October 10, 2016

Proposed Tax Policies and Positions by the Republican and Democratic Presidential Candidates

By Justin Mainusch, Senior, Tax & Business Services

Proposed Tax Policies and Positions by the Republican and Democratic Presidential Candidates

With all of the noise coming out of both presidential campaigns, deciphering the proposed tax policies of either candidate is a challenge for most voters. To help clarify their respective positions, following is an overview of the topline differences between their plans.

Republican Candidate Donald Trump

Individual Income Tax: Trump is currently proposing three tax rates for individuals — 12, 25 and 33 percent – thereby doing away with the current 10, 28, 35, and 39.6 percent rates. In order to make up the difference, he’s proposed limiting deductions for those in the highest tax bracket. The two exceptions would be the charitable and mortgage interest deductions, which he would preserve at full value for all tax brackets. Mr. Trump has not yet stated what he may or may not do with capital gains rates, but he is on record supporting the elimination of the Alternative Minimum Tax (AMT). The Affordable Care Act, which encompasses a number of current tax provisions, including the Additional Medicare Tax as well as the Net Investment Income Tax, is currently not supported by Trump, and an appeal of both taxes would be highly likely under his presidency. Trump would also try to repeal the Federal Estate Tax.

Individual Tax Credits and Deductions: Trump has proposed allowing a deduction for the average cost of childcare expenditures on parents’ tax returns; however, his campaign has not provided materials on any of the current education credits or deductions for students or their parents.

Business Taxation: Trump supports a maximum corporate tax rate of 15 percent, including pass-through income from S corporations and partnerships. This tax rate would also be applied towards small businesses and would be somewhat supplemented by eliminating loopholes and deductions that would no longer be necessary due to the lower tax rate.

Democratic Candidate Hillary Clinton

Individual Income Tax: Clinton is proposing a four percent “Fair Share Surcharge,” which would be imposed on the top 0.02 percent of taxpayers whose income is more than $5 million per year. For capital gains, Clinton would raise short-term rates in order to encourage long-term investing, but as of yet she has not addressed any changes to the AMT tax. Clinton is a known supporter of the Affordable Care Act, and it would therefore be highly likely that she would keep all related taxes and deductions, such as the Net Investment Income Tax and the Additional Medicare Tax, intact. She may, however, propose changing the Federal Estate Tax from a rate of 40 percent to 45 percent, while also decreasing the exclusion limit from $5 million to $3.5 million.

Individual Tax Credits and Deductions: Clinton has proposed a $1,200 tax credit for caregiver expenses and would possibly try to expand the portion of the credit that is refundable. Like Trump, Clinton has not proposed any changes to the deductions for charitable donations or mortgage interest. She is in favor of limiting the value of itemized deductions to 28 percent for individuals in higher tax brackets.

Business Taxation: Clinton’s camp has not yet released information regarding any changes they may propose to the corporate tax rate, but has stated that she would “simplify tax filings for millions of small businesses” and promote immediate expensing for small businesses. Clinton has also proposed a tax credit for hiring apprentices as well as tax credit bonuses for hiring young people.

An additional note of interest: both candidates support programs and incentives aimed at bringing jobs and production back to the United States.