In light of what Ben Franklin said about life’s merely two certaintiesand considering there’s a good chance neither Donald Trump norHillary Clinton will be able to drive the country into a rapid demise spiraling before introducing their first slate of legislationthe new president will expend much of his or her first word talking about taxes.
In terms of taxation reform, both presumptive presidential nominees largely echo their party’s standard lines. Trump’s plan generally adheres to Republican orthodoxy stretching back generations. It would cut taxes across the board, but with the overwhelming majority of the benefit going to the wealthy. Unless it were accompanied by an enormous cut in expenditures, Trump’s plan would trigger a significant expansion of the national debt. Interestingly, Trump’s current scheme is vastly different from the one he proffered the last period he operated for president, which includes an enormous taxation hike on the richest subset of the richest 1 percent of Americans.
Conversely, Clinton’s vision for the tax system doesn’t appear to substantially differ from that of President Barack Obama. Where Trump’s plan is sweeping, Clinton’s ideas for changing the tax code are far more incremental. Her plan, as it is currently laid out, involves leaving the tax code largely the same for the vast majority of Americans, while hiking rates and closing loopholes for very rich.
Trump’s tax plan
In the rundown of Trump’s tax plan posted on his campaign website, the candidate lists the four broad priorities that form the basis of his plan: taxation relief for middle-class households, simplify the tax code, grow the American economyall without adding to the debt and deficit.
If legislated, Trump’s tax plan would cut taxes by $11.98 trillion over the next 10 years.
It would exempt from all federal income taxes all single people earning less than $25,000 and all households bringing in under $50,000. This group of Americans being taxed at the zero percent rate would comprise one of the four taxation brackets in Trump’s plandown from the current system of seven. The other three brackets will be set at rates of 10, 20 and 25 percentage. Trump’s plan would also eliminate the matrimony penalty, which occurs when the combined tax burden for a newly married couple filing collectively is higher than what they would pay separately, as well as the Alternative Minimum Tax, which was created in the late 1960 s as a style to prevent the extremely wealthy from use loopholes to winnow their taxation bills down to basically nothing, and the so-called death tax, a taxation assessed on very large estates being passed down from one generation to the next.
The plan also involves closing a number of loopholes and allowances principally exploited by the very rich and large corporationssuch as phasing out the tax exemption on life insurance interest for high-income individuals and objective the controversial carried interest loophole for speculative partnerships, which lets executives of Wall Street firms to have their income taxed at a considerably lower rate than most Americans.
The corporate tax rates would be lowered from 35 percentage down to 15. It would also institute a one-time tax holiday on the repatriation of corporate income earned overseas, taxing any fund brought back during this window at 10 percent. Trump argues the high international rate, that is applicable to income U.S. companies earn overseas, is pushing companies to amass fund abroad rather than reinvesting it in their businesses domestically. While the U.S. corporate rate is the highest in the world, the tax code has so many loopholes and allowances available that the effective rate for most corporations repatriating income is closer to 28 percent.
While Trump claims his tax scheme is revenue neutral, that evaluation was disputed in a detailed analysis undertaken by the non-partisan Tax Foundation.
The Tax Foundation found that the scheme would end up reducing federal tax revenues by $10.14 trillion over the next decade, even after accounting for economic growth triggered by the change. As an expression of the results of this decrease in tax revenues, the debt would grow substantially as both the gap between revenues and expenditures as well as the best interest payments on the debt increased.
Overall, the Tax Foundation calculated Trump’s reforms would, over the long term, boost GDP by 11 percenton the assumption that the tax cut could be appropriately financedand create 5.3 million full-time equivalent chores.
In a broad sense, it would cut taxes for people at all income levels. However, the plan is most favorable to the wealthy. The bottom 10 percentage of the income distribution would find their after-tax income rises by an estimated 0.6 percent, while the top 10 percentage would experience a boost of 21.6 percent.
The Tax Policy Center, a collaboration between the Urban Institute and the Brookings Institution, reached a similar conclusion in its own analysis of the Trump plan. It found that Trump would reduce federal revenue by $9.5 trillion over its first decade and, unless accompanied by massive spending cuts, would increase the national debt by 80 percent of GPD, thereby offsetting some or all of the incentive effects of the tax cuts.
Trump’s old tax scheme
Other than in a few minor facets, such as the elimination the carried interest loophole and merely reducing the U.S.’s global corporate taxation rather than scrapping it wholly, Trump’s plan doesn’t deviate all that much from current mainstream GOP thinking on taxes. Yet, it’s a world away from the one he put forth back 2000. At the time, Trump was considering the presidential run on the Reform party ticket and published a volume of public policy proposals called The America We Deserve .
The disjointed set of proposals in the book operate the gamut from letting Trump simultaneously serve as chairperson and U.S. Trade Representative to holding their own nationals lottery to pay for the War on Terror. The book’s most fleshed-out notion is a revolutionary tax-reform plan that marries long-term middle-class taxation cuts with a gigantic one-time tax on the wealthy.
I would impose a one-time 14.25 percentage tax on individuals and trusts with a net worth over $10 million, Trump wrote. That would raise $5.7 trillion in new revenue, which would we use to pay off the national debt . … We would save $200 billion in interest pays, which would allow us to cut taxes on middle-class working households by $100 billion a year.
Income from the proposed tax hike, which would have been the single largest taxation increase in American history if it were enacted, would be directed toward shoring up the looming budget holes in the Social Security trust fund, Medicare, and Medicaid. He would also remove all capital gains taxes, pay down government debts to zero, and end the practice of issuing U.S. government bonds.
When the Daily Dot ran Trump 2000 -era plan past a trio tax policy experts from across the ideological spectrum, all agreed it was both utterly unworkable and suggested Trump had little grasp on how the global economy functions.
To think that it’s a good idea to confiscate trillions of dollars of the wealth of high earners is altogether crackpot. For a businessman like Trump to propose it is even more crazy, Chris Edwards, director of tax policy analyzes at the libertarian Cato Institute, told the Daily Dot. He added that the sudden imposition of such an enormous tax obligation would cause financial markets to tank as wealthy individuals and estates sell off assets to pay their taxation bills. He clearly doesn’t is understood that the issue isn’t only the gross unfairness of the retroactive taxation of trillions of dollars after these folks have already earned it.
If enacted, Trump’s 2000 plan would have had the effect of encouraging more people to hold their assets outside the United States, experts said. Trump’s plan would likely constitute the largest taxation increase in American history, Edwards charged. For Trump not to recognize that business people are forward-looking is a classic instance of how he seems to simply shoot from the hip without actually trying to think things through.
Edwards added that Trump’s belief that a one-time cash infusion would have any lasting impact with regard to the health of Social security systems indicates a lack of intimacy with how the system is actually structured. The Social Security trust fund is not a big pond of savings in the bank. It’s merely an accounting entry, he said. Rather than simply use the money on Social security systems, Edwards said, the government would have an extra $100 billion sitting around and would expend it on other stuff.
Trump’s plan attracted different, albeit no less vociferous, criticism from experts on the other side of political spectrum. The primary goal of Trump’s tax was to pay down the national debt, but, in 2000, the national debt was already in the process of being paid down as a result of a government budget surplus. That surplus was about to be erased by a tax cut targeted principally at the wealthy and pair of foreign wars, but Trump had no way of knowing that at the time.
For Frank Clemente, executive director of the left-leaning Americans for Tax Fairness, Trump’s insistence that, once the national debt was altogether paid down, the country would stop issuing debt similarly indicated an ignorance of government finance. The current level of interest rates and Treasury bond rates makes it a phenomenal time for the U.S. government to borrow money to make the economy more productive and create a hell of a lot more, Clemente said. He’s a business personwho borrows money all the time to make investments, for weeping out loud. He, more than anybody, knows the value of borrowing money to induce you more productive.
Clinton’s tax plan
Unlike Trump’s sweeping proposals, Clinton’s reforms are considerably more targeted and integrated into a larger vision for restricting the economy. Whereas Trump’s campaign website dedicates a page solely to taxes, Clinton’s tax plan is just one part of A plan to raise American incomes.
On the whole, Clinton’s plan would increase taxes on wealthy Americans and create a number of incentives targeted by boosting the lucks of the poor and middle class. While Trump’s plan views taxation cuts as an objective in and of themselves, the increased government revenue garnered by the targeted tax expanded in Clinton’s plan are presented in the context of paying for expanded social programs elsewhere in the governmental forces.
In addition, it’s important to note that Clinton’s tax plan is, as her campaign insists, incomplete. What she’s made publicly available so far doesn’t include a proposal for low- and middle-class taxation cuts, which is reportedly still in the works.
In its analysis of Clinton’s plan, the Tax Foundation predicted it would increase tax revenue by nearly half a trillion dollars over the next decade; however, actual collecting would only be $191 billion due to the tax increase’s impact on overall economic growth. In contrast, the Tax Policy Center’s review estimated that Clinton’s proposals would increase revenue by $1.1 trillion over the same period of time, with virtually the entirety of that new taxation onu falling on the pocketbook of the wealthiest 1 percent of Americans.
The core of Clinton’s plan involves shifting regulations regarding how the wealthy are taxed. Currently, the top marginal rate for individuals is set at 39.6 percentage. By imposing a 4 percent surcharge on households earning over$ 5 million a year, Clinton would effectively create a new bracket above the one currently sitting at the top, with a rate of 43. 6 percent. Whereas Trump wants to wholly repeal the estate tax, which only affects about 0. 2 percent of Americans, Clinton would increase it to the pre-2 009 level.
As a way to ensure the wealthy don’t employ loopholes to end up with an effective rate substantially below the rate at which they’re supposed to be taxed, Clinton would cap itemized deductions at 28 percent and enact a policy labeled the Buffet Rule after billionaire investor Warren Buffett, which would install a 30 percentage taxation floor for people earning over$ 1 million a year.
She would also objective the carried interest loophole that allows many hedge fund, venture capital, and private equity fund managers to pay a taxes at a 20 percentage rate rather the considerably higher rate they would have to pay if their compensation was treated as regular income. In addition, Clinton’s plan involves increasing the tax on income from capital gains as a route to incentivize investors to hold their investments for longer terms rather than buying and selling in a quick, speculative flurry.
Clinton has called for making permanent a temporary $2,500 per student taxation credit for parents paying for their children to go to college. She would also put in place taxation incentives for businesses that have programs to share gains with their employees.
By the Tax Foundation’s estimations, if enforced, Clinton’s plan would reduce GDP by 1 percent over the long term and result in about 300,000 fewer full-time equivalent jobs. However, if Clinton’s tax plan is put into the context of a larger iniative to employ government programs to boost job growth, those numbers could change.
While Trump’s plan would almost certainly cause the national debt to skyrocket, Clinton’s changes to the tax code would shrink the national debt by $1.1 trillion over the course of 10 years and the other $2.1 trillion the decade after.
The former Secretary of State hasn’t called for a temporary taxation vacation aimed at enticing foreign companies to repatriate their earnings on the 2016 campaign trail, like Trump has. However, while in the Senate, Clinton did vote in favor of the 2004 American Jobs Creation Act, which had just such a provision. What happened in the interim? Maybe the Democratic Party has shifted to the left when it comes to corporate tax policy since then? Or maybe it was the 2011 release of a Senate report calling the $3.3 billion tax vacation a failed tax policy.