INDIVIDUAL TAXATION
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
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
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
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
Clinton’s campaign materials do not describe any changes to the AMT.
Trump
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
Clinton has expressed her support for the ACA, and presumably this includes the NII tax.
Trump
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
Clinton has expressed her support for the ACA, and presumably this includes the Additional Medicare Tax.
Trump
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
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
Trump has proposed to repeal the federal estate tax.
INDIVIDUAL TAX INCENTIVES
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
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
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
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
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
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
Clinton has proposed no changes to the charitable giving deduction.
Trump
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
Clinton has proposed no changes to the current mortgage interest deduction.
Trump
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
Clinton has proposed to limit the value of itemized deductions to 28 percent for higher bracket taxpayers.
Trump
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
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
Trump has proposed to “eliminate the carried interest deduction.”
BUSINESS TAXATION
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
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
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
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
Trump has proposed a new “business in - come tax rate within the personal income tax code that matches the 15 percent corporate tax rate.”
BUSINESS TAX INCENTIVES
Both candidates have proposed reforms to some business tax incentives as well as pro - posing new incentives.Clinton
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
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.”
ENERGY
Various tax incentives promote energy production, efficiency and conservation.Clinton
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
Trump’s campaign materials do not discuss specific tax proposals related to energy.
INTERNATIONAL
The candidates address international tax in several ways.
Repatriation
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
Clinton’s campaign materials do not discuss any specific repatriation tax proposals.
Trump
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.
In-sourcing
Both candidates have broadly discussed “in-sourcing” jobs.Clinton
Clinton has proposed “to provide support for companies that move jobs and production back to the U.S. from abroad.”
Trump
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.”
TAXES AND HEALTH CARE
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
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
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
“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.
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