2020 Election | Comparing the Tax Plans of Donald Trump and Joe Biden
Published on by Mark Hamad in Tax Services
With the election less than 7 weeks away, we have outlined each candidate’s tax plans below. Donald Trump has not released a full second-term tax plan, but has frequently talked about taxes and what his administration would like to accomplish during a second term, which we have addressed below. Joe Biden and his campaign have issued several proposed ideas since kicking off his presidential campaign last year. We’ll look at both parties’ wish lists:
Issue | Current Law | Trump | Biden |
|---|---|---|---|
| Individual Tax Rate Proposals | Currently 7 Tax Brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37% | Proposed a ‘middle-class’ tax cut, which would lower the current 22% tax bracket to 15%, or otherwise adjust the tax brackets to add more middle-income earners to lower brackets | Proposed restoring the top marginal income tax to 39.6% (up from 37%) for income over $400K |
| Capital Gains Tax Rates | Currently taxed at either 0%, 15% or 20% depending on income | Three different general capital gain proposals: 1. Reduce the 20% top capital gains rate to 15% 2. Proposed indexing capital gains for inflation (taxpayers could increase their tax basis by the rate of inflation) 3. Enact a capital gains holiday that eliminates capital gains tax | For those earning over $1M, Biden has proposed removing the capital gains rates and instead taxing capital gains at ordinary rates |
| Itemized Deductions | State and Local Taxes (SALT) capped at $10,000 | Wants to see the $10,000 SALT cap made permanent | Capping itemized deductions at 28% of their value |
| Section 199A Deduction | 20% deduction on Qualified Business Income (QBI) | No phase out for high earners | Phasing out the 20% qualified business income for those earning over $400,000 |
| Payroll Tax | Employers and employees each pay 6.2% Social Security tax on wages, up to the taxable maximum of $137,700 (for 2020) | Has called for forgiveness for the employee-side of the Social Security payroll tax deferral plan that went into effect on 9/1/2020 | Proposed Social Security tax would kick in again for workers with wages over $400,000 |
| Healthcare | 3.8% Net Investment Income Tax (NIIT) on income over a certain threshold ($250,000 MFJ) | Wants to eliminate the 3.8% NIIT and Obamacare in its entirety | Proposed increasing the health premium tax credit for those who buy health insurance through an exchange |
| Education | Currently no tax credit for donations made to state-identified not-for-profit scholarship organizations. Forgiveness of debt is included into taxable income. | Trump has expressed support of the Education Freedom Scholarship (EFS) bill, which would give tax credits to individuals and corporations that donate cash to qualified organizations for the purpose of providing scholarships | Forgiving student loan debt and excluding the forgiven amount from taxable income |
| Estate and Gift Exemptions | Basic exclusion amount is currently at $11,580,000 | Proposed extending the TCJA estate exemption increase past the 2025 expiration | Proposed lowering the estate tax emption to around $5M & eliminating the step-up in basis for inherited assets at death |
| Corporate Tax Rates | Corporation tax rate currently at 21% | Reduce corporate tax rates to 20% | Increase corporate tax rates to 28% |
| Corporate Tax Deductions | 1. Currently 50% deduction for meals and 0% deduction for entertainment 2. 100% bonus depreciation set to phase out in 2023. | 1. Allow businesses to deduct 100% of meals and entertainment 2. Give tax breaks to firms that invest in the U.S. and bring jobs back from China 3. Make the 100% bonus depreciation permanent, plus enhance business asset expensing as well as the R&D tax credit | 1. Provide a new manufacturing tax credit for businesses that revitalize recently closed plants and facilities 2. Increased credits for employers that hire disabled workers 3. Tax breaks to small firms that offer retirement plans to their employees. |
| Minimum Book Tax | N/A | N/A | Proposed a 15% minimum book tax on corporations with $100M or more in income |
| Global Intangible Low-Taxed Income (GILTI) | Tax rate on GILTI is currently 10.5% | N/A | Increase GILTI to 21% |
| Like-Kind Exchanges | Only available for real property | N/A | Proposed eliminating 1031 Like-Kind exchanges for taxpayers with income over $400,000 |
| Miscellaneous Tax Proposals | 1. Currently the maximum child tax credit is $2,000 and is scheduled to revert to the pre-TCJA amount of $1,000 after 2025 2. Currently there is no credit for long-term care to elderly or disabled relatives 3. Workers older than 65 who do not have a qualifying child are not eligible for the Earned Income Credit | 1. Make permanent the $2,000 Child Tax Credit 2. Wants to expand Opportunity Zones 3. “Made in America” tax credit 4. Unspecified tax cut to boost take-home pay | 1. Expanding the child and dependent care credit to $8,000 per child (up to $16,000) 2. Creating a new credit up to $5,000 for family members who provide long-term care to elderly or disabled relatives 3. Allowing workers age 65 and older to claim the earned income tax credit |
In summary, Trump wants to see many of the provisions in the 2017 tax law changes made permanent. The broad themes of the president’s agenda as noted above, favor providing tax relief to individuals and tax credits to businesses that engage in America first. Biden’s tax vision is twofold: higher taxes on high-income earners and businesses, paired with more generous tax cuts for specific lower-income earners and households.
Have questions about how the election may impact your tax situation? Talk to one of our Barnes Dennig tax professionals to ensure you’re ready for any situation.
Sources: Taxfoundation.org – Biden| Taxfoundation.org – Trump | Committee for a Responsible Budget
