With both the Republican and Democratic primaries heating up now, it is probably a good time to attempt to separate fact from fiction when it comes to the future plans of the nominees on how they will change the tax code. With our national debt soaring to 19 trillion dollars, it is certain we will need a way to balance our budget and right the ship of the financials in this country. So, here are the cliff notes to some of the tax plans being proposed by the frontrunners.
The Trump Tax Plan Achieves These Goals
- If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% – from the income tax rolls. They get a new one page form to send the IRS saying, “I win,” those who would otherwise owe income taxes will save an average of nearly $1,000 each. (yes, really.. “I win”)
- All other Americans will get a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven. This new tax code eliminates the marriage penalty and the Alternative Minimum Tax (AMT) while providing the lowest tax rate since before World War II.
- No business of any size, from a Fortune 500 to a mom-and-pop shop to a freelancer, will pay more than 15% of their business income in taxes. This lower rate makes corporate inversions unnecessary by making America’s tax rate one of the best in the world.
- No family will have to pay the death tax. You earned and saved that money for your family, not the government. You paid taxes on it when you earned it.
Donald vows that married couples earning less than $50,000 paying no income taxes which will remove more than 75 million households and offers a top tax rate of 25%.
Cruz’s plan is centered on abolishing the IRS and moving to a simple flat tax for both individuals and corporations across America. He vows that the tax code would become so simplified, you could file your taxes on a postcard or smartphone app.
Under the Simple Flat Tax, the current seven rates of personal income tax will collapse into a single low rate of 10 percent. For a family of four, the first $36,000 will be tax-free. The Child Tax Credit will remain in place, and the Simple Flat Tax Plan expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms. Under the plan, deductions for charitable contributions and mortgage interest payments are preserved.
The IRS will cease to exist as we know it.
For businesses, the corporate income tax will be eliminated. It will be replaced by a simple Business Flat Tax at a single 16 percent rate. The current payroll tax system will be abolished while maintaining full funding for Social Security and Medicare.
It was very tough to find any real detailed plan with tax rates or tax codes on her website. There was an overview of working hard to cut taxes for working families (assuming middle-class families) and closing corporate loopholes. Here are a few paragraphs with specifics from the website…
Provide tax relief for families. Hillary will cut taxes for hard-working families to increase their take-home pay as they face rising costs from child care, health care, and sending their kids to college. She is calling for extending a tax cut of up to $2,500 per student to help deal with college costs as part of her New College Compact, and for cutting taxes for businesses that share profits with their employees.
Unleash small business growth. Hillary’s father owned a small business—and she understands small businesses are the backbone of jobs and growth in America. She’s put forward a small-business agenda to expand access to capital, provide tax relief, cut red tape, and help small businesses bring their goods to new markets.
Create a New College Compact. Hillary’s New College Compact will invest $350 billion so that students do not have to borrow to pay tuition at a public college in their state. Her plan will also significantly cut interest rates on student loans and enable an estimated 25 million Americans with student debt to refinance at today’s lower rates, saving the typical borrower $2,000 over the life of their loans.
For the most part, she has been in favor of cutting the tax breaks for any ultra-high income earners for “the common good.”
FREE. FREE. FREE. No taxes at all! Ok, not really. Bernie has some big concepts that he believes will make sense in how he will change the tax code.
Expand Social Security: Paid for by lifting the cap on taxable income above $250,000 so that the wealthy pay the same percentage of their income into Social Security as working people. This means you pay 6.2% of your income in perpetuity!
Expand Health Care: Paid for by a 6.2 percent income-based health care premium paid by employers, a 2.2 percent income-based premium paid by households, progressive income tax rates, taxing capital gains and dividends the same as income from work, limiting tax deductions for the rich, adjusting the estate tax, and savings from health tax expenditures.
How To Pay For FREE college: Paid for by imposing a tax on Wall Street speculators that would generate about $300 billion in revenue.
Bernie Sanders vows to:
- End tax breaks on capital gains and dividends for the wealthy.
- Higher income tax rates for the richest Americans. (Top tax rate would be 52%)
- Limit tax deductions for the rich
As you can see, there are vast differences in the proposals by each candidate. Not just Democratic and Republican, but also between the candidates in each party, on how to solve the country’s complicated tax code. What you should be asking yourself is who will be able to balance the budget the best because you cannot run up a credit card forever!
Taxfoundation.org has an in-depth analysis of how they believe each candidate’s tax proposals would impact the economy:
Author: Nick Vail