From Clinton to Trump: Tax plans of 5 presidential candidatesArticle added by Melanie Waddell on March 11, 2016
Melanie Waddell

Melanie Waddell

Joined: November 18, 2014

As the income tax filing deadline approaches it’s important to take a look at the presidential candidates’ tax policies, which vary widely on their economic impacts and actual costs, with measures ranging from eliminating the estate and alternative minimum taxes to implementing the Buffet Rule.

A dozen states — Alabama, Arkansas, Georgia, Massachusetts, Minnesota, Oklahoma, Tennessee, Texas, Vermont and Virginia – vote Tuesday for both Republicans and Democrats.

Work began in earnest among lawmakers last July on measures to advance comprehensive tax reform in five areas: individual income tax; business income tax; savings & investment; international tax; and community development & infrastructure.

A recent report by the Tax Council and EY’s quantitative economics and statistics practice finds that 61 percent of U.S. business tax professionals expect tax reform to happen in 2018 or earlier.

Read on to see how the Tax Foundation, an think tank that supports reforming the tax code, laid out the presidential candidates’ tax plans, as well as how their plans will impact the economy. To make these projections, it used its proprietary model, which it describes as "a 'neoclassical' model that measures the effects of tax policy changes on the cost of capital and the supply of labor."

Here's how six of the presidential candidates' tax policies break down:



Hillary Clinton (D):

Clinton’s tax plans include increasing the marginal tax rates for taxpayers with incomes of more than $5 million, a new 30 percent minimum tax (the Buffett Rule), and the restoration of the estate tax to its 2009 parameters.

Economic Impact:

  • Raise tax revenue by $498 billion over the next decade on a static basis. However, the Tax Foundation says, the plan would end up collecting $191 billion over the next decade when accounting for decreased economic output in the long run.

  • A majority of the revenue raised by Clinton’s plan would come from a cap on itemized deductions (the Buffett Rule) and a 4 percent surtax on taxpayers with incomes over $5 million.

  • Clinton’s proposals to alter the long-term capital gains rate schedule would actually reduce revenue on both a static and dynamic basis due to increased incentives to delay capital gains realizations.

  • The plan would reduce GDP by 1 percent over the long term due to slightly higher marginal tax rates on capital and labor.

  • On a static basis, the tax plan would lead to 0.7 percent lower after-tax income for the top 10 percent of taxpayers and 1.7 percent lower income for the top 1 percent. When accounting for reduced GDP, after-tax incomes of all taxpayers would fall by at least 0.9 percent.


Sen. Bernie Sanders, I-Vermont

Among his proposals includes increasing the top marginal income tax rate to 54.2 percent, taxing capital gains and dividends as ordinary income, and moving the U.S. toward a worldwide tax system by ending the deferral of foreign-source business income.

Economic Impact:

  • The Democratic candidate's plan would raise tax revenue by $13.6 trillion over the next decade on a static basis. However, the plan would end up collecting $9.8 trillion over the next decade when accounting for decreased economic output in the long run.

  • A majority of the revenue raised by the Sanders plan would come from a new 6.2 percent employer-side payroll tax, a new 2.2 percent broad-based income tax, and the elimination of tax expenditures relating to health care.

  • The plan would significantly increase marginal tax rates and the cost of capital, which would lead to 9.5 percent lower GDP over the long term.

  • On a static basis, the plan would lead to 10.56 percent lower after-tax income for all taxpayers and 17.91 percent lower after-tax income for the top 1 percent. When accounting for reduced GDP, after-tax incomes of all taxpayers would fall by at least 12.84 percent.


Donald Trump (R)
  • Consolidates the current seven tax brackets into four, with a top marginal income tax rate of 25 percent.

  • Taxes long-term capital gains and qualified dividends at a top marginal rate of 20 percent.

  • Creates a substantial zero bracket for lower income individuals.

  • Steepens the curve of the Personal Exemption Phase-out (PEP) and the Pease Limitation on itemized deductions.

  • Eliminates the Alternative Minimum Tax.

  • Eliminates the Net Investment Income Tax of 3.8 percent, which was passed as part of the Affordable Care Act.

  • Taxes carried interest at ordinary income tax rates instead of capital gains and dividends tax rates.

  • Phases out the tax exemption on life insurance interest.

  • Cuts the corporate income tax rate from the current 35 percent to 15 percent.


Economic Impact:

The increased incentives to work and invest from this tax plan would increase the size of the economy by 11 percent over the long run. The plan would lead to 6.5 percent higher wages and a 29 percent larger capital stock.

The larger economy is mainly the result of the significant reduction in the service price of capital due to the rate reductions for corporations and pass through businesses. In addition, the reduction of marginal tax rates on individual income would increase incentives to work and result in 5.3 million full-time equivalent jobs.

Overall, the plan would reduce federal revenue on a static basis by $11.98 trillion over the next 10 years. Most of the revenue loss is due to the reduction in individual income tax rates, which would reduce revenues by approximately $10.2 trillion over the next decade.


Sen. Marco Rubio, R-Florida

Sens. Marco Rubio and Mike Lee have developed a plan to reform the individual and corporate income tax codes by reducing the number of tax brackets to two (15 percent and 35 percent) and eliminating nearly all itemized deductions.
  • Rubio’s plan would also create a new child tax credit of $2,500; replace the standard deduction and personal exemption with a refundable personal credit; and create a top tax rate of 25 percent on both corporate and noncorporate business income;

  • Businesses would be allow to deduct the cost of investments when they occur (full expensing), and Rubio’s plan would move to a territorial tax system that would exempt active foreign income of U.S. corporations.

  • His plan would also eliminate the estate tax, as well as most business tax credits and many special deductions, and integrate corporate and shareholder taxes to eliminate double taxation.
Economic Impact:

The Rubio-Lee tax reform plan would increase the size of the economy by 15 percent over the long run, boost investment by nearly 49 percent, wages by 12.5 percent, and raise the level of employment by nearly 2.7 million jobs.

The plan would increase federal revenue on a dynamic basis by an annual $94 billion in the long run, following an estimated $1.7 trillion revenue loss over the initial 10-year period. On a static basis, the plan would cost $414 billion annually.



Sen. Ted Cruz, R-Texas

  • Cruz’s tax plan would enact a 10 percent flat tax on individual income and replace the corporate income tax and all payroll taxes with a 16 percent “Business Transfer Tax,” or subtraction method value-added tax. In addition, his plan would repeal a number of complex features of the current tax code.


  • Economic Impact:

    Cruz’s plan would significantly reduce marginal tax rates and the cost of capital, which would lead to a 13.9 percent higher GDP over the long term, provided that the tax cut could be appropriately financed.
    • The plan would also lead to a 43.9 percent larger capital stock, 12.2 percent higher wages, and 4.8 million more full-time equivalent jobs.

    • On a static basis, the plan would cut taxes by 9.2 percent, on average, for all taxpayers.

    • Accounting for economic growth, all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.

    • His plan would cut taxes by $3.6 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $768 billion over the next decade when accounting for economic growth from increases in the supply of labor and capital and the much broader tax base due to the new value-added tax.
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