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0620, 16 Aug 16

Candidates’ tax plans reveal their priorities

My column for the West Bend Daily News is online. Here you go:

In an effort to look seriously at the presidential election that smells like a dumpster fire fueled by shredded emails and bad hair, an evaluation of Donald Trump’s and Hillary Clinton’s tax plans reveal very different approaches to governing.

It must be noted that tax plans released during a political campaign are pieces of fiction. They are almost never enacted as promised because of the legislative process and the math, based on fanciful financial projections and dubious notions of human behavior, never adds up. A candidate’s plan is more of a tax manifesto laying out their priorities and revealing how they view the tax code.

On income tax, Trump would cut the number of income tax brackets from 7 to 3 and cut the highest rate from 39.6 percent to 33 percent. Clinton would not change much in the income tax code except to confiscate a 4-percent tax surcharge for people earning more than $5 million per year and implementing rules to forbid people earning more than $1 million per year from paying less than an effective 30 percent income tax rate.

Both Clinton and Trump would offer more tax benefits for childcare. The difference is Trump proposes allowing parents to deduct childcare expenses, which reduces the tax burden for those paying income taxes, while Clinton is proposing a tax credit for childcare, which would be paid to parents even if they do not pay income taxes.

Both candidates have also voiced staunch support for not increasing taxes on America’s lowest earners. Currently 45.3 percent of Americans do not pay anything in federal income taxes. In fact, the average person in the bottom 40 percent of income earners actually receives more than $600 through various tax-redistribution schemes like the Earned Income Tax Credit. Both candidates are promising to maintain that system.

Overall, Trump’s plan would more aggressively reform the complexity of the federal income tax code and reduce the tax burden for far more Americans. Clinton’s plan would keep taxes where they are for most Americans and increase taxes on the highest earners. Both candidates firmly support an overly progressive income tax code where a huge number of Americans view it is a source of income instead of an obligation to pay their fair share to fund our government.

Trump’s tax plan calls for eliminating the death tax while Clinton’s plan would increase the rate and make it apply to more people. Currently, the federal government confiscates 40 percent of people’s estates if they are valued at more than $5.45 million for an individual or $10.9 million for a married couple. Clinton would increase the rate to 45 percent and make it applicable to estates valued at $3.5 million and $7 million, respectively.

The notion that the government should seize an enormous chunk of a dead person’s wealth that was accumulated over a lifetime is a detestable practice rooted in the greed of politicians and envy of constituents. Trump is dead right on this one.

The candidates’ plans for business taxes are starkly different. At 35 percent, the United States has one of the highest corporate tax rates of any advanced economy. Clinton would leave the tax rate where it is, but implement regulations designed to punish American corporations for taking measures to reduce their tax burden, like tax inversions and interest deductions. Clinton’s plan would use the tax code to further flog corporations for having the temerity to do business in our nation.

Trump would lower the corporate tax rate to a more reasonable 15 percent. He would also impose that rate for other types of businesses like partnerships and limited liability corporations. Currently, profits from most noncorporate businesses are taxed at the owners’ individual income tax rate. For successful businesses, this could be as high as the top tax rate of 39.6 percent in the current tax code. By taxing profits at 15 percent, it would represent a massive tax decrease for a huge number of American businesses. The lower corporate tax rate would also encourage America’s largest multinational corporations to repatriate foreign profits and invest in America.

There are more details of the candidates’ respective tax plans, but the themes are the same. Trump intends to simplify and reduce the tax burden for Americans, which will stimulate the national economy out of the Barack Obama malaise. Clinton would increase taxes for Americans and use the tax code to further punish Americans and their businesses.


0620, 16 August 2016

1 Comment

  1. billphoto

    Neither tax plan addresses reality.  While the USA has a high corporate tax rate, nobody pays that.  Big money takes advantage of special interest loopholes (remember Buffet bragging he pays a lower tax rate than his secretary) while the little guys are the ones getting hammered.  Lower the tax rate, yes but get rid of the loopholes, too.

    I did not see anything about means testing entitlements.  Arguably controversial but means testing could easily be cross pollinated with fraud detection saving tons.  The incompetence of government bureaucrats aside, any plan needs to address stopping people from gaming the system.  The lost $$$ are just swept under the rug by bureaucrats with the complicity of politicians.

    What I find most egregious is the IRS sending checks to people that pay little or no taxes.  Certainly, there should be a bottom rung on the economic ladder where confiscatory taxes are refunded but zero is zero.

    Speaking for myself, Trump’s plans is preferable to Clinton’s but I would still like to see the IRS abolished.  Maybe Ctrl-AltDelete.

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