Tahoe Market Pulse: Breaking down Trump, Hillary tax plans
I’ve been asked to write an article comparing the two presidential candidate’s tax plans. I was initially hesitant because political articles can be polarizing and a tax plan would have to go through Congress before being implemented. Good luck with that.
Nevertheless, here we go:
On individual tax rates, Hillary Clinton would impose a 4 percent surcharge on Americans making more than $5 million annually. She would also implement the “Buffett rule,” imposing a minimum 30 percent effective tax rate on Americans making more than $1 million. Donald Trump would lower everyone’s tax rates and would reduce the current seven tax brackets to three (12%, 25%, and 33%).
Regarding capital gains, Trump makes no mention of any changes to the capital gains rate. Clinton would like to raise the capital gains rate for shorter-term investments (holding period of 1 year or less).
Currently, the estate tax is 40 percent with an exemption for individuals with less than $5.45 million or $10.9 million for couples. Trump would eliminate the estate tax for everyone. Clinton would lower the exemption to $3.5 million for individuals and increase the tax rate to 45 percent.
She would also “crack down on loopholes” that allow estates to look smaller than they are. My view is that as long as the tax system is complicated, tax professionals will always be able to find ways to benefit the taxpayer.
Possibly the greatest area in need of reform is corporate taxation, because our system incentivizes companies to hold money overseas instead of returning it to the U.S. Last week’s story on Apple’s tax status in Ireland shows the need for reform.
Both candidates vow to crack down on deals that allow companies to relocate their headquarters overseas to lower their tax bills, but details are murky. Clinton will charge an “exit tax” for companies leaving the U.S. while Trump will punish companies that relocate by imposing taxes on the products they sell in the U.S.
Regarding corporate tax rates, Clinton does not give specifics on corporate tax rates while Trump would place the top corporate tax rate at 15 percent.
To summarize both plans, Donald Trump would lower taxes, while Hillary Clinton wants the wealthy to pay “their fair share.” The effect each plan would have on the economy and the deficit is open to discussion … and hear about it you will.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.