Where Clinton and Trump Stand on Taxes

Clinton's plan would raise taxes on the wealthy, while Trump's would cut taxes across the board.

(Image credit: alfexe)

Key differences: Clinton’s plan would increase taxes on the wealthiest Americans. Trump’s would cut taxes across the board — from the lowest-income earners to the top 1%.

Key Clinton quote: “I want to make sure the wealthy pay their fair share, which they have not been doing. I want the Buffett Rule to be in effect, where millionaires have to pay 30 percent tax rates instead of 10 percent to nothing in some cases. I want to make sure we rein in the excessive use of political power to feather the nest and support the super wealthy.”

Key Trump quote: “Middle-income Americans and businesses will experience profound relief, and taxes will be greatly simplified for everyone. I mean everyone. […] Reducing taxes will cause new companies and new jobs to come roaring back into our country.”

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Under Clinton’s plan, taxes would change slightly or not at all for the bottom 95% of taxpayers, while the top 1% would see sizable increases. This is because Clinton wants to implement a 4% surcharge tax on income over $5 million, plus the Buffett Rule, which would ensure that individuals who earn more than $1 million annually pay a minimum effective tax rate of 30%. She would also cap the value of all itemized deductions at 28% for folks in higher brackets. This limitation would apply to other tax breaks, too, such as the write-off for IRAs and moving expenses. And it would nick some currently tax-free items, such as 401(k) payins, tax-exempt interest, and the value of employer provided medical insurance..

According to the Tax Policy Center, Clinton’s policies would increase taxes by $78,000, or 5% of after-tax income, for the top 1% of taxpayers. The top 0.1% of taxpayers would see an increase of about $520,000, or 7.6% of after-tax income. Middle-income households would see an average increase of about $44, or a tenth of a percent of change.

Roberton Williams, Sol Price fellow at the Urban Institute-Brookings Tax Policy Center, says that Clinton promised to share another proposal discussing low and middle-income tax cuts but didn’t specify its release date.

Clinton’s tax plan has several additional focuses, including estate and business taxes. She would increase the top estate tax rate to 45% and reduce the threshold to $3.5 million for individuals and $7 million for married couples. Clinton also wants to increase taxes on multinational corporations. She would raise the threshold for foreign ownership in inversion transactions to 50% of combined company shares and place an exit tax on unrepatriated corporate profits.

The Tax Policy Center found that Clinton’s plan would increase federal revenue by $1.1 trillion over the next ten years and reduce national debt by 10% of GDP by 2036.

In a speech at the Detroit Economic Club on Aug. 8, Trump modified his proposal for overhauling the tax system. He still wants individual rate cuts, but they’re not as deep as in his original plan. Many said his first plan, with four brackets topping out at 25%, was too costly. Now he sees three brackets, maxing out at 33%, the same as the House GOP plan.

He continues to offer up a 15% rate on corporations and pass-throughs, such as partnerships and LLCs, and would extend the rate to sole proprietors. He favors full expensing for new asset purchases such as buildings and equipment. And he wants to do away with the estate and gift tax.

He’s silent on capital gains for now. His prior plan called for rates from 0% to 20%, compared with a 16.5% top rate under the House GOP blueprint. Also, he gives no details about which write-offs will be on the chopping block. He’ll probably keep breaks for home mortgage interest and donations to charity. But most others would have to disappear to help offset the cost of his proposed rate cuts.

Says Williams of the Urban Institute-Brookings: “The Clinton plan is basically stay as you go. You’ve got a basic tax plan in place right now. She has so far proposed no major changes to that structure other than to raise taxes significantly on some high income people. That’s not a very radical change. Trump’s changes are much bigger.”

Meilan Solly
Intern, Kiplinger.com
Solly is a Kiplinger.com intern. She is a junior studying English and anthropology through the Joint Degree Programme between the College of William & Mary and the University of St. Andrews. Solly serves as the deputy editor of The Saint, St. Andrews' student newspaper, and an associate blogs editor of The Flat Hat, William & Mary's student newspaper.