The voter’s choice: richer or poorer 3

Here are our selected details of the tax proposals of Donald Trump and Hillary Clinton.

First: Trump’s plan benefits the individual. It lets you keep more of your income, considerably reduces tax on business, and abolishes estate duty.

That is to say, you will be personally better off with a President Trump; there will be more jobs; and your lifetime’s accumulation of wealth will go to your heirs without the government taking another bite out of your already taxed earnings and capital gains.

The overall result will be more prosperity.

We select our points from the analysis by the Tax Foundation:

Details and Analysis of the Donald Trump Tax Reform Plan, September 2016

Changes to the Individual Income Tax 

Consolidates the current seven tax brackets into three, with rates on ordinary income of 12 percent, 25 percent, and 33 percent.

Adapts the current rates for qualified capital gains and dividends to the new brackets.

Changes to Business Income Taxes

Eliminates the Net Investment Income Tax.

Makes childcare costs deductible from adjusted gross income for most Americans (above-the-line), up to the average cost of care in their state.

Offers credits (“spending rebates”) of up to $1,200 a year for childcare expenses to lower-income families, through the earned income tax credit.

Creates new saving accounts for care for children or elderly parents, or school tuitions, and offers a 50 percent match of contributions.

Reduces the corporate income tax rate from 35 percent to 15 percent.

Other Changes 

Eliminates federal estate and gift taxes. 

The Trump plan “will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both big and small, that want to retain the profits within the business”. 

Conclusion 

The Trump tax plan as outlined in September 2016 is a large tax cut, mostly on individual and corporate income.

This plan would significantly reduce the cost of capital and reduce the marginal tax rate on labor.

These changes in the incentives to work and invest would increase the U.S. economy’s size in the long run, boost wages, and result in more full-time equivalent jobs.

On a static basis, the plan would reduce federal revenue by between $4.4 trillion and $5.9 trillion, depending on policy assumptions about business tax rates. However, due to the larger economy and the significantly broader tax base, the plan would reduce revenue by between $2.6 trillion and $3.9 trillion over the next decade, depending on those same policy assumptions.

In all cases, it would increase after-tax incomes for all income groups, but reduce revenue to the Treasury.

So as well as being good for the individual and business, which greatly commends it to us, it will also be bad for the government, which also commends it to us. 

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Hillary Clinton’s tax proposals are intended to benefit the government. They take more of your income, hobble business, and hugely increase estate duty.

Again we select our points from the analysis of the Tax Foundation:

Details and Analysis of Hillary Clinton’s Tax Proposals 

Key Findings; 

Hillary Clinton would enact a number of tax policies that would raise taxes on individual and business income.

When accounting for reduced GDP, after-tax incomes of all taxpayers would fall by at least 0.9 percent.

Over the past few months, former Secretary of State and Senator Hillary Clinton has proposed a number of new and expanded government programs. In order to pay for these new or expanded services, she has proposed raising and enacting a number of new taxes.

Her plan would restore the estate tax to its 2009 parameters and would limit or eliminate other deductions for individuals and corporations.

Our analysis finds that the plan would increase revenue by $498 billion over the next decade.

The plan would also increase marginal tax rates on both labor and capital. As a result, the plan would reduce the size of gross domestic product (GDP) by 1 percent over the long term.

This reduction in GDP would translate into 0.8 percent lower wages and 311,000 fewer full-time equivalent jobs.

Accounting for the economic effects of the tax changes, the plan would end up increasing federal tax revenues by $191 billion over the next decade.

Restores the federal estate tax to 2009 levels. This would increase the estate tax rate to 45 percent and reduce the exemption to $3.5 million.

Economic Impact

According to the Tax Foundation’s Taxes and Growth Model, Hillary Clinton’s tax plan would reduce the economy’s size by 1 percent in the long run. The plan would lead to 0.8 percent lower wages, a 2.8 percent smaller capital stock, and 311,000 fewer full-time equivalent jobs. The smaller economy results from somewhat higher marginal tax rates on capital and labor income.

Overall, the plan would increase federal revenue on a static basis by $498 billion over the next 10 years. Most of the revenue gain is due to increased individual income tax revenue, which we project to raise approximately $381 billion over the next decade. The changes to the estate tax will raise an additional $106 billion over the next decade. The remaining $11 billion would be raised through increased taxes on corporations.

On a dynamic basis, the plan would reduce after-tax incomes by an average of 1.3 percent. All deciles would see a reduction in after-tax income of at least 0.9 percent over the long-term. Taxpayers that fall in the bottom nine deciles would see their after-tax incomes decline by between 0.9 and 1 percent.

Conclusion 

Hillary Clinton would enact a number of tax policies that would raise tax revenue over the next decade in order to fund new or expanded programs. Most of her policies raise tax revenue as designed, except for her capital gains policy, which would actually end up losing revenue both on a static and a dynamic basis due to the incentives it creates to hold on to assets longer. If enacted, her tax policies would impose slightly higher marginal tax rates on capital and labor income, which would result in a reduction in the size of the U.S. economy in the long run. This would decrease the revenue that the new tax policies would ultimately collect.

The plan would lead to lower after-tax incomes for taxpayers at all income levels, but especially for taxpayers at the top.

In sum, Hillary’s proposals are bad for the individual. She would make everyone poorer.

So the choice is clear:

Vote for Trump if you want to be better off.

Vote for Hillary if you despise money, consider “profit” a dirty word, and enjoy submitting to the power of government.

 

See the full analyses here and here.

Posted under Tax by Jillian Becker on Friday, September 23, 2016

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This post has 3 comments.

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  • liz

    So no wonder they’re saying Trump would be bad for the economy.
    Yes, bad for the government leeches!

  • Azgael

    The american moron, pretty much all americans vote for the candidate that will give them the most free stuff all this analyses is meaningless.

    • 65% estate duty versus none?

      That means something to most people.