By Peter C. Golotko, CPA/PFS, MBA and Sherrie Morgan, Director of Marketing & Public Relations.
In less than two months, Americans will choose the nation’s 45th President who will play a key role in shaping tax policy. According to a special report released by Wolters & Kluwer, both Republican Donald Trump and Democrat Hillary Clinton have dozens of proposals related to individual tax rates, credits and deductions.
Let’s begin talking income tax rates. On her campaign website, Hillary Clinton has proposed adding a “fair share surcharge” on multi-millionaires and billionaires to ensure the wealthiest Americans do not pay a lower tax rate. She says she will close loopholes that will create a private tax system for those most fortunate. According to Donald Trump’s campaign website, he’s proposing the biggest tax reform since President Ronald Reagan. He wants to streamline deductions and simplify the income tax from 7 brackets to 3. He’s also proposing lowering the tax rate on business income to 15% for every business. Right now, it appears Clinton is the only candidate considering raising rates for short term capital gains to encourage long-term investment. Trump has proposed eliminating, a parallel tax structure called the Alternative Minimum Tax, which ensures individuals, corporations, estates and trusts with substantial income do not avoid tax liability.
There’s been much debate over Obama Care the last several years and currently the Affordable Care Act imposes a 3.8% tax on net investment income of taxpayers who qualify. Clinton continues to support the ACA while Trump has proposed to repeal it. Aside from medical, families will be keeping an eye on child tax incentives. Clinton has proposed up to a $1,200 tax credit for caregiver expenses and Trump is considering allowing parents to deduct the average cost of childcare spending from their taxes. Clinton has also called for tax relief from college costs for middle-income families.
Business owners will certainly be keeping an eye on the candidates’ views. Both have a number of proposals related to business taxation. Clinton has proposed simplifying and cutting taxes for small businesses so they can hire and grow. Her website also indicates she plans to close tax loopholes that reward companies for shifting profits and jobs overseas. Trump has proposed reducing the maximum corporate tax rate to 15%. It currently tops out at 35%. As far as small businesses go, Clinton has stated she plans to simplify tax filings for millions of small businesses. Trump has talked about introducing a new business income tax within the personal income tax code that matches his proposed 15% corporate tax rate. Both have suggested reforms to business tax incentives and have new incentives in mind.
Some of the tax policies with no proposed changes include charitable giving and mortgage interest deductions. Looking at the Federal Estate Tax, Trump proposed to repeal it while Clinton would like to restore it to the parameters in effect in 2009, which was a maximum estate tax rate of 45-percent with a 3.5 million-dollar exclusion.
CPS will continue keeping an eye on the proposals in the months to come.
Source: Wolters Kluwer Tax and Accounting