How Trump, Clin­ton tax plans would af­fect Amer­i­cans

Daily Local News (West Chester, PA) - - BUSINESS - By Christo­pher S. Ru­gaber and Nicholas Ric­cardi

WASH­ING­TON >> For Amer­ica’s wealth­i­est fam­i­lies, the pres­i­den­tial cam­paign presents a stark choice: A big tax in­crease if Hil­lary Clin­ton wins the elec­tion — or a big tax cut if Don­ald Trump wins.

For every­one else? Right now, nei­ther can­di­date is propos­ing ma­jor tax changes.

Tax pol­icy is one of the is­sues on which the two nom­i­nees dif­fer most. Their ap­proaches are likely to draw new at­ten­tion in the wake of a New York Times re­port that Trump’s nearly $916 mil­lion in losses in 1995, ac­cord­ing to tax records the pa­per re­ceived anony­mously, means he may not have paid fed­eral in­come taxes for as many as 18 years.

On trade, Clin­ton has backed off her pre­vi­ous sup­port for free trade agree­ments and, like Trump, now op­poses the Tran­sPa­cific Part­ner­ship, a pact in­volv­ing the U.S. and 11 other na­tions.

Trump has said he will spend twice as much on build­ing and re­pair­ing roads, air­ports and other in­fra­struc­ture as Clin­ton would.

On trade and in­fra­struc­ture spend­ing, Trump has taken a pop­ulist ap­proach that jet­ti­sons Repub­li­can or­tho­doxy. But on taxes, his pro­posed tax cuts for in­di­vid­u­als and busi­nesses are more in line with pre­vi­ous Repub­li­can can­di­dates and elected of­fi­cials. Af­ter two pre­vi­ous tries, he pro­vided more de­tails on his tax plans in a speech in New York last week — although he left one key com­po­nent un­clear.

Clin­ton, for her part, is pro­pos-

pos­ing to raise taxes for the wealth­i­est house­holds to pay for tra­di­tional Demo­cratic pro­pos­als such as ex­pand­ing ac­cess to higher ed­u­ca­tion.

“Here, at least, they fall into very much tra­di­tional Demo­cratic and Repub­li­can pro­pos­als,” said Wil­liam Gale, co-di­rec­tor of the Tax Pol­icy Cen­ter, a joint project of the Brook­ings In­sti­tu­tion and Ur­ban In­sti­tute.

On taxes, the two can­di­dates re­main far apart. Here are sum­maries of their pro­pos­als:

Taxes on higher in­comes

TRUMP » He would cut the top in­come tax bracket to 33 per­cent from its cur­rent level of 39.6 per­cent. Repub­li­can House Speaker Paul Ryan has made the same pro­posal, which the con­ser­va­tive Tax Foun­da­tion said would help boost af­ter-tax in­come for the wealth­i­est 1 per­cent of Amer­i­cans by 5.3 per­cent. Trump would also cap tax de­duc­tions at $200,000 per house­hold. CLIN­TON » She is propos­ing sev­eral tax in­creases on wealth­ier Amer­i­cans, in­clud­ing Demo­cratic pres­i­den­tial can­di­date Hil­lary Clin­ton meets with African Amer­i­can com­mu­nity lead­ers Sun­day at Mert’s Heart & Soul in Char­lotte, N.C. a 4 per­cent sur­charge on in­comes above $5 mil­lion, ef­fec­tively cre­at­ing a new top bracket of 43.6 per­cent. And those earn­ing more than $1 mil­lion a year would be sub­ject to a min­i­mum 30 per­cent tax rate. She would also cap the value of many tax de­duc­tions for wealth­ier tax­pay­ers. All the changes would in­crease taxes in 2017 for the rich­est 1 per­cent by $78,284, re­duc­ing their af­ter-tax in­come by 5 per­cent, ac­cord­ing to the Tax Pol­icy Cen­ter.

Taxes on mid­dle in­comes

TRUMP » Would re­duce the seven tax brack­ets in cur­rent law to three, at 12 per­cent, 25 per­cent and 33 per­cent. He’d also raise the stan­dard de­duc­tion to $15,000 for sin­gles and $30,000 for house­holds. CLIN­TON » Says she will not raise taxes on the mid­dle class. Her cur­rent pro­pos­als would have lit­tle im­pact on the bot­tom 95 per­cent of tax­pay­ers, ac­cord­ing to the Tax Pol­icy Cen­ter.

Cor­po­rate tax rate

TRUMP » Would cut the cor­po­rate rate from its cur­rent 35 per­cent to 15 per­cent. It’s un­clear how­ever, if he’d al­low “pass through” cor­po­ra­tions, which pay taxes on rev­enue as per­sonal in­come, to claim the 15 per­cent rate. Do­ing so would cost an ex­tra $1.5 tril­lion, ac­cord­ing to the non­par­ti­san Tax Foun­da­tion, which sup­ports lower tax rates. CLIN­TON » Would not change the cor­po­rate tax rate. Repub­li­can pres­i­den­tial can­di­date Don­ald Trump takes the stage at a rally Satur­day in Man­heim, Pa.

‘Car­ried in­ter­est’ loop­hole

TRUMP » Man­agers for pri­vate eq­uity firms and hedge funds can clas­sify their in­vest­ment prof­its as “car­ried in­ter­est” and pay cap­i­tal gains taxes on their in­come at rates that can be as low as half the reg­u­lar in­come tax rate. Trump says he would elim­i­nate the loop­hole, but hedge fund and pri­vate eq­uity man­agers would be able to pay even lower tax rates should Trump let passthroughs en­joy his lower 15 per­cent rate. CLIN­TON » Would elim­i­nate the loop­hole and tax car­ried in­ter­est as or­di­nary in­come.

Es­tate taxes

TRUMP » Would elim­i­nate the so-called “death tax” that is cur­rently levied on es­tates worth more than $5.45 mil­lion ($10.9 mil­lion for mar­ried cou­ples). CLIN­TON » Would in­crease the es­tate tax to 65 per­cent from 40 per­cent and ap­ply it to more es­tates, start­ing with those worth $3.5 mil­lion ($7 mil­lion for mar­ried cou­ples).

Cor­po­rate in­ver­sions

TRUMP » Ar­gues his steep cut in the cor­po­rate tax rate would end the prac­tice of cor­po­rate “in­ver­sions,” which oc­cur when a U.S. com­pany ac­quires a for­eign corporation, then re­lo­cates over­seas, to avoid pay­ing U.S. cor­po­rate taxes. The U.S. cor­po­rate tax rate of 35 per­cent is the high­est in the de­vel­oped world, though many com­pa­nies use de­duc­tions and other strate­gies to avoid

pay­ing that amount. Trump would only tax repa­tri­ated cor­po­rate money at 10 per­cent to in­cen­tivize busi­nesses to bring it back into the coun­try. CLIN­TON » Would dis­cour­age in­ver­sions by mak­ing it harder for a U.S. com­pany to clas­sify it­self as a for­eignowned to avoid U.S. tax­a­tion. She would also place an “exit tax” on com­pa­nies that leave the U.S. while still keep­ing earn­ings over­seas that haven’t been sub­ject to U.S. tax.

Child care

TRUMP » Wants to make child care costs tax-de­ductible, sub­ject to caps based on in­come and the aver­age price of child­care in a state. It would ap­ply to stay-at-home par­ents as well. Would ex­pand the Earned In­come Tax Credit to ben­e­fit low­er­in­come earn­ers who pay lit­tle or no in­come tax. Cur­rent law al­lows par­ents claim a credit of up to $6,000 for child care ex­penses. He’d also let fam­i­lies put aside money in tax-ex­empt ac­counts to pay for child care. CLIN­TON » Has made sev­eral pro­pos­als in­tended to help limit child care ex­penses to 10 per­cent of a fam­ily’s in­come through a com­bi­na­tion of ex­panded govern­ment spend­ing and un­spec­i­fied tax cred­its.


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