Democrats and Republicans have sharply differing views of the role of the federal government, and that is reflected in the tax policies their presidential candidates advocate.
Generally, Democrats believe that higher taxes provide more revenue to finance anti-poverty and other programs. They favor a more nuanced tax code that allows Washington to use tax policy for social and ideological goals.
Republicans tend to believe that lower taxes provide a more vibrant economy that reduces poverty through greater employment, and note that a private sector unburdened by high taxes actually produces more revenue than higher rates. They believe that it is mostly inappropriate to use the tax code for ideological purposes.
Various analyses of the leading candidate’s tax proposals essentially confirm those different views. Here are brief snapshots of their ideas:
These are some of Donald Trumps’ concepts noted by The Tax Policy Center:
“Collapse the current seven tax brackets, which range from 10 to 39.6 percent, into three brackets of 10, 20, and 25 percent. Increase the standard deduction to $25,000 for single filers and $50,000 for joint filers in 2015, indexed for inflation thereafter. Leave personal exemptions unchanged at $4,000 per person in 2015, indexed. Tax dividends and capital gains at a maximum rate of 20 percent. Limit the tax value of itemized deductions (other than charitable contributions and mortgage interest) and exclusions for employer-provided health insurance and tax-exempt interest. Increase the phaseout rates for the personal exemption phaseout and the limit on itemized deductions. Repeal the alternative minimum tax. Tax carried interest as ordinary business income. Repeal the exclusion for investment income on life insurance contracts entered into after 2016. Repeal federal estate and gift taxes. Reduce the corporate tax rate to 15 percent. Limit the top individual income tax rate on pass-through businesses such as partnerships to no more than 15 percent. Repeal most tax breaks for businesses. Repeal the corporate alternative minimum tax. Impose up to a 10 percent deemed repatriation tax on the accumulated profits of foreign subsidiaries of US companies on the effective date of the proposal, payable over 10 years. Tax future profits of foreign subsidiaries of US companies each year as the profits are earned.”
The Tax Foundation reports that the Clinton Plan.
“would increase marginal tax rates for taxpayers with incomes over $5 million, enact a 30 percent minimum tax (the Buffett Rule), alter the long-term capital gains tax rate schedule, and limit itemized deductions to a tax value of 28 percent. Her plan would also restore the estate tax to its 2009 parameters and would limit or eliminate other deductions for individuals and corporations.”
Forbes outlines Bernie Sanders tax plan:
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Sanders proposes a top rate on individual income of … 52%, … the top rate on someone earning $250,000 would increase from 33% under current law to 37% under Sanders, while someone earning $500,000 would see his top rate jump from 39.6% to 43%.
In addition, Sanders would do away with the preferential treatment long afforded capital gains and dividends, meaning those types of income would be taxed at the same rates as ordinary income for taxpayers earning in excess of $250,000. Under current law, the top rate on such income is 23.8%; as a result, a taxpayer who, for example, sells a business for $5 million of gain would pay $1.19 million in federal tax under current law, but would pay $2.4 million in federal tax under the Sanders plan (a rate of 48%).
Sanders would also limit the benefit of all itemized deductions to a 28% rate, meaning a taxpayer who earned $500,000, and was thus in Sanders’ 43% bracket would effectively pay a 15% tax on deductions such as mortgage interest, state and local taxes, and charitable contributions.
National Review outlined the Rubio tax plan. He would reduce the corporate tax rate from 35 to 25%, establishing a 25% tax rate on all business income and a maximum 25 percent maximum rate on all small businesses that file using Schedule C as part of a 1040 tax return. The proposal eliminates the capital gains tax, the double tax on dividends, and the second layer of tax on interest. The proposal alters depreciation rules to encourage new business investment. The rule mandating that businesses pay a second layer of tax on income that is earned and already subject to tax in other nations. The death tax would be eliminated entirely. The plan eliminates the state and local tax deduction.
The Tax Foundation outlines the Cruz tax plan as follows:
“Senator Cruz’s (R-TX) 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. Consolidates the current seven tax brackets into one bracket at 10 percent on all personal income (wages, salaries, interest, capital gains, dividends, and business income). Increases the Standard Deduction from $6,300 ($12,600 married filing jointly) to $10,000 ($20,000 married filing jointly) while retaining the personal exemption. Eliminates all itemized deductions except for the home mortgage interest deduction and the charitable deduction. Places a tighter cap on the home mortgage interest deduction. Eliminates the Alternative Minimum Tax. Eliminates the Net Investment Income Tax of 3.8 percent and the Medicare surtax of 0.9 percent, which were passed as part of the Affordable Care Act. Eliminates all individual tax credits except for the Child Tax Credit and the Earned Income Tax Credit. Expands the Earned Income Tax Credit by 20 percent. Preserves the exclusions from income of pension contributions, employer-provided health premiums, and imputed rent, similar to current law. Creates a new “universal savings account” that allows up to $25,000 of tax-deductible saving. Eliminates the payroll tax. Eliminates the corporate income tax. Provides a temporary tax holiday at a 10 percent rate (instead of a full 35 percent rate) on any deferred foreign profits that are repatriated.”
Again, these are snapshots, and greater details can be found on each of the candidates’ websites.