When comparing the tax plans of Hillary Clinton and Donald Trump it is evident that Hillary’s plans are more specific and disciplined, and worked over by experienced tax policy wonks. Donald’s seem more spontaneous, less cohesive, and very much influenced by his own experience.
Hillary Clinton brands her tax position as “making sure the wealthy, Wall Street, and corporations pay their fair share in taxes.” First she would impose a 4% “Fair Share Surcharge” (say that 4 times fast) on taxpayers earning above $5 million per year. These people are the most likely to “benefit from tax planning” and 4% will help offset their advantage, goes her thinking. Ironically Hillary’s plan doesn’t simplify the tax code and thereby reduce the taxpayer’s ability to benefit from tax planning. I think of this as job security as she further complicates the convoluted tax code and simultaneously puts more pressure on the wealthy to find ways to reduce their tax liability. The CPA lobby must be doing a good job. 4% is not where Hillary’s creativity ends, she would implement the Buffett rule which would ensure that anyone making at least $1 million pays tax at no less than 30%. She also proposes to end write-offs for oil and gas companies and their investors, crack down on the tax advantages some companies derive by moving overseas, increase tax rates for hedge fund managers and on people like Mitt Romney, and make more estates subject to higher tax rates.
While Hillary chases the wealthy with a billy club she does seek to provide more relief to the middle class and small businesses and increase transfer payments to the poor. To start with she would give a $1,200 credit for child caregiver expenses. She would give small businesses a credit for apprenticeships and profit sharing plans and expand the use of the cash method of accounting. Don’t you hate laundry lists. Let’s get to the big news! Drum roll, please. Hillary Clinton wants to allow small businesses to use a standard deduction instead of actually accounting for their expenses. I hope that wasn’t anti-climatic. But seriously one of the few good things the tax code accomplishes is it forces some businesses to actually figure out how much they made or maybe lost.
Let’s talk about Trump to shake up this blog post. Trump’s tax plans are better than any tax plans ever conceived by men or a woman, at least I think he said that once. All hyperbole aside, Trump’s plan amounts to major tax reform. Trump proposes a 15% flat tax rate on all businesses from large corporations to mom or pop sole proprietors and only three tax brackets for individuals (down from 7). Don’t think that this will put the tax professionals out of business, we will be plenty busy trying to make every American a small business so that they can pay tax at 15% instead of at Trump’s top individual rate of 33%. Trump also practically gets rid of depreciation by allowing immediate expensing of all asset purchases. As a point of comparison, Hillary would allow expensing of up to $1 million of asset purchases each year. Under either plan, small businesses won’t need to ask if the higher 179 limits have been extended. Instead of going after companies who seek tax shelters overseas Trump wants to use the carrot approach by offering a one time 10% tax on income corporations hold overseas if they repatriate the money. My favorite part of Trump’s tax plan is the part about getting rid of the Alternative Minimum Tax, but he will also get rid of the Obamacare tax on investment income.
Now you may think Trump just likes to pander to the wealthy and business owners. But like Clinton he can pander to other people too. He doesn’t want to be outdone by Clinton in regards to child caregivers (these used to be called parents if you are confused). He would allow a deduction for the average cost of childcare. The best part of Trumpnomics is that all these cuts will be paid for by decreasing some available deductions (don’t know which ones really) and reducing waste.
So how do you feel? Excited, confused, disgusted? Maybe you just skipped to the end. This post probably isn’t as important as it seems because the most grandiose proposals here have a slim shot of ever becoming law. However you feel I would love to have the opportunity to sit down with you and improve your financial position. Preparation is the best way to deal with any situation. Call well before the end of the year to insure we have time to optimize your current tax situation.
Ben Smith, MTAX, CPA