Tax policy is a critical element of any presidential campaign, and this year is no different. Presumptive nominees Donald Trump and Hillary Clinton have proposed very different tax law changes, and it is not too early to take a look at the highlights of these proposed plans. Keep in mind that regardless of the outcome, neither candidate will have all of his or her proposals enacted into legislation.
The two plans have some distinct differences that are worth a closer look. Highlights are as follows:
Trump’s Tax Proposal
Trump Proposal for Income, Capital Gains and Dividend Tax Structure
Income Tax Rate |
LTCG/Div. Tax Rate* |
Single |
Married, Filing Jointly |
Head of Household |
0% |
0% |
$0 - $25,000 |
$0 - $50,000 |
$0 - $37,500 |
10% |
0% |
$25,001 - $50,000 |
$50,001 - $100,000 |
$37,501 - $75,000 |
20% |
15% |
$50,001 - $150,000 |
$100,001 - $300,000 |
$75,001 - $225,000 |
25% |
20% |
$150,001 + |
$300,001 + |
$225,001 + |
*Long-term capital gains/dividend tax rate
Clinton’s Tax Proposal
Proposed New Structure of Capital Gains Rates Under Clinton Plan
Ownership Duration of Asset |
Top Tax Rate |
Add $250,000 Surtax¹ |
Add $5 Million Surtax |
Less than 2 years |
39.6% |
43.4% |
47.4% |
2 - 3 years |
36% |
39.8% |
43.8% |
3 - 4 years |
32% |
35.8% |
39.8% |
4 – 5 years |
28% |
31.8% |
35.8% |
5 – 6 years |
24% |
27.8% |
31.8% |
6 + years |
20% |
23.8% |
27.8% |
¹Assumes Married Filing Jointly. This surtax is already in place in the current Tax Code.
Proposed Tax Brackets & Rates Under Clinton Plan
Ordinary Income |
CG & Dividends² |
Single |
Married, Filing Jointly |
Head of Household |
10% |
0% |
$0 - $9,275 |
$0 - $18,550 |
$0 - $13,250 |
15% |
0% |
$9,276 - $37,650 |
$18,551 – $75,300 |
$13,251 - $50,400 |
25% |
15% |
$37,651 - $91,150 |
$75,301 - $151,900 |
$50,401 - $130,150 |
28% |
15% |
$91,151 - $190,150 |
$151,901 - $231,450 |
$130,151 - $210,800 |
33% |
15% |
$190,151 - $413,350 |
$231,451 - $413,350 |
$210,801 - $413,350 |
35% |
15% |
$413,351 - $415,050 |
$413,351 – $466,950 |
$413,351 - $441,000 |
39.6% |
20% |
$415,051 - $5M |
$466,951 - $5M |
$441,001 - $5M |
43.6% |
24% |
$5M + |
$5M + |
$5M + |
²Assumes capital assets are held for 6+ years.
The big question is how these tax policies would affect our nation’s already massive deficit. Both campaigns take the position that their plans would not increase the deficit. We naturally believe otherwise. Trump’s four-page plan promises tax cuts for everyone. He doesn’t mention, however, that the top 0.1% would see annual tax cuts of, on average, $1.3 million. Furthermore, his plan is estimated by the Tax Policy Center to increase the national deficit by at least $9.5 trillion over the next ten years.
Clinton’s plan has evolved into a much more progressive one than originally proposed due to influence from Bernie Sanders’ campaign efforts. She hinges her tax plan on a shift of the tax burden to the wealthiest taxpayers, estimating that the top 1% would pay for over 75% of the overall increases she is proposing.
Congress has spent a lot of time on hearings about tax reform. What the proposed legislation will look like for 2017 will depend on the political make-up of the presidency, the House and the Senate. My co-author, Brielle Pepper, and I will be blogging about tax issues for the HORNE Tax Legislation and Policy Group, and we will keep you updated on changes as the campaigns move forward.
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About the Co-Author:
Brielle Pepper, CPA, is a senior associate at HORNE LLP. Her primary focus is in the area of tax compliance for public and middle market clients. Brielle joined Horne in 2013.
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