Presidential Candidates' Plans Would Carry Tax Code in Different Directions
By Richard Rubin
Presidential candidates Hillary Clinton and Donald Trump would
take the tax code in opposite directions, with the split being
especially sharp on their treatment of the top 1% of U.S.
households, according to an analysis released Tuesday.
The tax policy divide between the candidates offers voters a
clear choice between two theories of economic growth and two
conceptions of who should bear the U.S. tax burden.
"They really couldn't be more different," said Leonard Burman,
director of the Tax Policy Center, which analyzed both candidates'
tax plans. "In almost every meaningful respect, these plans are
Mr. Trump's plan would cut taxes by $6.2 trillion over a decade,
removing more than 13% of projected federal revenue and delivering
about half the benefit to the top 1%, according to the Tax Policy
Center. Those richest households would get an average tax cut in
2017 of $214,690 and would see their after-tax income increase by
13.5%. Middle-income households, on average, would see tax cuts,
too, though their gains wouldn't be as large as a share of
Mrs. Clinton, meanwhile, would increase taxes by $1.4 trillion,
concentrated on the top sliver of U.S. households. The top 1% would
see after-tax income fall by 7.4% and face an average tax increase
of $117,760 in 2017. Most Americans in lower income groups would
get small tax cuts.
Mr. Trump's tax cuts would amount to a 2.6% of gross domestic
product and be nearly double those that President George W. Bush
pushed through Congress in 2001 and 2003. He would have the top 1%
pay 25% of federal taxes. Mrs. Clinton, meanwhile, would increase
taxes by 0.6% of GDP and make the top 1% pay 31.5% of the larger
The Tax Policy Center is a project of the Brookings Institution
and Urban Institute; Mr. Burman was a tax official in the Treasury
Department under President Bill Clinton.
The analyses don't include either candidates' spending proposals
or estimates of what would happen to tax revenue as a result of
economic changes caused by the tax plans. Mr. Burman said a further
study of the plans' economic effects is forthcoming.
To pay for targeted tax cuts and spending programs, Mrs. Clinton
would raise taxes on the wages, business income, capital gains and
estates of the richest Americans, using layers of new taxes to make
them pay what she says is their "fair share." Those changes would
reduce the incentive for high-income taxpayers to save and invest,
according to the center.
The center's analysis does show tax increases under the Clinton
plan, on average, starting for the top 20% of households, which
have household incomes above $143,100, according to the expansive
definition of income the center uses.
That is below the $250,000 threshold Mrs. Clinton has set as the
barrier for where she won't raise taxes. She wouldn't tax those
people directly; as shareholders and workers, they would bear some
of the burden of Mrs. Clinton's proposals to increase some
The analysis includes a plan the campaign announced earlier
Tuesday that would double the $1,000 child tax credit for children
ages 4 and under.
Mr. Trump would lower marginal tax rates, cap itemized
deductions, repeal the estate tax and set a new 15% tax rate for
corporations and for businesses that report their profits on their
owners' tax returns. Those so-called pass-through businesses, in
some cases, would have to pay a second layer of dividend taxes,
just like corporations.
Mr. Trump would also increase the standard deduction, eliminate
personal exemptions, repeal the head-of-household filing status and
allow parents to deduct child care costs. The combination of those
changes would raise taxes on many large families and single
parents, according to the center. The Trump campaign has disputed
that and said it would ensure no one would pay higher taxes.
Mr. Burman said the Trump campaign also objected to other
assumptions but didn't offer clarifying information about aspects
of their plan.
The Trump campaign says its tax plan would spur economic growth
and cover some of its own costs. Mr. Burman said the budget
deficits created by the plan would lead to higher interest
"Eventually higher interest rates would swamp the effect of
lower tax rates," he said, "so that in the long run, the economy
would be worse off than it is under current law."
Write to Richard Rubin at email@example.com
(END) Dow Jones Newswires
October 11, 2016 13:14 ET (17:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.