stand on tax policy, go to BallotPedia or the Tax Foundation.
- Tax policy will be one of the major issues of the 2016 presidential campaign. Stay informed on where the candidates stand.
- Democratic candidates have generally said they want upper income earners to pay more taxes in order to fund several initiatives.
- Republican candidates have generally proposed some form of a flatter tax that would be paid for my eliminating or minimizing current tax deductions.