This is certainly the craziest presidential election that I’ve ever witnessed. While the http://www.remotedba.com/consulting-services/ is typically only one consideration for database consulting, it is often an important one. I asked two associates Brett Norris and Foster Hyde, CFP®, CFA to scour each candidate’s website and compare their proposed changes in tax policy.
Higher Income Earners
Trump: Mr. Trump would lower the top individual tax rate from 39.6% for income over $466,950 ($415,050 for single filers) to 33% for income over $225,000 ($112,500 for single filers). He has also stated that he would repeal:
- The estate (death) tax. However, large estates would not get the step-up in cost basis, so heirs will have to pay capital gains taxes when assets are sold, but with a $10 million exemption
- The 3.8% net investment income surtax
- The alternative minimum tax
He has also said that he will cap deductions at $200,000 ($100,000 for single filers). Deductions are currently phased out beginning at an income of $311,300 ($259,400 for single filers). Trump would leave the top rate on capital gains at 20%, which would apply to taxpayers with incomes in excess of $225,000 ($112,500 for single filers) versus the current $466,950 (415,050 for single filers).
Clinton: Mrs. Clinton would impose a 4% surtax on taxpayers with incomes exceeding $5 million per year and would also institute the “Buffet Rule”, which ensures that taxpayers earning over $1 million per year pay an effective tax rate of 30%. She plans to retain the current 3.8% surtax on net investment income. Clinton would raise the top rate on capital gains to potentially 47.7% from the current 20%. A taxpayer earning more than $415,000 would have to hold a capital asset for six years under her plan before the top capital gains rate would come down to the current rate of 23.8%. Regarding estate taxes, Mrs. Clinton would lower the estate tax exemption to $3.5 million ($7 million for married couples) from the current $5.45 million ($10.9 million for married couples) and increase estate tax rates to as much as 65% for estates exceeding $500 million. Additionally, she would do away with the step-up in basis on assets being passed to heirs.
Trump: Income over $75,000 but less than $225,000 would be taxed at a rate of 25% (currently 25-28%), while households earning less than $75,000 would pay 12% (currently 15%). Brackets for single filers would be half of these amounts. Furthermore, he would raise the standard deduction available to households to $30,000 ($15,000 for single filers) versus the current $12,600 ($6,300 for single filers).
Clinton: She has vowed to not raise taxes on the middle class. Her current proposals would have little impact on all but high income earners and wealthy families.
Trump: His plan would expand the earned income tax credit to benefit lower-income earners and would allow families to put aside funds in tax-exempt accounts to pay for child care and education.
Clinton: Clinton has proposed unspecified tax credits designed to help limit child care expenses.
It appears that Mrs. Clinton would keep the current seven income tax brackets (10%, 15%, 25%, 28%, 33%, 35%, 39.6%) and, in effect, add two more (43.6% and the Buffet Rule tax) which will make an already complex tax system, more complex. Mr. Trump’s proposal, on the other hand, retools the current seven brackets into a 3 bracket framework (12%, 25%, 33%); increases the amount of standard deductions being taken; and cuts several other aspects of the current tax code such as surtaxes and the estate tax, effectively simplifying the tax system. Mrs. Clinton is proposing tuition-free college (in-state public community colleges) as well as plans to provide some relief for repayment of college loans.