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All Contents © 2020The Kiplinger Washington Editors
By Rocky Mengle, Tax Editor
| June 25, 2019Updated January 14, 2020
Who will face President Trump in the 2020 election? Right now, 12 Democrats are in the race…and that number is dropping fast (Cory Booker just bowed out). It's been a crazy contest so far, and it will only get more interesting when the primaries start. But, as we continue to watch the race evolve, let's stop and take a look at what all the current Democratic candidates have to say about an important campaign issue: Taxes.
The Democratic party is moving to the left, and party voters want to know how each candidate will address income inequality as president. That means pushing progressive ideas on job creation, health care, higher education and other economic issues. Tax policy has to be part of the equation, too. Any broad new social programs will have to be paid for somehow, and that usually means tinkering with the tax code. Some candidates have big, bold tax plans, while others have ideas that are more modest and piecemeal. The voters will ultimately decide which path is best. The Iowa caucuses are just around the corner, so it's time to start thinking about who will get your vote. When it comes to taxes, here's what all 12 of the remaining Democratic primary challengers (in alphabetical order) are proposing. Start brushing up now, so you'll know who to vote for when the time comes.
Home State: Colorado
Highest Office: U.S. Senator
As part of his climate change plan, Sen. Michael Bennet is calling for tax incentives to encourage the use of zero-emission vehicles and transit programs. The credits could go to car manufacturers that sell zero-emission vehicles. He is also backing legislation that would create an investment tax credit for business and home use of energy storage technology. This tax break is modeled after the current investment credit for solar energy and would apply either to grid-connected energy storage systems or to residential battery systems.
Under the senator's health-care plan, Obamacare is enhanced rather than replaced with a Medicare-for-All system. His plan calls for increasing the tax credit for individuals earning less than 400% of the federal poverty line. It also includes premium tax credits for Americans earning more than 400% of the federal poverty level who currently don't qualify for any assistance.
As part of his "Real Deal" plan, Sen. Bennet wants to overhaul the child tax credit. Currently, you claim the credit on your tax return and the credit amount is subtracted from your tax bill. Also, up to $1,400 of the credit is "refundable" (i.e., you can get a tax refund for up to that amount if the credit is more than what you would otherwise owe). The revised credit under Sen. Bennet's plan would be paid to taxpayers on a monthly basis—$300 per-month ($3,600 per year) for children under six years of age and $250 per-month ($3,000 per year) for children under 17 years of age. So you wouldn't have to wait until April 15 each year to actually benefit from the credit. The credit would also be fully refundable.
The senator also wants to:
Home State: Delaware
Highest Office: U.S. Vice President
While several Democrats running for president want to adopt a Medicare-for-all health care system, former Vice President Joe Biden would rather keep and improve Obamacare. As part of his plan to do this, he would eliminate the income-based cap on the premium tax credit so that all families who purchase insurance through a health insurance exchange can claim the credit. He would also increase the credit amount by basing it on the cost of a gold-level health plan, rather than a less-expensive silver-level plan. In addition, Biden's health care plan would impose a tax penalty on pharmaceutical companies that increase drug costs by more than the rate of inflation and take away their deduction for advertising expenses.
The former Vice President has also proposed several tax changes to help senior citizens and those who care for them. First, his plan calls for increased tax benefits for elderly Americans who pay for long-term care insurance with their retirement savings. As president, Biden will also allow low-wage workers over 65 years of age to claim the earned income tax credit (currently, you can't claim the credit if you're over 65). To help protect Social Security, he would make all income subject to the Social Security payroll tax. (Wages above $132,900 are currently not subject to the payroll tax.) In addition, he would create a $5,000 tax credit for "informal" caregivers—family members or other loved ones—providing long-term care to the elderly. Caregivers would also be allowed to make "catch-up" contributions to retirement accounts.
Vice President Biden has issued a climate change plan that includes some tax provisions, too. His "Clean Energy Revolution" would be paid for by "reversing the excesses of the Trump tax cuts for corporations, reducing incentives for tax havens, evasion, and outsourcing, ensuring corporations pay their fair share, closing other loopholes in our tax code that reward work not wealth, and ending subsidies for fossil fuels." More specifically, his plan calls for restoring the full electric vehicle tax credit (while aiming it at middle-class consumers), pushing tax breaks for energy efficiency, and increasing tax incentives for carbon capture, use and storage. He has also separately stated that he would support a carbon tax.
Other tax proposals coming out of the Biden camp include:
Home State: New York
Highest Office: Mayor of New York City
Former New York City Mayor Michael Bloomberg does not support the type of "wealth taxes" proposed by Sens. Warren and Sanders. Nevertheless, he has indicated that he supports increased taxes on the wealthy—we just don't know which taxes and by how much.
Mayor Bloomberg has proposed a plan to reform the earned income tax credit (EITC). He wants to simplify the rules so that the credit is easier to administer, pay it monthly instead of annually, and provide help applying for the tax break for qualifying families. If elected president, he'll also look into expanding the EITC to cover family caregiving and other forms of unpaid or ineligible employment.
He is also taking aim at the child tax credit. The mayor has called for increasing the credit, making it fully refundable, and phasing it in faster.
To help the environment and address climate change, Mayor Bloomberg wants to ending all subsidies for fossil fuels, including repealing tax breaks for drilling new oil and gas wells, eliminating deductions for royalties paid abroad, and doing away with excessive deductions for declining well production. If elected president, he will push for extended and expanded solar and wind tax credits, and create new tax incentives for private companies to improve clean-energy technology (including battery storage and green hydrogen). To combat climate change, he supports a border adjustment (i.e., charges on imports and a tax break for exports) for emissions-intensive goods.
The Mayor also wants to increase incentives for hiring veterans by expanding the Returning Heroes and Wounded Warriors tax credits.
Home State: Indiana
Highest Office: Mayor of South Bend, Ind.
Mayor Pete Buttigieg has also criticized the 2017 tax reform bill signed by President Trump, saying it just provided tax cuts for the wealthy and corporations—again, nothing new when it comes to the 2020 Democratic presidential candidates.
However, the mayor has hinted at a few tax increases that he would consider as president, including:
He has also called for a "more equitable use of the estate tax," which could possibly mean lowering the exemption amount back down to pre-2010 levels.
Mayor Buttigieg's climate protection plan includes several tax provisions. For instance, he supports a carbon tax (but with the tax revenue returned to the American people with progressive rebates). A "border adjustment tax" on any imported goods not subject to a price on carbon where they were produced is part of the plan, too. The mayor also wants to eliminate tax subsidies for the fossil fuel industry; enact new tax incentives for energy efficiency; extend and modernize tax credits for solar, wind, geothermal and other clean energy technologies; expand tax credits for electric vehicles to a maximum of $10,000 per vehicle; and extend the tax credit for capturing carbon.
In addition, the mayor supports the increased availability of tax credits for employers who hire formerly incarcerated people, and an extra tax deduction for 50% of the cost of interns who live in rural and other underserved areas and who are current or recent students.
The mayor also wants to create "public option 401(k) plans," which would have all the tax benefits of a traditional or Roth 401(k) account. In addition to serving as a retirement savings plan, public option 401(k) funds would also help workers pay for pre-retirement emergencies. An employer match would be required.
Home State: Maryland
Highest Office: U.S. Representative
As the first Democrat to join the race, former Rep. John Delaney has had plenty of time to work on his policy proposals … and he has quite a few ideas on taxes. He's in favor of increasing the top marginal income tax rate—but not all the way up to 70%, as has been suggested by some Democrats. He would roll back tax breaks for wealthy Americans enacted as part of the 2017 tax reform law, too. Doubling the earned income tax credit and expanding eligibility for adults without children are also on his list.
To pay for improvements to the nation's infrastructure, Rep. Delaney wants to increase the corporate tax rate from 21% to 27% and adjust the federal gas tax annually to account for inflation. His climate change plan calls for a carbon tax and having the revenue returned to the American people. (You could also invest your share of the tax revenue in an IRA, 529 plan or some other tax-advantaged savings account.) He also supports enhanced renewable energy tax credits to spur private sector investment in renewable energy.
Rep. Delaney is also calling for:
Home State: Hawaii
As a presidential candidate, Rep. Tulsi Gabbard hasn't talked all that much about taxes. She has repeated the standard Democratic line about the 2017 tax reform law overwhelmingly benefiting wealthier Americans, and she generally supports more taxes to pay for new social programs, but tax policy certainly doesn't seem to be at the center of her campaign.
Nevertheless, as a member of Congress, Rep. Gabbard has supported tax incentives that encourage or reward:
She has also come out against tax breaks for the fossil fuel industry.
Home State: Minnesota
One policy area where Sen. Amy Klobuchar has several tax ideas is infrastructure improvement. Her plan to rebuild America's roads and bridges and upgrade other critical infrastructure systems would be paid for in part by raising the corporate income tax rate from 21% to 25%, eliminating tax breaks that encourage U.S. businesses to move overseas and increasing tax enforcement efforts. New tax credits to attract capital investment to public infrastructure and expanding clean energy tax incentives are also part of the plan.
Sen. Klobuchar is also behind efforts to boost retirement savings for working-class families by requiring minimum employer contributions to employee retirement accounts. Employers would receive a tax credit for 50% of their minimum contributions to their first 15 workers, and 25% of their minimum contributions to their next 15 workers. However, to pay for the tax credits, the plan calls for increasing the corporate income tax rate from 21% to 23% (a smaller increase than her infrastructure plan calls for) and bumping the top personal income tax rate from 37% back up to 39.6%, which was the top rate before the Tax Cuts and Jobs Act.
The senator's plan to help senior citizens has some tax provisions, too. For instance, she supports subjecting income above $250,000 to the payroll tax to extend the solvency of Social Security. Her plan also includes a new refundable tax credit to help offset the costs of nursing homes and other long-term care options. She has also called for the enactment of (1) a 20% tax credit for the premium costs of qualified long-term care insurance, and (2) a tax credit of up to $6,000 per year for people caring for an aging or disabled relative.
In addition, providing free tuition for community college is on Sen. Klobuchar's wish list. She wants to pay for this by raising the capital gains and dividends rate for people in the top-two income tax brackets, limiting the amount of capital gain deferral allowable through like-kind exchanges, and implement the "Buffet Rule" through a 30% minimum tax for people with incomes over $1 million. Other tax provisions in her plan to make post-secondary education more affordable include allowing older students and workers to use 529 plans to pay for post-secondary credentials and occupational licenses; removing age-based contribution restrictions for Coverdell education accounts; creating a new tax credit for employers that invest in training for workers at risk of being laid off that leads to an industry-recognized credential, certificate, or degree; and expanding eligibility for the child and dependent care credit to cover child care expenses while parents pursue post-secondary education.
Tax credits to help farmers and other Americans in rural areas are also on Sen. Klobuchar's mind. She supports extending biodiesel and second-generation biofuels tax credits. She also wants to create a new tax credits for (1) manufacturers that invest in rural communities or communities suffering manufacturing job losses, and (2) rural manufacturers that hire registered apprentices. As president, the senator will work to reauthorize the new market tax credit and make sure it effectively serves rural America. She will also push for a new tax credit for farmers who sell land or equipment to beginning farmers.
Other tax changes that Sen. Klobuchar supports include:
She has also stated that a wealth tax "could work" and that she's "open to it."
Home State: Massachusetts
Highest Office: Governor of Massachusetts
While he hasn't yet proposed any full-fledged tax plans, Former Massachusetts Gov. Deval Patrick has hinted at what type of tax policy he would pursue as president. First, he wants to treat all income as ordinary income. That includes carried interest and other investment income.
He has also called for an increase in the corporate income tax rate to 25% (it's currently 21%). In addition, he supports eliminating "loopholes that still permit some of the most profitable companies in the world to pay no income taxes."
The governor also wants to raise the estate tax, although he hasn't yet specified in what way or by how much.
Home State: Vermont
As president, Sen. Bernie Sanders would push an ambitious progressive agenda that includes health care for all, jobs for all and college for all. So how would he pay for it all? Largely by taking away tax breaks or adding new taxes for corporations and the wealthy.
For example, to help fund his Medicare-for-all plan, Sen. Sanders would increase the top marginal tax rate up to 70% on Americans earning more than $10 million per year and limit tax deductions for anyone in the top tax bracket. He would also impose a 7.5% insurance premium tax on employers (the first $2 million in payroll would be exempt to protect small businesses). However, taxes would go up for middle-class families as well. Employees would be hit with a 4% income-based premium tax (the first $29,000 in income would be exempt for a family of four).
Sen. Sanders also has a "wealth tax" plan with a progressive rate structure. It would start with a 1% tax on net worth above $32 million for a married couple. The rate would increase to 2% on net worth from $50 to $250 million, 3% from $250 to $500 million, 4% from $500 million to $1 billion, 5% from $1 to $2.5 billion, 6% from $2.5 to $5 billion, 7% from $5 to $10 billion, and 8% on wealth over $10 billion. (The brackets ranges would be cut in half for singles.) There would also be a 40% exit tax on the net value of all assets under $1 billion and 60% over $1 billion for all wealthy individuals seeking to expatriate to avoid the tax. To enforce the tax, the plan also calls for the creation of a national wealth registry and additional third-party reporting requirements. The IRS would also be required to audit 30% of wealth tax returns for those in the 1% bracket and 100% audit of returns from billionaires.
Another idea to tax the rich that Sen. Sanders has touted as a candidate is his plan to create a higher, progressive estate tax. For 2019, only estates worth more than $11.4 million are subject to the federal estate tax, which is imposed at a 40% rate. Under Sanders' plan, estates valued from $3.5 million to $10 million would be tax at a 45% rate; estates valued from $10 million to $50 million, at a 50% rate; estates valued from $50 million to $1 billion, at a 55% rate; and estates valued over $1 billion, at a 77% rate.
In addition, Sen. Sanders wants a new financial-transactions tax on stock, bond and derivative trades. The tax rates would be 0.5% for stock trades, 0.1% for bond trades and 0.005% for derivative trades. He wants to eliminate the payroll tax exemption for wages above $250,000, too. Currently, wages above $132,900 are not subject to payroll taxes. (Under Sanders' plan, wages between $132,900 and $250,000 would still not be taxed.)
On the business side, Sanders wants to restore the corporate income tax rate to 35% (it's currently 21%) and get rid of "virtually all corporate tax breaks and loopholes." This includes transitioning to economic depreciation for all investments and further limiting the interest deduction to 20% of adjusted taxable income. He also wants to eliminate the use of offshore tax havens by, among other things, applying the same tax rate on offshore and domestic income. The 20% deduction on pass-through business income would also be repealed under Sanders' plan, and large pass-through entities would be subject to corporate taxes.
Corporations with large pay gaps between their CEO and workers would also pay more taxes under Sanders' "income inequality tax." The plan is to raise the corporate income tax rate for companies with CEO to median worker ratios above 50 to 1. (If the CEO didn't receive the largest paycheck in the corporation, the ratio would be based on the highest-paid employee.) The rate increases would range from 0.5% to 5%, depending on the company's pay ratio. The tax increase would only apply to corporations with annual revenue of more than $100 million.
Rounding out his tax plans, Sen. Sanders is also calling for:
Home State: California
Highest Office: None
Billionaire Tom Steyer is the latest Democratic candidate to throw his hat into the ring. So far, he hasn't proposed any specific new tax law changes since joining the race. However, last year he did call for a 1% "wealth tax" on assets greater than $20 million and an unspecified estate tax increase.
He also has a history of throwing his money behind progressive causes, including efforts to:
That should give voters some idea where Steyer stands on tax issues.
Out of all the Democrats running for president, Sen. Elizabeth Warren has arguably had the most to say about taxes as a candidate. It started back in January, when she proposed the Ultra-Millionaire Tax (also known as the "wealth tax"). The annual tax would be equal to 2% on net worth above $50 million and 6% (3% before the senator's Medicare-for-All plan) on net worth above $1 billion. A taxpayer's "net worth" would consist of all assets worldwide, including residences, businesses, trusts, retirement funds and personal property worth $50,000 or more. Assets held by minor children would be counted, too. Other aspects of the plan include:
Sen. Warren is pushing a similar proposal for corporate income taxes—the Real Corporate Profits Tax. Under her plan, there would be a 7% tax on all corporate profits reported to investors above $100 million. There would also be no exemptions or deductions for the new tax.
To pay for her Medicare-for-All plan, Sen. Warren would rely on new tax revenue from, among other things:
The senator has a plan to expand Social Security, too. To pay for it, she'll impose a 14.8% payroll tax on wages above $250,000. It would be split equally between employees and employers at 7.4% each. (The current Social Security payroll tax is 12.4% on wages under $132,900, which is split evenly between the employer and employee.) Her plan also calls for a new 14.8% Social Security tax on net investment income for individuals making more than $250,000 annually ($400,000 for families). This is designed to channel taxes on capital gains, as well as on wages, into the Social Security fund. The plan would also prevent self-employed workers from reclassifying income to avoid paying Social Security taxes.
Sen. Warren's climate change plan doesn't call for a carbon tax, but she has more-or-less expressed support for a carbon tax in separate statements. The senator's official plan mainly relies on tax breaks to encourage environmentally friendly activity. For example, she wants to extend tax credits for zero-emission vehicles, wind power and solar power; build energy and pollution standards into federal housing tax credits; use tax credits to spur private investment in energy efficiency and electrification in residential and commercial buildings; expand refundable tax credits for installing energy-efficient upgrades; offer tax credits for reducing the carbon output of existing homes and businesses, including subsidizing weatherization for low-income households; and provide refundable tax incentives to speed utilities' deployment of smart grid and advanced transmission technologies.
Under the senator's lobbying tax plan, companies that spend between $500,000 and $1 million per year on lobbying would pay a 35% tax on those expenditures. The rate would increase to 60% for every dollar above $1 million spent on lobbying, and to 75% for every dollar above $5 million.
As part of her plan to address gun violence, Sen. Warren wants to increase the excise taxes on guns and ammunition. Currently, handguns are taxed at 10% and other guns and ammunition are taxed at 11%. Sen. Warren has proposed raising those rates to 30% on guns and 50% on ammunition.
In 2019, Sen. Warren has also introduced or co-sponsored legislation in the U.S. Senate that would:
She also introduced a housing bill last year that would be funded by moving the estate tax thresholds back to their 2009 levels and establishing more progressive estate tax rates. She has also called for the elimination of a stepped-up basis for inherited assets.
If elected president, entrepreneur Andrew Yang's first priority will be the creation of a universal basic income system that will pay every American adult $1,000 a month. But how's he going to pay for it? For the most part, with a new 10% value added tax (VAT).
Basically, a VAT is a consumption tax that is levied on businesses at each stage of the production process (including final sale) and based on the value added to a product during that stage. (Like other taxes imposed on businesses, VATs are often passed on to consumers in the form of higher prices.) The value added is measured by the difference between the business's sales and costs. For example, Company A creates a widget from scratch (with no costs for supplies) and sells it to Company B for $10. Company B uses the widget as a component part in a thingamabob it sells to Company C for $30. Company C sells the thingamabob to you for $45. Company A is taxed on the $10 of value it added ($10 - $0) to the final product, Company B is taxed on the $20 of value it added ($30 - $10) and Company C is taxed on the $15 of value it added ($45 - $30). Although Americans generally aren't familiar with VATs, they're widely used in other countries around the world.
Yang has a few other tax ideas, too. For instance, he wants to end favorable tax treatment for capital gains and carried interest. He supports a carbon tax starting at $40 per ton and eventually rising to $100 per ton. He is also proposing a 0.1% tax on financial transactions. If you don't like filling out tax forms, you could be in luck: Yang would let you opt into an IRS program to have your taxes filed automatically. Finally, to "make paying taxes patriotic and fun," he thinks everyone should be able to direct 1% of their taxes to a specific government project of their choice.