Monday, August 15, 2016

Major 2016 Presidential Candidates Describe Tax Policies

()--Wolters Kluwer Tax and Accounting:unveils new tax briefing on tax plans of major presidential candidates. With the presidential nominees selected – Donald Trump for the Republican Party, and Hillary Clinton for the Democratic Party – both candidates have announced their tax plans. Wolters Kluwer Tax and Accounting is closely monitoring the upcoming election and has just released a new tax briefing with an analysis of both candidates’ tax plans. Additionally, Wolters Kluwer tax experts are available to provide insight and analysis on the candidates’ tax plans now and after a new President is elected.
Americans go to the polls November  8, 2016, to elect the 45th President  of the United States. The next President  will  play  a  key  role  in  shaping  tax   policy  and  possibly  reforming  the  entire   Tax  Code.  This  special  briefing  describes   the  tax  policies  of  the  candidates  of  the   two  major  parties:  Hillary  Clinton,  the   Democratic  candidate  for  President  and   Donald Trump, the Republican candidate  for President.
Both  candidates  have  proposals  related  to   individual tax rates, credits and deductions.
Income Tax  Rates 
Under current law, individual income tax rates  are 10, 15, 25, 28, 33, 35, and 39.6 percent. 
Clinton  has  proposed  a  four  percent  “Fair   Share  Surcharge”  on  the  “top  0.02  percent   of taxpayers on their incomes over $5 mil - lion per year.” Clinton also has endorsed the  so-called “Buffett Rule,” to ensure that “no  millionaire would pay a lower effective rate  than their secretary.”  Trump 
Trump  has  proposed  three  individual  tax   rates: 12, 25 and 33 percent (which are the same rates proposed by House Republicans).  Trump  has  indicated  he   would partially fund these tax decreases  through  limiting  the  value  of  deductions,  especially  among  higher-income   taxpayers.  Trump  has  said  that  those   in  the  highest  bracket  “will  keep  fewer   deductions.”  Two  deductions,  however,   will   apparently   remain   available   at    full  value  and  to  all  income  levels:  the   charitable  deduction  and  the  mortgage interest  deduction,  based  on  Trump’s   campaign materials. 

 Capital Gains/Dividends 
Under  current  law,  qualified  capital  gains   and dividends are taxed at zero percent for  taxpayers in the 10 and 15 percent income  tax  brackets,  15  percent  for  taxpayers  in  the  25,  28,  33,  and  35  percent  brackets,   and  20  percent  for  taxpayers  in  the  39.6   percent bracket.
Clinton has proposed “raising capital gains  rates for short-term trading in order to en - courage   long-term   investment.”   Clinton    also said that she would “explore additional  measures to prevent high-income taxpayers  from misclassifying income as capital gains.”
Trump’s campaign materials do not describe  any specific changes to the capital gains and  dividends tax rates.
Alternative Minimum Tax (AMT)
For federal tax purposes, a parallel tax structure -- the AMT -- exists to ensure that individuals, corporations, estates, and trusts with  substantial income do not avoid tax liability.
Clinton’s  campaign  materials  do  not  describe any changes to the AMT. 
Trump has proposed to eliminate the AMT.
 Net Investment Income (NII) Tax 
The  Affordable  Care  Act  (ACA)  imposes  a   3.8  percent  tax  on  net  investment  income   (NII tax) of qualified taxpayers with income  above certain threshold amounts.
Clinton has expressed her support for the ACA,  and presumably this includes the NII tax.
Trump has proposed to repeal the ACA, and  has not mentioned any specific carryover of  the NII tax.
 Additional  Medicare Tax 
The  ACA  imposes  an  Additional  Medicare   Tax  on  qualified  taxpayers  with  income   above certain threshold amounts.
Clinton  has  expressed  her  support  for  the   ACA, and presumably this includes the Additional Medicare Tax.
Trump  has  proposed  to  repeal  the  ACA, and presumably this includes the Additional  Medicare Tax.
Federal  Estate Tax 
For estates of decedents dying after December  31,  2012,  the  maximum  federal  estate   tax  rate  is  40  percent  with  an  inflation-adjusted  $5  million  exclusion  (inflation- adjusted to $5.45 million in 2016).
Clinton  has  proposed  to  restore  the  federal estate tax to the parameters in effect in  2009 (a maximum estate tax rate of 45 percent with a $3.5 million exclusion).
Trump  has  proposed  to  repeal  the  federal estate tax.
Both candidates have proposed measures addressing  certain  individual  tax  deductions and credits. Child Tax  Incentives 
Both candidates have proposed tax incentives  for taxpayers with children.
Clinton has proposed up to a $1,200 tax credit  for  caregiver  expenses.  The  Democratic  Party   platform has proposed that the “child tax credit  should  be  expanded,  for  example,  by  making   more of it refundable, or indexed to inflation.”
Trump  has  proposed  to  “help  reduce  the   cost of childcare by allowing parents to fully  deduct the average cost of childcare spending from their taxes.”
Education incentives include the American  Opportunity Tax Credit (AOTC), the Life - time  Learning  credit,  the  tuition  and  fees   deduction,  the  deduction  for  student  loan   interest and, among others.
Clinton’s  campaign  materials  do  not  describe  any  specific  changes  to  the  AOTC   or  other  education  incentives.  However,  Clinton has called for tax relief from college  costs for middle-income families. 
Trump’s campaign materials do not specifically discuss the AOTC or other education  incentives  over  and  above  capping  deductions and credits based upon tax bracket. 
 Charitable Giving 
A  deduction  is  available  to  individuals  for   their   qualified   charitable   contributions,    subject to certain rules and limitations. 
Clinton  has  proposed  no  changes  to  the   charitable giving deduction.
Trump  has  proposed  no  changes  to  the   charitable giving deduction.
Mortgage Interest Deduction 
Qualified  mortgage  interest  may  be  deductible if it is paid or accrued during the  tax  year  on  acquisition  and/or  home  equity indebtedness secured by the taxpayer’s  principal  or  second  residence,  subject  to   certain limitations. 
Clinton  has  proposed  no  changes  to  the   current mortgage interest deduction.
Trump has proposed no changes to the cur - rent mortgage interest deduction.
Pease Limitation/Personal  Exemption Phaseout 
The   Pease   limitation   reduces   the   total    amount  of  a  higher-income  taxpayer’s  otherwise  allowable  itemized  deductions,  subject to certain limitations. The Personal Exemption  Phaseout  (PEP)  reduces  the  total   amount of exemptions that may be claimed  by higher-income taxpayers.
Clinton  has  proposed  to  limit  the  value  of   itemized deductions to 28 percent for higher bracket taxpayers.
Trump  has  proposed  to  “steepen  the  curve   of the Personal Exemption Phaseout and the  Pease Limitation on itemized deductions.” 
Carried Interest 
Both  candidates  have  proposals  related  to   carried interest.
Clinton  has  proposed  to  “close  the  carried interest loophole that allows taxpay - ers  to  avoid  paying  ordinary  income  tax   rates on what is essentially remuneration  for services.”
Trump has proposed to “eliminate the carried interest deduction.” 
Both candidates have a number of proposals  related to business taxation. Corporate Tax  Rates The  maximum  corporate  tax  rate  currently   tops out at 35 percent.  
Clinton’s  campaign  materials  do  not  describe any specific change to the corporate  tax  rate.  Clinton  has  called  for  unspecified  measures  to  “broaden  the  tax  base”   in  order  to  lower  the  rate  as  a  necessary   component to being more competitive in  the global economy.
Trump  has  proposed  to  reduce  the  maximum  corporate  tax  rate  to  15  percent.   Trump  would  also  tax  all  business  income   at  the  15  percent  rate,  including  income   passed  through  from  S  corporations  and   partnerships, or earned by freelancers
Small Businesses 
Both candidates have tax proposals for small  businesses.
Clinton  has  stated  that  she  will  release  new   plans  to  “simplify  tax  filings  for  millions  of   small businesses.” Clinton would also promote  immediate expensing for small businesses.
Trump  has  proposed  a  new  “business  in - come  tax  rate  within  the  personal  income   tax code that matches the 15 percent corporate tax rate.”
Both  candidates  have  proposed  reforms  to   some business tax incentives as well as pro - posing new incentives.
Clinton  has  proposed  a  tax  credit  for  businesses that hire apprentices at $1,500 per apprentice  and  a  “bonus  on  that  tax  credit  to   businesses providing opportunities specifically  for young people.” Clinton also has proposed  a “Manufacturing Renaissance Tax Credit.” 
Trump has proposed “reducing or eliminating  some corporate loopholes that cater to special  interests, as well as deductions made unneces - sary by the new lower tax rate on corporations  and  business  income.”    Additionally,  Trump   has proposed “to allow businesses to immediately expense new business investments.”
Various tax incentives promote energy production, efficiency and conservation.
Clinton has proposed to  extend and expand  the New Markets Tax Credit (NMTC) program  “to  all  communities  suffering  from  a   decline  in  coal  production  or  a  coal  plant   closure.”   Additionally,    Clinton   has   proposed “closing tax loopholes for oil and gas  companies” to pay for a clean-energy plan.
Trump’s campaign materials do not discuss  specific tax proposals related to energy.
The  candidates  address  international  tax  in   several ways.
The  American  Jobs  Creation  Act  of  2004   (AJCA)  temporarily  allowed  U.S.  companies to repatriate earnings from their foreign  subsidiaries at a reduced tax rate, subject to  certain limitations.
Clinton’s campaign materials do not discuss  any specific repatriation tax proposals.
Trump  has  proposed  a  one-time  deemed  repatriation  of  “corporate  cash  held  overseas  at   a  discounted  10  percent  tax  rate.”  Additionally, Trump has proposed to end the deferral of  taxes on corporate income earned abroad. The  foreign tax credit, however, would remain, according to Trump’s campaign materials.
Both candidates have broadly discussed “in-sourcing” jobs.
Clinton  has  proposed  “to  provide  support   for companies that move jobs and production back to the U.S. from abroad.”
Trump’s   campaign   materials   do   not   specifically  discuss  “in-sourcing”  from  the  tax  perspective although a major campaign theme  is to “bring jobs back to the United States.”
Since passage of the ACA, taxes and health  care have become more intertwined than in  previous years. The ACA created a number  of new taxes and fees. 
Clinton  would  retain  the  ACA  but  change   certain  parts.  Clinton  would,  among  other   things, support Medicare buy-ins for people  over 55 years old; lower copays and reduce  the  cost  of  prescription  drugs;  incentivize   states  to  expand  Medicaid;  and  repeal  the   excise  tax  on  high-dollar  health  plans  (so- called “Cadillac plan” tax).
Trump would repeal the ACA, although also  saying that he would keep “the good parts.”  Trump has also indicated that he would address the rising cost of prescription drugs. 
“Tax  reform”  has  been  a  label  placed  upon  a   variety of proposals recently, both in scope and  scale.  Both  candidates  characterize  their  proposed changes to the Tax Code as “tax reform.”  More frequently in the spotlight, however, have  been  changes  to  the  tax  rates  and  tax  benefits   aligned with the candidates’ overall positions.

No comments:

Post a Comment

The Baldwin City Gazette welcomes your comments, as long as they are on topic and remain respectful to others. Please no anonymous comments. Comments containing advertising will be marked as spam, this includes links.