Presidential Candidate Tax Positions

PHB Partner, Craig Ballentine highlights the candidates’ tax positions and how they may impact our next President’s position on tax reform…

We are hot and heavy into the presidential debate season, and as the field of candidates starts to shrink, we will continue to see more concrete tax proposals. Not all candidates have released formal plans, but many have started to campaign on specific reforms. None of these proposals are likely to become law, but many will be discussed over the next year and could become a basis for our next President’s position on tax reform.

Here’s what we know so far from the most popular candidates:

Jeb Bush (according to an op-ed he wrote in the Wall Street Journal)

  • Calls for a complete overhaul of the tax code
  • Three tax brackets, with the highest being 28%
  • Expansion of the earned income credit
  • Repeal of the estate tax and alternative minimum tax
  • Reduction in the corporate tax rate to 20%
  • End worldwide taxation for businesses and assess a one-time 8.75% tax on overseas profit
  • Allow for immediate deductions for capital investment and simultaneously eliminate most corporate tax deductions

Ben Carson (per his website)

  • Nothing formal released, but wants tax return that can be completed in 15 minutes
  • Fairer, simpler and more equitable system
  • Alluded to a flat tax, akin to a “tithe”

Hillary Clinton (per campaign releases and speeches)

  • A reform to capital gains where the tax on gains would decrease over a 6 year period from a rate of 39.6% to 20% for only the wealthiest Americans
  • 0% tax on capital gains from the sale of small business stock
  • Supports ending the “carried interest” rule that allows hedge fund and private equity managers to be taxed at capital gains rather than ordinary income tax rates
  • A $1,500 “apprenticeship tax credit” for new workers an employer trains and hires
  • A 15% tax credit for employers that share profits with their workers

Marco Rubio (per his website and Economic Growth and Family Fairness Tax Reform Plan)

  • Reduce the number of tax brackets to two – 15% and 35%
  • Consolidate and increase the child tax credit and earned income tax credit
  • Eliminate capital gains taxes, taxes on dividends, the estate tax, the standard deduction and personal exemptions, the additional Medicare tax, the alternative minimum tax and all itemized deductions except for a reformed home mortgage deduction, and charitable contributions
  • Tax corporations and pass-thru entities at a 25% rate
  • Transition away from the worldwide tax system to an international dividend exemption system with a repatriation rate of 6%

Bernie Sanders

  • No formal plan released but has clearly stated a desire to raise taxes on the wealthiest Americans
  • Lower the estate tax exemption, raise the top estate tax rate to 55% and lower the annual gift tax exclusion
  • Raise the net investment income tax from 3.8% to 10%
  • Create a financial transaction tax on investment transactions

Donald Trump

  • Exempt single taxpayers earning less than $25,000 and married taxpayers earning less than $50,000
  • Reduce tax rates to a maximum of 25% and lower the number of brackets to four
  • Reduce the corporate tax rate to 15%
  • Eliminate the estate tax and alternative minimum tax
  • Reforming the “carried interest” rule that allows hedge fund and private equity managers to be taxed at capital gains rather than ordinary income tax rates
  • Remove most deductions except for home mortgage interest and charitable contributions

Other republican candidates

Several other republican candidates (Mike Huckabee, Ted Cruz, and Rand Paul) generally support some kind of flat tax and a simpler system that carves out most deductions, lowers tax rates, and maintains deductions for home mortgage interest and charitable contributions. Some have offered a flat income tax, while others have proposed a flat national sales tax (with exemptions for certain lower income taxpayers) and the repeal of the income tax.

My humble opinion is that we’ll see little in the way reform for the next several years. It appears that many of these proposals are little more than campaign fodder. I think the most likely outcome will be that snippets of certain ideas may be integrated into our current system. We can’t seem to agree on anything in this country, and with neither major political party having complete control of the Presidency and Congress, there is little chance at major reform. As the election nears, it will be interesting to see how the Congressional races impact Congress and the possibility of one party having total control.