We will cover 3 taxes areas: individual income taxes, business taxes, and estate taxes. Today, we will start with Individual Income Taxes.
Trump's tax reform plans -
- Consolidates the current seven tax brackets into four brackets (0%, 12%, 25%, 33%), with a top marginal rate of 25%. The top marginal rate of 25% would be for married filers with taxable income of $300,000 and single filers with taxable income of $150,000
- Taxes long term capital gains and qualified dividends at rates of 0%, 15%, or 20% depending on taxable income. Gains would be taxed at 0% for married filers with taxable income up to $100,000 and single filers with taxable income up to $50,000. The top capital gain rate of 20% would be for married filers with taxable income of $300,000 and single filers with taxable income of $150,000
- Eliminates the personal Alternative Minimum Tax
- Eliminates the passive Investment Income Tax of 3.8% which is part of the Affordable Care Act
- Taxes carried interest for hedge fund traders at ordinary income rates instead of capital gains and dividend rates
Hilary's tax reform plans -
- Keeps the current seven tax brackets (10%, 15%, 25%, 28%, 33%, 35%, 39.6%) with a top marginal rate of 39.6%
- Creates a 4% “surcharge” on high income taxpayers which effectively adds an additional marginal tax rate of 43.6% (39.6% + 4.0%) for taxable income over $5,000,000
- Creates a 4% “surcharge” on capital gains and dividends which effectively adds an additional marginal rate of 24% (20% + 4.0%) for taxable income over $5,000,000
- Enacts the so-called “Warren Buffet Rule” which would establish a 30% minimum tax on taxpayers with adjusted gross income (AGI) over $1,000,000. This tax would phase-in between $1,000,000 and $2,000,000 AGI
- Caps all Form 1040 Schedule A itemized deductions at a tax value of 28%
- Preserves the passive Investment Income Tax of 3.8% and the Medicare surtax on earned income of 0.9% which were part of the Affordable Care Act
- Limits the account value of tax deferred and tax free retirement accounts. Excess account value above the threshold amount would be forced out as a taxable distribution
- Taxes carried interest for hedge fund traders at ordinary income rates instead of capital gains and dividend rates
In our next blog post, we will compare the two candidates' business tax reform plans .