White House chief of staff Mark Meadows discusses a potential second wave of coronavirus and President Trump's economic policies for manufacturing.
Before stepping into a voting booth, voters should know where each presidential candidate stands on tax policy. Below is a look at what each presidential candidate's tax plans are and how it will affect you and your money.
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TRUMP COULD CUT TAXES BY $1.1T OVER NEXT DECADE IF REELECTED, STUDY SHOWS
While there is no formal plan for his tax agenda, the Trump campaign listed President Trump's goals for a second term to include proposing further cuts beyond those passed under the Tax Cuts and Jobs Act in 2017 in order to boost take-home pay and keep jobs in America. He also is looking to expand opportunity zones, a tax incentive to reward those who invest in economically distressed areas, and is looking to offer "Made in America" tax credits, which would provide tax relief specifically designed to create new jobs and small businesses in America.
President Trump's extension of provisions in the Tax Cuts and Jobs Act would reduce taxes by about $1.1 trillion from 2021 through 2030, according to an analysis by the Tax Policy Center.
Simply extending the individual and estate tax provisions in the legislation would reduce taxes, on average, by about $1,460 per household in 2026, according to the analysis. The reduction would be even more significant for wealthy Americans, as taxpayers in the top 0.1% — those earning more than $3.7 million annually — would receive an average cut of $71,000 in 2026.
Middle-income taxpayers, or those who earn between $52,500 and $92,900, would receive a windfall of about $860, the study shows. The lowest-income households, who earn less than $26,300, would receive an average tax cut of $80.
WHAT BIDEN'S TAX PLAN COULD MEAN FOR YOUR 401(K)
Meanwhile, Democratic presidential candidate and former vice president Joe Biden is calling for increases in both payroll taxes and income taxes on wealthy households exceeding $400,000, according to the Biden campaign's website. He also noted that the "first thing" he would do as president is roll back the Trump tax cuts.
Biden's campaign estimates his proposed tax plan would raise $3.2 trillion in revenue over a decade.
In order to achieve this, the corporate tax rate would be raised to 28%, which his campaign estimates would produce $730 billion in tax revenue over a decade, and raise the top individual tax rate to 39.6%, its level before the 2017 Republican tax cuts became law, to generate $200 billion in revenue over a decade.
Tax breaks for the wealthy would be capped at 28%, which according to Biden would collect an estimated $310 billion over 10 years. An estimated $800 billion would also be raised over a decade from taxing capital gains as ordinary income for taxpayers with more than $1 million in income.
The plan also details his call to end loopholes worth hundreds of billions of dollars and other breaks, including a stepped-up basis so that individuals can no longer pass on appreciated property without having to pay tax on the gain, which the Biden campaign estimates would generate $440 billion in revenue. In addition, Biden's plan aims to close real estate loopholes, which is estimated to generate $70 billion in revenue and end fossil fuel tax breaks, which is estimated to generate $40 billion in revenue.
A $400 billion so-called minimum book tax revenue is also estimated to be generated from a 15% minimum corporate tax on companies that report a net income of more than $100 million. Biden’s plan also aims to double the global intangible low tax income rate, known as Gilti, and capping the value of breaks for wealthy taxpayers to generate $310 billion in revenue. He also calls for $200 billion in sanctions on countries that “facilitate illegal corporate tax avoidance.”
IRS RELEASES NEW INCOME TAX BRACKETS FOR 2021
In terms of tax credits, Biden would look to expand the Child Tax Credit to help families during the coronavirus pandemic to "provide thousands of dollars of tax relief for middle-class households." According to his plan, he would increase the CTC to $3,000 per child for children ages 6 to 17 and $3,600 for children under 6. He would also make the CTC fully refundable and allow families to receive monthly payments if they choose.
A breakdown in the plan for 2021 notes a teacher and an electrician with a seventh grader and a newborn will receive an additional $2,600 — or $6,600 total, a nurse and a grocery store clerk with a 2-year-old and a 5-year-old will receive an additional $3,200 — or $7,200 total, a firefighter with three teenagers will receive an additional $3,000 — or $9,000 total, and a letter carrier and a child care worker with children ages three, five, seven, and nine will receive an additional $5,200 — or $13,200 total.
Biden also says he's comitted to offering specific tax cuts towards health insurance, child care, elderly care and long-term insurance, and for families looking to buy their first homes and build wealth.
In addition to his plan to protect and expand Obamacare, Biden claims that under his policies no family will spend more than 8.5% of their income on health insurance by expanding access to refundable health premium tax credits. He also says he will offer up to $8,000 in tax credits to help low-income and middle-class families pay for child care, a "major expansion" of the existing tax credit which the campaign estimates would offer up to $6,800 in additional tax relief each year for those families.
Biden's tax credit for the elderly would be modeled off of legislation supported by AARP. His plan adds that he would also increase "the generosity of tax benefits for older Americans who choose to buy long-term care insurance." For families buying their first home, Biden would offer tax credits of up to $15,000. Biden's tax credit would build off a temporary tax credit expanded as part of the Recovery Act and would be "permanent and advanceable," meaning homebuyers would receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year. As for tax benefits on retirement plans, Biden says he would look to equalize the benefits for both working class and upper-income familes.
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The Tax Policy Center estimates that Biden would raise taxes by nearly $4 trillion over the next decade, about 1.5% of Gross Domestic Product (GDP). They do note, however, that the highest-income 20% of households (who will make about $170,000 or more) would bear nearly 93% of the burden of Biden’s proposed tax increase, and the top 1% nearly three-quarters.
The TPC estimates the 2021 tax changes would reduce after-tax incomes of the highest-income 1% of households (those making about $837,000 or more) by an average of about $300,000, or 17%. Tax burdens on the top 0.1% (who will make $3.7 million or more) would increase by about $1.8 million, on average, nearly one-quarter of their after-tax incomes. Meanwhile, TPC says the 2021 tax changes would reduce the after-tax incomes of middle-income people by about 0.4%, or $260 and reduce incomes for those at the bottom of the income distribution by about 0.2%, or $30.
According to an analysis by the Institute on Taxation and Economic Policy on the overall impact of Biden's proposed personal income tax and payroll tax increases for 2022, taxes would be projected to go up by around $289 billion overall and about $279 billion, or 97%, would be paid by the richest 1%.
Direct tax increases would be $174,360 for the top 1% and $1,530 for the next 4% making an average income of $400,800, while for everyone else would have a direct increase of zero. For indirect tax increases from the corporate tax rate change and offshore changes, the top 1% would pay an additional average of $29,100 and the next 4% would pay an average of $2,840, while those making an average income of 175,000 would pay $730. Middle- and lower-class Americans making respective average incomes of $93,800, $56,600, $34,100 and $14,700, would pay an additional $280, $140, $60, and $20, respecitvely.
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