Election Countdown: The Presidential Candidates’ Proposed Tax Plans
Contributors:Â Jaime Aulicino, EA
Karima ElKis, CPA
Kaitlyn Farber
Matt Craw
Introduction
As we approach the upcoming presidential election, the tax policies of both Former President Donald Trump and Vice President Kamala Harris are taking center stage, becoming a focal point for voters. As the November 5 election nears, both candidates continue to provide insights into their tax policy proposals. The following outlines the candidates’ latest tax plans in several key categories.
Tax Plan Similarities
Child Tax Credit
Both candidates have proposed increases to the Child Tax Credit which currently stands at $2,000 per child. Trump proposes an increase to $5,000 per child, while Harris proposes an increase to $6,000 for the child’s first year, then $3,600 thereafter for children 2-5, and $3,000 thereafter for older children.
Tip Income
Another area the candidates agree on is the taxation of tip income. Currently, tips paid to employees are taxed the same as normal wages. Trump and Harris both propose to end taxation on tips in order to reduce the tax burden on workers who rely on tips for a significant portion of their income. Details surrounding this proposal are still vague for both parties.
Tax Plan Differences
Personal Income Tax
Trump’s tax proposal includes making the expiring individual income tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) permanent. He is also considering replacing or lowering personal income taxes with tariffs, a more consumption-focused form of taxation. Harris is advocating for an increase in the top personal income tax rate from 37% to 39.6%. The top tax bracket for single filers and heads of households currently starts at $609,351 in annual income, $365,601 for married filing separately, and $731,201 for married filing jointly.
Social Security
A significant aspect of Trump’s proposal involves eliminating taxes on Social Security benefits, saying this would provide relief for retirees and potentially reduce their overall tax burden. Harris’ plan increases the threshold on annual wages that are subject to social security tax, claiming this would help the longevity of the fund. Currently, wages above $168,600 are exempt from social security tax.
Corporate Tax
Both parties have taken a clear stance on the corporate tax rates, which currently sit at 21%. Harris proposes increasing the rate to 28% while Trump plans to reduce the rate to 20%. He also proposes reducing the rate even further to 15% for corporations who produce their products solely in the United States.
Capital Gains
Capital gains taxes are paid on profits made from the sale of assets, such as stock or real estate. Short-term capital gains are treated as ordinary income and taxed according to ordinary income tax brackets. Long-term capital gains are currently taxed at 0%, 15%, or 20%. Trump has not announced a tax policy specifically related to long-term capital gains, while Harris’ plan calls for raising the top rate to 28% for those earning $1 million or more per year. Neither candidate is expected to tax unrealized gains in taxpayer’s portfolios.
Conclusion
While both presidential candidates have proposed tax policies they believe will strengthen the economy and improve the financial well-being of U.S. taxpayers, their approaches differ vastly.
It is important to note that neither candidate will be able to make these proposed tax changes through an executive order should they become President. Only Congress can make changes to tax law. Therefore, while the tax proposals of both candidates remain a key focus of the upcoming election, much will depend upon the balance of power in Congress following the November election.
If you have questions or would like to further discuss these tax policies and how they may impact your financial landscape, please contact your Louis Plung tax advisor. Our advisors are ready to provide clarity and guidance tailored to your unique circumstances. You can also reach us at [email protected].
